Thursday June 22, 2006

India bans export of lentils, eases import rules for wheat, sugar to curb price rise

NEW DELHI (AP): India's government on Thursday banned export of lentils and eased rules on import of wheat and sugar in a bid to curb a recent surge in prices of essential goods in the country.

The decision by the Cabinet came in the wake of a sharp rise in prices of food items and a growing resentment among people whose household budgets have been hit hard.

Prices of sugar and lentils have increased more than 20 percent in the past month, while cost of vegetables like tomato have increased fourfold in some cities like New Delhi.

The price rise has been largely attributed to supply shortages.

Finance Minister P. Chidambaram said the government decided to ban export of lentils and eased rules on import of wheat and sugar in order to augment supplies in the domestic market and stabilize prices.

He said private companies will be allowed to import wheat and sugar free of customs duties for a limited period of time.

Currently, select state-run agencies are allowed to import wheat free of duty, while private importers pay 50 percent in customs duty. All sugar imports currently attract a customs duty of 60 percent.

With these measures, Chidambaram said, the "inflationary expectations will be dampened and a measure of restraint will come in the market.''

The surge in prices of essential goods also tracked the government's decision earlier this month to hike fuel prices in the wake rising global crude prices.

There have been fears that rising inflation could lead to increase in interest rates at slow growth of the Indian economy, which has averaged more than 8 percent annual expansion in the past three years.

The weekly inflation rate rose to 4.72 percent on June 3. earlier this month, India's central bank increased two key rates by 25 basis points and more hikes are expected next month if the trend in inflation continues.

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