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'Contingency Plan Soon To Deal With Deficient Monsoon'

Friday, June 05, 2015
By A Business Reporter

Government proposes to use the Rs 500 Cr price stabilization fund to ensure availability of essential commodities at reasonable cost

The government will soon come up with a comprehensive contingency plan to deal with the impact of deficient monsoon that could include using MNREGA funds for some activities to provide relief in drought-hit areas, a finance ministry official said.  Under the contingency plan, the government proposes to use the Rs 500-crore price stabilization fund to ensure availability of essential commodities at reasonable cost.

"We are working on a contingency plan to deal with poor monsoon. Price stabilization fund of Rs 500 crore with agriculture ministry could also be put in use if rainfall is deficient," PTI quoting the official said. The Met department had earlier this week said that the rainfall this year would be 88% or "deficient" of the long term average, triggering fears of drought. Last year also, the country had received 12% less rains, which had impacted production of grains, cotton and oilseeds.

The official further said that the MNREGA funds could also be used for specific activities to provide relief in drought-affected areas.  "Home ministry, agriculture ministry and finance ministry are holding regular consultations assessing monsoon situation," he said. Further, the Centre has also directed the states to take steps so that there is minimum damage to agriculture sector and overall economy.

Earlier this week, the Reserve Bank had said that the Government should put in place a "contingency plan" to deal with the possibility of a deficient monsoon and its impact on food grain production and prices.  "What is clear is that contingency plans for food management...Need to be in place to manage the impact of low production on inflation," RBI Governor Raghuram Rajan had said in his monetary policy review. Strong food policy and management will be important to help keep inflation and inflationary expectations contained over the near term, he had said.

Food inflation has softened to a 4-month low in April, but the impact of unseasonal rains is yet to show up. In April, wholesale inflation has dipped to record (-)2.65%, while that of retail inflation has fallen to 4-month low of 4.87% in the same period.

Incidentally, earlier in March, the Agriculture Ministry had approved setting up of price stabilization fund (PSF) with a corpus of Rs 500 crore for market interventions to ensure price control of perishable commodities. The fund would be used to advance interest free loan to state governments and central agencies to support their working capital and other expenses on procurement and distribution interventions for such commodities.

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