Finance Minister Pranab Mukherjee on Friday said the government will strengthen and improve the public distribution system (PDS) to protect consumers, as rising prices of essential commodities continue to push up food inflation.

He also indicated the government could rewrite the new direct tax code to make it acceptable to all stakeholders.

Inflation in food articles touched 19.05 per cent for the week ended November 28 against 10.48 per cent a year ago. The last time inflation in food articles had crossed the 20 per cent mark was in 1998.

To insulate (the common man) from the adverse impact of price rise we are improving the PDS, Mr Mukherjee said while replying to a discussion on the first batch of supplementary demands for grants in the Lok Sabha.

The supplementary demand for grants was later approved by the House. It seeks to raise public expenditure by Rs 25,725 crore over and above the expenditure approved by Parliament in Budget 2009-10.

Mr Mukherjee noted that rising prices were largely due to supply shortage. The price rise is not because of demand management. It is largely due to shortage of supply. Edible oils, sugar and pulses are the things most affected by the price rise, he said.

The FM highlighted the steps taken by the government to improve supplies of essential food items like pulses and sugar, the prices of which have shot up significantly during the year. He also mooted incentives to farmers for growing pulses, with imports getting scarce.

On the tax code, he said, the government would attempt to build consensus on the proposals. I have laid a certain proposal in the form of a direct tax code. But it is not the Bhagwad Gita and it cannot be said that it cannot be changed, he added.

The new draft direct tax code has evoked strong reactions from all quartersindividuals, industry, politicians, ministries and departments. The code proposes to phase out tax exemptions, tax individual retirement savings at the time of withdrawal and impose a minimum alternate tax on gross assets of companies.

Mr Mukherjee also sought to allay fears that the additional expenditure would entail additional borrowings.

With the prevailing trends in receipts and expenditure, coupled with better than expected performance of the economy during the second quarter of 2009-10, it is expected that the fiscal deficit will remain within the estimate of 6.8% presented in the Budget in July 2009.

The FM said the government borrowings were front-loaded in the first half of FY10 to ensure there was adequate space for the private sector in the second half.