23/03/2008 (The Daily Star, Bangladesh) - With the inflation inching towards the six percent mark, the Indian government has reduced customs duty on rice and edible oils drastically to rein in their prices in domestic market.

The customs duty on rice has been cut to nil from 70 percent, duties on all crude and refined edible oils were slashed from the existing levels of 52 percent and 75 percent to 20 percent and 27.5 percent.

The measures came close on the heels of Finance Minister Palaniappan Chidambaram's assurance in Parliament on Monday that the government would take all steps, including fiscal actions, to contain inflation.

The duty cut, to be available until March 31, 2009, is expected to help in cushioning the domestic prices of the commodities from the rise in prices in international markets.

Following the duty cut, semi-milled or wholly-milled rice imports would attract nil customs duty instead of 70 percent. Prices of rice have increased considerably from $430 in August 2007 to $590 in February this year.

Spurred by a rise in demand, international prices of edible oils have risen steadily in recent months and domestic prices have also gone up despite two separate rounds of cut in customs duty on palm oil in April 2007 and again in July the same year.

The government has already slapped a ban on export of all edible oils for one year with effect from March 17 this year to help curb rising prices.

The government aims at easing supply-side constraints so that prices of essential commodities and input commodities remain under control by making imports cheaper.

Rising food prices in international market have made it difficult for Indian government to import these items and still check inflation.

India's annual inflation reached 5.92 percent last week, a ten-month high, blighting chances of an interest rate cut, which the industries have been hoping for to spur a slow-down in the economy.

The inflation beyond the comfort level projected by the Reserve Bank of India was driven by rise in prices of edible oils, pulses, fruits, vegetables and spices and has become a matter of concern for the Congress-led coalition government that faces a string of elections to state legislatures in the coming months.

Last week, Chidambaram blamed the inflation on rising international prices of crude oil, commodities and foodgrains.

The Prime Minister's Economic Advisory Council's Chairman C Rangarajan said the inflation rate did not favour an early cut in interest rates to bolster slowing economic growth. The interest rate was hiked nine times since 2004.