July 30, 2007	Monday	Rajab 14, 1428

THE government has appointed a four-member ministerial committee to look into the issue of food inflation and bring it down through strict administrative measures and by removing the gap between demand and supply.

"This was the decision of the ECC to have this committee control food inflation by taking some special initiatives", said Prime Minister's Adviser on Finance Dr Salman Shah.

Dr Shah, who is also one of the members of the committee, said that a decision had been taken to lower food inflation by curbing smuggling, especially of wheat, prevent hoarding and banning export of any major item that was causing increase in food inflation. "On top of it, this time there will be a severe administrative action to achieve our objectives", Dr Shah said.

He did not believe that the new committee would be a failure like the previous committees and other provincial bodies in controlling food inflation and was meant only to appease the anger of the common man.

"This time we mean business, and you will find no relaxation in our resolve to check the menace of inflation".

When reminded that some people sitting in the cabinet were allegedly responsible for food inflation particularly of wheat and sugar, Dr Shah said there was need of a "dynamic process" to resolve the issue by taking timely action against anybody who is involved in price hike.

"This committee would constantly monitor the food supply situation and whenever it finds undue export of any commodity, it will recommend a ban or a 15-20 per cent export duty to cut food inflation which, of course, is causing problems and an embarrassment to the government every now and then", he said.

Currently wheat prices were very low here as compared to its prices in other countries, forcing businessmen to start its export. "But now there will be thorough check, and unless there is an adequate quantity of surplus wheat available, its export will not be allowed, he said.

He admitted that smuggling was a serious crime but it could not be controlled overnight. He also conceded that vested interests sitting both inside and outside the government were responsible for smuggling wheat and other commodities.

"We have been failing in taking timely action and this is a real issue which will now be seriously looked into".

The core inflation, he said, was still below the target at 5.3 per cent but it is the food inflation which was above the target and causing problems to price stabilisation. In June food inflation was 0.2 per cent and if it continues to be in the range of 0.2 to 0.3 per cent, it might get stabilised and help the government in ensuring certain check in prices.

The major problem, he believes, is the supply side shocks, and if the oil prices remained at $78 per barrel, it will be a serious issue. The oil prices needed to be stabilised in the international market so that its negative impact could be avoided by the developing countries like Pakistan.

However, some people within the government did not believe that any new initiative or mechanism would work to control both the inflation and the food inflation. They said that there was no real 'will' on the part of the government to address the issue with the result it gets compounded every day adding to people’s problems.

A concerned official said there was need to address the issue of inflation and food inflation on "permanent basis" and not through "ad hoc measures". The policy of allowing import of any item, whose prices are high in the country, is a temporary solution. The real solution lies in increasing its production, he added.

The real issue is the increase in productivity on which the government was not paying any attention, despite having institutions like Parc, which failed to perform its duties in terms of proposing real crop substitutions and changing pattern for various verities of pulses. Why there is still a failure in finding out high-yield varieties of crops, he asked.

Similarly, why there is a failure in seed multiplication and if the public sector cannot do any thing then this is a high time to transfer the job to the private sector, he advised. He regretted that the high officials did not take into account the advice of their subordinates and planned things considering the interests of the sitting ministers and the influential landed gentry.

"The government promised last year to provide adequate funds to increase livestock production but it was not done", the official said.

About inflation, he said, the money supply had not been restricted due to which the government had failed in achieving its target. And now it did not seem that 6.5 per cent inflation target set for 2007-08 could be achieved as the government would once again borrow more than its requirements from the banks. The current target of borrowing Rs130 billion from the banks would not be met, he predicted. "Last year the government borrowed the double of its target - Rs250 billion which created problems in money supply situation", the official said.

Prominent economist and the former director of Pakistan Institute of Development Economics (PIDE), Dr A.R, Kamal, said that the issue of inflation and food inflation cannot be resolved by appointing committees and other bodies.

Unless the government improves the supply side situation, which was a real problem, the food inflation would not be controlled.

Likewise, money supply situation was another matter of concern and it could not be addressed as long the government kept on borrowing without any justification against its own targets. He too was of the view that hoarders, smugglers and profiteers were needed to be checked without caring for the consequences. Only then there could be some respite for the public, he added.