Home Commodities A softer approach on commodities this time even as shortages loom globally

A softer approach on commodities this time even as shortages loom globally

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Agriculture, farmers, wheat, procurement, MSP, APMC, commodity



There is a difference in the way in which controls are being imposed on in the country this time, in order to deal with the impending global crunch. Unlike the previous episodes, such as the ones in 2011 or 2014 or even somewhat in 2018, this time the central government is not restricting movement within the economy, but has only imposed curbs on exports. Consequently there is no rush to use the Essential Act.


Also, the price action is far more nuanced. This week the government, for instance, removed import duty on raw materials for steel while increasing the export duty on iron ore and pig iron. EEPC India Chairman Mahesh Desai said the lower import duties would cut costs for the domestic steel industry while downstream uses of steel would benefit from the higher export barriers.





The numbers facing such price actions could change, but till mid May, the Centre has imposed some sort of trade controls on six . On the seventh commodity, coal, there is no price control but an informal rationing system that prioritises supplies to power plants at the cost of supplies to cement, paper and other manufacturers. Of the six there is a ban on wheat exports through the open market, and duty on steel and iron ore exports. There is also speculation about some export bans on others, like sugar and cotton. Domestically, controls are in play only on retail prices of petrol and diesel and on power sold at the electricity markets.


Still, it is not a small list. This is understandable, given the huge supply chain shocks in the global commodity markets. India is not an outlier. Germany has begun rationing supplies of natural gas. Further afield in Europe, Turkey has stopped exports of butter, beef, lamb, goats, maize and vegetable oils, according to a New York Times report. In Asia, Indonesia has stopped exporting palm oil. Some or the other forms of price controls are coming down all over the world.


Some other countries, like neighbouring Sri Lanka, to some extent Pakistan and of course, war-torn Ukraine and Russia, are not able to buy food stocks.


In India, the balancing act on pricing is most evident in the non-deployment of the . In 2014, for instance, control orders remained switched on for edible oils, rice, onions and potatoes under this law. Earlier in 2011, other than these commodities, paddy, pulses and sugar also made it to this list.


In this episode, the government has so far not rung in any control over the domestic movement of any of the goods. The controls, like the latest one on steel and iron ore (finance ministry has imposed up to 50 per cent duty on exports of iron ore and 15 per cent on a few steel intermediaries) has only clipped exports, not domestic movement. In fact, the emphasis is to encourage the trade in goods across the country freely after two years of intermittent shutdowns in various time periods, due to Covid lockdowns.


To ensure domestic prices do not go off kilter, the government is closely peering into the price data collected by the department of consumer affairs. The Price Monitoring Division of this department measures daily price movements for 22 commodities, particularly across the four metros and Ranchi. So far the data (up to May 24) does not show any sharp regional variation, except to some extent, for Chennai.


This is important as it will tell an anxious Centre if the ban on exports has had a salutary effect on the price levels. The daily report for all these commodities (see table for May 23, 2022) shows the highest prices were reserved for mostly Port Blair and the North Eastern states—possibly the impact of transport cost. In fact there were some surprises. A reflection of how these logistical challenges play out is visible in the case of sunflower oil, which recorded its highest price at Rohtas in Bihar, while the minimum price for the same commodity was in Jamshedpur in the adjacent state of Jharkhand.


The new entrant in the list of items whose price is being controlled is that of electricity. As coal constraints led to black outs in some states in April, the Central Electricity Regulatory Commission has made an ill advised move to put a price cap of Rs 12 per unit at the energy markets. It was meant to shield the almost uniformly badly run state electricity distribution companies from having to pay a higher price for their misdeeds. But it has had the opposite effect.


Coal prices have shot up in the international markets to over $200 per metric tonne while the heat wave in India has raised demand for electricity. In such an environment, coal-based power plants were quite likely to raise the price of electricity they generate, passing through the higher price. If the discoms cannot pay, the generating companies would have diverted their supply to the exchanges, forcing the same buyers to buy at even higher prices. This is market discipline, but the move has aggravated the problem. Volumes of trade in the exchanges have declined in April. Prashant Jain, joint managing director and chief executive officer of JSW Energy told Moneycontrol the government’s decision to cap the price of power in the short-term market will discourage power producers from generating electricity.


Table: Commodities under price action












Item

Action taken

Electricity

Cap of Rs 12 per unit on exchange traded prices

Steel

Export control

Wheat

Export control

POL

Price control

Iron ore

Export duties

Pig iron

Export duties

Coal

Allocation to sectors controlled



Source: PIB


Table: Status of daily retail prices as on May 23, 2022
































Commodity

Price (Rs/kg)

Centre

Price (Rs/kg)

Centre

Rice

57

Vijaypur

19

Azamgarh

Wheat

47

Kasargod

17

Malda

Atta (Wheat)

59

Port Blair

22

Purulia

59

Mayabunder

.

,

Gram Dal

130

Haldwani

55

Waghai

Tur/Arhar Dal

130

Amritsar

70

Jagdalpur

130

Aizawl

.

.

Urad dal8

143

Ernakulam

73

Rewa

Moong dal

128

Kozhikode

80

Bodeli

Masoor dal

130

Aizawl

68

Hoshangabad

Sugar

53

Aizawl

35

Ahmedabad

Milk

80

Dimapur

32

Mangalore

Groundnut oil (packed)

247

Srinagar

150

Ujjain

Mustard oil (packed)

270

Ramanathpuram

150

Jabalpur

Vanaspati (packed)

211

Port Blair

92

Surat

Soya oil (packed)

209

Sahibganj

105

Bodeli

Sunflower oil (packed)

260

Rohtas (Sasaram)

139

Surat

Palm oil (packed)

188

Port Blair

89

Jamshedpur (East Singbhum)

188

Warangal

.

.

Gur

120

Aizwal

34

Dharni

Tea loose

547

Gangtok

123

Aizawl

Salt pack (iodised)

29

Ludhiana

8

Dharni

29

Bathinda

.

.

Potato

50

Port Blair

8

Samastipur

Onion

60

Sohra

9

Sagar

60

Aizawl

.

.

Tomato

115

Port Blair

9

Purulia


Prices as on May 23, 2022; Source: Department of Consumer Affairs (Price Monitoring Division)
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