Lok Sabha Question No. 297 (STARRED), answered on 2016-08-05
Subject: Food Inflation
Ministry: FINANCE
Asked by: RAHUL RAMESH SHEWALE, BHARTRUHARI MAHTAB

## GOVERNMENT OF INDI,A MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABIH STARRED  QUESTION  No.  *297

## TO BE AI\ISWERED ON: sru I.UGUST,2016 r.OOD INFLATION

## *2e7:  SHRf RAHT L SIIEWALE

- SHRI BHARTRUHARI MAIITAB

Will the Minister  of Finance  be pleased  to state:

- (a) ufiether trading in Commodity  Market and black marketing of food commodities  have played  a significant role in high food inflation in the country and if so, the details thereof;
- (b) whether cases of irregularities  in the functioning of Commodity Market have come to the notice of the Securitios  and Exchange Board of India (SEBD since 2015 and if so, the details thereof; and
- (c) the steps taken by the  ,Govemment  to regulate cornmodity  market, check blackmarketing of food items and curb high food inflation in the county?

## AI\iSWER

## MINISTER OF FINA}.ICE (SHRI ARUN JAITLEY)

- (a) to (c): A statement is placed  on the Table of the House.

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Several studies have pointed out that futrne trading per se does not lead to any price rise. For instance,  Abhijit Sen Cqmmittee  set up by the Government it2007 in this regard concluded that therc is no causal relationship  between  futures trading and iuflation. Similar view has been echoed in the RBI's Amual  Beport  of 2009-10 also. price risk.

Bbsid6s,'an  inaepenaErit study irtz:frlzby Dr. Ashok Gutati ccincluded thnt during 1995-96 to December, 2072, fiscal deficit, global food inflation  and domestic  wages werc instead the primafyreasons  for fodt iuflation  in  India. . .

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ii Fifteeuth Report(201,1) of the  dadiamentary  Standing  Corumittee  on Fop4 Consumer  Affairs aud Public'DisEibution  states  &at  futures nading  does not impact the prices  of agrioiltural commodities  qq4 that the  .Coni$ittee  do agree with the views of various cooperatives and firrmers  organisations  that commodity  futures market is useful to the real economy  and smatl / marginal  farmers.

Black Marketing is only ond of the many reasorur  for inflation  of food or essential commodities.  Rise of prices of any essential commodity depends  on various factors, such as, demand and supply mismatch, rend of prices  in international markets, etc.

Securities  and Excharrge Board of India (SEBD took over regulatory functions of commodity derivatives rnarkets orr,September  29,2015 and no case of irregularities  in the functioning of comrnodity dedvative.exchange  has come to its notice. In so for as the tading in futures contracts  is concerned, an instance of suspension  of the trading  in all the running  futures contrasts  in Castor  Seea at the close of business by the National Commodity  and Derivatives Exchmge Limilcd on January 27,2016 was noticed by SEBI, in response to which, it took effective  remedial measures.

SEBI has taken various measures and has prescribed specffic nonns for stneogthening of the commodity derivativbs  market  in the areas of, Risk Managernent  frameworlg  position limits, daily price limits, governance of exchanges,  registration  of .brokers,  arbitration mechanism, investorrgrievance  redressal mechdnism,  etc. Exchanges have to comply with all zuch norms prescribed  by SEBI within the specified  timeframe, compliance  of which is monitored by SEBI by way of periodic  inspections. SEBI also carries  .out integrated monitoring and surveillancc  of commodity  derivatives market.

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fnelG.ovem-enl has, inter alia, rihdertaken the following  meastres to check black marketing of fgod items and crub infla1lqn,  in particulm,,food  inflation: I .i :l

- ...--.'-..-.-..:'."':l' i '-' Isiued advisbries  to States  / Union  Territories to take strict action ggainst hoardlng .1.i, : Black-Marketing and Maintenance  of Supplies of Essential Commollitiesdct,  1980.

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- ii.. Imposition of stock holding limils and coordinated  dehoarding  operations to increase the availability  of pulses  in the market.
- iii. Approved buffer stock of pulses under the Price Stabilization Fund. Increased allocation  of Rs. 900 crore for Price Stabilization Fund in the Budget 2016-17  to check volatility ofprices of essential commodities, in particular of pulses.
- iv., Imposed 20 per cart duty on export of sugar and extension  of "zry.o import duty'i, on . n'ts"t' '
- v..  With the objective to safeguard the interest of farrrers, the Governmen!  on :the , : recommendations:  of Commission for Agricultural Costs and, Prices, increased I the Minimum  Suppon Prices (MSP)  for kharif pulses for 2016-17 season. In order to further incentivise farmers to increase  the acre4ge  under pulses so as to tame prices of pulses,  Governmqrt has decided  to grve a bonus of Rs. 425t- pr quintal for kharif rr pulses,  namely  ryhar  (Tur), Urad and M*og, payable  over and above the. MSP
- vi. To facilitate procurement  of pulses,  Ciovernment has designated Food Corporation  of India as the nodal agency for procurernent  of pulses and oilseeds, due to its pan-India pres€nce.  Small  ,Farrnbrs',  Agribusincss  Consortium  and National Agriculnral Cooperative Marketing Federation c,f India also supplement  the efforts of Food Corporation of India on the procurement  of pulses and oilseeds.

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