Deregulation? Govt imposes stock limits on onion

In a knee-jerk reaction, the Centre on Friday imposed stock holding limits on onion prescribing maximum quantity of 25 tonne for wholesalers and 2 tonne for retailers, until December 31, to arrest the rising prices of the vegetable.

The decision came in less than five months after it promulgated an ordinance amending the Essential Commodities (EC) Act to ‘de-regulate” key foodstuffs such as cereals, edible oils, oilseeds, pulses, onions and potato from its purview.

FE had reported on June 9 how a rider on ‘extraordinary price rise’ in the amended law could still give the government a chance to impose stock limits and other restrictions. Analysts had apprehended that the rider could stymie the objective of spurring private investments in agriculture value chain, including in the capital-intensive warehousing and cold- chain infrastructure.

Addressing the media, consumer affairs secretary Leena Nandan said : “Steady increase in onion prices noticed since second week of September and as a first step the government started releasing from its buffer stocks. Then ban on export was also imposed last month while import norms have been relaxed.”

As on October 21, the average retail price of onion in the country was Rs 55.60/kg, which was more than double the average level in the last 5 years, officials said. By imposing the stock limit, the government will assess how much stock is left with whom.

According to the amended EC Act, “any action on imposing stock limit shall be based on price rise and an order for regulating stock limit of any agricultural produce may be issued under this Act only if there is 100% increase in retail price of horticultural produce and 50% in non-perishable agricultural foodstuffs”. The defined price rises will be computed “over the price prevailing immediately preceding 12 months, or average retail price of last 5 years, whichever is lower.”

Nandan said that there would be calibrated release of onion from the buffer stocks maintained by Nafed till next kharif onion crop arrives in the market. So far, 42,000 tonne have already been released from the buffer stocks and the Centre is selling these onions to the state governments at Rs 25/kg. Public sector firm MMTC has been asked to import onion, the consumer affairs secretary said.

The price rise should not have happened since there was 14.5% increase in onion production at 261 lakh tonne in 2019-20 from the previous year, she said. She also said that that the current price rise is a cyclical factor, happened during this period in some years due to delayed arrival of kharif crop and exhaust of rabi crop.