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Food inflation – Is Jaitley capable of handling it?

Arun Jaitley said there is “no panic situation” and asked the states to take measures to crackdown on placard and black marketing to rein in prices. We were expecting something extra-ordinary from him. Anyway, Jaitley should daily introspect the situation as he was doing during UPA reign. When he was in opposition — he tingled and pinched the then FM — that he has solution for every problems in economy. Look at the situation, he has not even properly sat on the chair and we have to face so many price rises. The meteorological department is responsible for price rise. It goes on predicting uselessly. The Quantum of Monsoon is not a parameter for growing good crops. So, there is no direct or indirect proportion related to monsoon for good crops except dry spell. If the Monsoon comes late but with adequate rainfall then there are chances of bumper crops. So, leaders should avoid giving such a statement that gives impetus to hoarder as an excuse of supply and demand. Jaitley should pass a Food Security Bill to outdo hoarders influence in food supply, without simply making irresponsible excuses. He has virtually agreed that he is not competent enough to control anything and so has asked state governments to look into it. This foolish government banned FDI in retail and now is at the mercy of the hoarders. If big players were allowed then these hoarders would become beggars overnight. In fact, FDI would have helped farmers and small traders. When production of food items is higher than last year then why prices are rising? It is obvious that somewhere stocks are with hoarders, which is wrong. Why this same logic was not applied when Chidambaram was Finance Minister? If the states have to take action against hoarders then why we have elected BJP government? This is just passing the buck.

The government, which wants to implement the new tax regime on a priority basis, is grappling with demands from the states to institutionalise the process of compensating them for the revenue losses suffered by them because of the reduction in the rates of central sales tax, or the CST, from 4 per cent to 2 per cent. The demand was articulated yet again in Jaitley’s meeting with a group of state finance ministers to discuss the GST rollout roadmap. State stuck to their position that the Centre should first put in place an institutionalised mechanism to earmark funds for them. They wanted Mr. Jaitley to incorporate this provision in the Constitution (115th Amendment) Bill, a legislation which was introduced in the Lok Sabha in 2011, but which has been lying with the standing committee on finance since then. The Centre is reluctant to commit itself to establishing such an institutional mechanism. The GST, a major tax reform initiative that seeks to subsume levies such as excise and service tax, was initially scheduled to have come into force across the country from April 1, 2010, but has been hanging fire because of resistance from the states. Besides the issue of compensation, the states also want their concerns on fiscal autonomy to be factored in before rolling out such as major tax reform.

The states claim that they stand to lose Rs. 19,000 crores every year because of reduction in CST rate. The state finance ministers also persisted with their demand for keeping the entry tax on petroleum and alcohol outside the GST ambit. Including them in the proposed tax regime, they argued, would hurt their revenue collection. Mr. Jaitley told the state finance ministers that some of their concerns would be woven into the GST legislation. The Minister asked the state governments to assess the problem as action taken after price rise creates panic in the market. Noting that prices of crude oil have increased due to tension in Iraq, Jaitley also mentioned that prices of onion, potato, rice, pulses and milk have increased because of different reasons. However, he forgot to specify those reasons. Inflation rose to a five-month high to 6.01 per cent in May due to rise in prices of essential items like vegetables, fruits and cereals. In order to check prices during the coming festival season, Jaitley urged the states to assess the supply-demand situation and take effective measures in advance to boost supply. He also asked the state governments to set an example of good governance as there is no reason for price rise, when production is at a record level and supplies are adequate. Emphasising on the need for coordinated efforts to control prices, Jaitley said both the Centre and states should prepare a joint-action plan in this regard. This is the correct process of introducing tax reforms. Centre should ensure that states get adequate share of revenues. It is best to move away from planning commission doles to states based on politics.

Dr. Vaidehi Taman
Dr. Vaidehi is an Investigative Journalist, Editor, Ethical Hacker, Philanthropist, and an Author. She is Editor-in-Chief of Newsmakers Broadcasting and Communications Pvt. Ltd. Since 11 years, which features an English daily tabloid – Afternoon Voice, a Marathi web portal – Mumbai Manoos, monthly magazines like Hackers5, Beyond the news (international) and Maritime Bridges. She is also an EC Council Certified Ethical Hacker, Certified Security Analyst and is also a Licensed Penetration Tester which she caters for her sister-concern Kaizen-India Infosec Solutions Pvt. Ltd.

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