If 2015 was the year of onions and pulses, with their respective retail prices soaring to highs of Rs 80 and Rs 200 per kg, the current one looks to be that of sugar. The sweetener is already selling at around Rs 40 a kg, a third more than its level at this time last year and could rise further as the effects of lower cane plantings in Maharashtra and Karnataka.
This comes even as onion is today retailing at about Rs 15, with farm gate prices in Maharashtra and Madhya Pradesh falling to Rs 5 per kg and below.
Reason for high prices(sugar):
1. A common theme running through these is the absence of proper market intelligence with the government or a mechanism for intervention to check extreme price fluctuations that benefit neither consumers nor producers in the long run.
2. In the case of sugar, the Centre till early this year was actually forcing mills to export at prices below domestic market realisations. It clearly had no clue on the extent of drought in Maharashtra and Karnataka.
3. Hoarding by traders .
Avoiding rocketing prices:
1. All this can be avoided through the creation of buffer stock in commodities having a significant bearing on food inflation. Right now, this is limited to just rice and wheat.
2. There is need for buffer stocks in the other commodities as well. It can be done by purchases during season and used in the event of unusual price increases. A sugar buffer stock of 2-3 million tonnes from last year’s production would, for instance, have been most useful today.
3. Buffer stocks are a means just as the RBI’s foreign exchange reserves are vis-à-vis the currency markets.