Union Finance Minister Shri Pranab Mukherjee has asked State Governments to urgently look into the supply management of items that are driving the current round of food inflation in the economy, in particular looking at the local factors that are widening the gap between the wholesale and retail prices. Mr. Mukherjee said that the State Governments need to ensure that all bottlenecks in the supply chain are removed so that food prices can be brought down quickly. 

The Finance Minister was reacting to the recent figures of food inflation which has shown a rising trend in the last few weeks and was at 18.32 per cent for the week ending December 25, 2010. He said that food inflation for the week ending on December 25, 2010 is more than doubled from its level of 8.6 per cent on November 20, 2010. Shri Mukherjee said that much of this inflation has been due to significant increase in the prices of a few primary items like fruits and vegetables, milk, meat, poultry, eggs and fish. He said that in fact, in the week for which the data has been released today, three-fourths of food inflation is explained by inflation in vegetables, and nearly one-fourth is explained by inflation in milk. While there are some weather induced supply constraints on some of these items, which go against the seasonal decline normally seen at this time of the year, a large part of price rise is due to widening gap between the wholesale and retail prices and the growing demand for these products due to rising income levels. Supply management directive: address supply chain bottlenecks to narrow wholesale retail price gaps and ease food inflation. The Finance Minister directs State Governments to address local factors widening the wholesale to retail price gap for key food items and to ensure all supply chain bottlenecks are removed promptly so that food prices can adjust, noting that much of recent food inflation stems from a few primary items and rising demand due to higher incomes.