Veggies may become cheaper from Sept, rising crude prices a concern: Govt official

In some good news for households all over the country, vegetable prices may start cooling off from next month as new crops enter the market. However, rising crude prices is a concern, even though it is still within the tolerable zone of $90 a barrel, a finance ministry official has said.

The official told PTI that a reduction in excise duty is not on the cards, and the government is driving infrastructure investment, but private sector capital investment is yet to gather steam.

He added that the Centre’s capital expenditure, which was 28 per cent of Budget estimates at the end of the June quarter, will reach 50 per cent by September end. In the 2023-24 Budget, the government had hiked capital investment outlay by 33 per cent to Rs 10 lakh crore in the current fiscal.

The Ukraine war factor

The official further said that a 6 per cent rainfall deficit is unlikely to impact kharif sowing, as the agriculture sector is resilient. The government has been taking steps to control inflation, including releasing wheat and rice stocks from reserves, clamping restrictions on exports of rice, sugar, and allowing the import of pulses and oilseeds.

“A flexible trade policy has been adopted to keep the prices down. We must remember that global food prices are very high due to the Ukraine war, and the supply of food grains has been affected and that is a global factor from which India cannot remain isolated. We have taken measures to isolate our population from that inflation and, relative to others, we are in a much better position,” the official told PTI.

Tomatoes may become cheaper

He said interventions have been made to cool tomato prices, and those steps will bear fruit in the coming months. “Tomato is a seasonal crop, and we will get another crop shortly and the price pressure will ease,” he added.

“This temporarily high inflation is partly driven by vegetables. I expect the vegetable prices will contract quickly, likely by next month,” the official added.

Retail inflation touched a 15-month high of 7.44 per cent in July, a spike from 4.87 per cent in June. However, wholesale inflation continued in the negative zone for the fourth straight month at (-)1.36 per cent in July.

In July, the annual retail inflation in the vegetable basket was at 37.44 per cent, spices at 21.63 per cent, pulses and products at 13.27 per cent, and cereals and products at 13 per cent.

Crude prices a concern

To a question on whether the government is concerned about the recent surge in crude oil prices, the official said Budget calculations do not include crude oil prices because the government does not give subsidies to oil marketing companies. So, the fluctuation in crude prices does not have any impact on the fiscal math.

Crude oil prices currently are hovering around $85 per barrel as against $70-73 a barrel at the time of the Budget.

“Rising crude oil price is a concern but they are still within a tolerable zone from the point of view of oil marketing companies. It doesn’t necessitate any policy adjustment right now. The Budget calculations are on track. I think we are quite ok with oil at about $80-85; up to $90 we shouldn’t be worried. Beyond $90, it has an impact on inflation and other things,” the official said.

The official also ruled out any cut in excise duty on petrol and diesel, saying it is not under consideration as of now. “We are not expecting any excise duty cut in petrol or diesel,” he added.