The immediate proposal which is weighing with the Finance Ministry is the introduction of direct subsidies for the poor in the form of food coupons. The public distribution system in the country is in a shambles; and the infrastructure of the PDS is in such a sorry state in most of the states that the PDS cannot be rejuvenated immediately to take care of the food needs of the poor below the poverty line. The coupons, on the other hand, can offer immediate relief to the poor by helping them buy the essential items from the food shops. This will have an interventionist effect on the market and reduce black marketing by jacking up food prices.

The thinking in the Government is that this food coupon system can work effectively as the beneficiaries will certainly make use of these in their own interests. According to Dr. Kaushik Basu, chief economic adviser of the Finance Ministry, the food coupon system was introduced in Sri Lanka in 1970s with big success. The system will have scope for little leakage since the poor who will have the coupons will certainly make use of it for getting their essential items. Otherwise, they have to pay much higher prices for food items which, will be against their interests.

As regards coupons for fertilisers, the Finance Ministry has already made detailed studies. And it has been found that a switchover to the coupons system for fertiliser subsidies will entail several ancillary decisions. There will be need to decide who get these coupons. One option is to give a fixed quota to every farm household. This will mean giving a subsidy to all farmers. But for small farmers, the subsidy will be a larger fraction of their farming needs whereas for larger farmers, this will be a small fraction. It has been underlined that for a full-fledged adoption of the coupons system, there will be need to dovetail the system to the Unique Identification system.

According to Planning Commission sources, March may witness higher inflation because of the fuel price increase. And it t could be higher in April if things are not contained through some special measures. That time, the trends of the inflationary pressures on the economy will be clear. If the fuel price impact on inflation continues and there is no easing of pressures, RBI might come out with major steps to check the inflationary pressures including the hike in interest rates. The slight revision last Friday was only a signal, and not a major step. The RBI will be taking that step only in April after a thorough review of the situation at the ground level.

The Government is giving a close look at the fertiliser policy announced in the 2010-11 budget to assess its impact on the prices of fertilisers to be paid by the farmers. The Government is also looking at creating a new urea policy and as a part of that discussions are on between the Government and the industry on the price parity of each nutrient. This might not decrease the country's dependence on large-scale urea import because that depends on production capacity in the country. So, the new urea policy should help in production capacity expansion and more and more urea plants might come up. (IPA)