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BW Businessworld

Govt Warns Of Tough Steps To...

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"If their behaviour (steel and cement manufacturers) does not change, government will not hesitate to take tough measures," Chidambaram said while intervening in the debate on rising prices in the Lok Sabha.

The finance minister admitted "the cement and steel manufacturers are behaving like a cartel... And we have to break this logjam." He also assured the House that the government will not hesitate to "sacrifice revenue to control prices".

Amid a walk-out by the Opposition and Left parties, Chidambaram said inflation has gone up because of rise in international prices of commodities such as wheat, rice, edible oil and metals, apart from speculative activities in the market.

He said the government has taken many fiscal measures in the Budget and cut customs duty on several items later to control prices, but states would also have "to take stringent measures against hoarders and prosecute them expeditiously." Pointing out that the Reserve Bank has already raised mandatory deposits by banks with the central bank eight times in recent past, he said that Governor Y.V. Reddy will assess the situation and take appropriate monetary steps.

When interrrupted by the members who said the minister was trying to shift the responsibility to state governments, he said the powers to take action under the Essential Services and Maintenance Act (ESMA) rests with them and added, "if I have the power I will do it tomorrow".

Responding to the demand for further cut in excise and customs duty to soften prices, the finance minister said, "We will sacrifice revenue if needed". The government cut cenvat from 16 to 14 per cent in the Budget and reduced customs duty on large number of items later, he said.

On the supply side, he said the government has taken many steps including the Rs 25,000-crore funds to raise farm production in the 11th Five-Year Plan, but it will take time to yield results. "Our target is to raise the production of wheat, rice and pulses by 10 million tonnes (MT), eight MT and two MT respectively," he said adding that steps are being taken to become "self-sufficient in essential food items which are major contributor to inflation."

"We will have to break this glass ceiling (farm production) which has plateaued over the years... we will remain under pressure from imports," Chidambaram said.

The minister also said the dependence of the Indian economy on imports of various non-food items including crude oil has gone up because of robust growth of 8.8 per cent in the past four years. This has to be met by more exports, he said.

As regards non-food items, Chidambaram noted that crude oil prices have gone up from 60 dollars a barrel in March 2007 to 102 dollars a barrel by March 2008, while palm oil prices went up to 1,240 dollars a tonne from 622 dollars during the same period.

Similarly, the prices of urea have gone up from 318 dollars a tonne in March 2007 to 378 dollars a tonne in March 2008, Chidambaram said, adding "while we import food and commodity we are importing inflation."

The finance minister regretted that states were not taking enough measures under ESMA against hoarders, whose activites were leading to "artificial" shortage and higher prices. He said some state governments have imposed only licensing requirements, but when it came to taking action against hoarders they remained reluctant.

The states, he said, should impose severe stock limits and conduct raids to check hoarding and ensure prosecution of traders guilty of storing grains beyond permisible limits.

Prime Minister Manmohan Singh, he said, has already written to the states to invoke power under ESMA and take action.