Now, brace for food inflation as essential items to go scarce

Prices of food grains may surge in the coming days as commodities could become scarce as a direct result of demonetisation, according to wholesale traders in Bengaluru. There is, however, no scarcity of edible salt.

Wholesale traders have not been able to place orders for food grains due to scarcity of cash. The bulk supply of commodities such as rice, dal, jaggery and sugar to the market has been hit since the Union government demonetised 500- and 1,000-rupee notes last week, said Ramesh Chandra Lahoti, president, Bengaluru Wholesale Food Grains and Pulses Merchants’ Association.

Wholesale traders largely depend on cash for transactions. Nearly half of the total transactions take place in cash and the rest on credit. Distributors demand upfront payments in cash when they get orders.

This is because distributors have to pay farmers and transporters up front. They do not mind if the balance is paid by cheque, he said.

According to Lahoti, the scarcity of liquidity has badly hit businesses. “It seems there will be temporary scarcity of food grains in the open market in the coming days,” he said. “It’s important to restore the cash flow at the earliest and help businesses stabilise.”

Contrary to rumours, there is no scarcity of edible salt. “We have learnt that small traders in some towns in North Karnataka are hoarding salt. “That’s mainly because of rumours in other parts of the country that there will be shortage of salt,” said A K A Rajappa, a wholesale salt trader in Bengaluru. “People need not worry. There is sufficient supply of edible salt and we don’t see any problem in the coming days.”

Harsh Gupta, secretary, Food, Civil Supplies and Consumer Affairs Department, said they were monitoring the situation and warned of action against hoarders of essential items.
“The state government procures salt in large quantity every month to supply it to BPL families under the public distribution system. There has been no problem in the supply. Scarcity is unlikely to arise as salt is produced throughout the year,” he said.