The Centre’s decision to bring onions and potatoes under the Essential Commodities Act, 1955, and permit states to slap stockholding limits on the two kitchen staples is indicative of a panic reaction within the administration. The step comes close on the heels of the commerce ministry’s announcement of a hike in the minimum export price for onions to $500 per tonne. Just last month, an MEP for onions had been re-introduced at $300 per tonne by the NDA government, barely three months after the previous government had abolished it in March. On June 26, the government had also imposed an MEP of $450 per tonne for potatoes.
What seems to have been ignored amid this flurry is the fact that a surge in the prices of onions and potatoes during this period is not an abnormal trend. Retail prices, especially of fruit and vegetables, spike in peak summer, which does not indicate any endemic shortage, and are subsequently quelled once the new crop arrives post-monsoon. The situation might be slightly aggravated this year on account of the damage caused to the rabi onion crop due to untimely rains and hail in April-May.
Despite its reformist credentials, the BJP seems to have taken a far more rigid stance when it comes to controls on onion and potato trade, considering that both these commodities were placed under the Essential Commodities Act from 1999 to 2004, before being removed by the UPA government. Now both are back on the list — a move that empowers state governments to undertake anti-hoarding operations and set their own stockholding limits for retailers. While there could be some grounds for concern on hoarding in the wake of predictions of a poor monsoon, a crackdown on hoarders could, at best, offer short-term relief.
Besides, the imposition of stock limits is fraught with the risk of aggravating the situation and triggering a further price rise. Experts suggest more liberal import policies alongside a push for processed food, which is needed to help stabilise prices in the medium term. Plus, the advisory to states to de-list fruit and vegetables from their APMC acts can only work if most states are on board. This would also require adequate platforms for buyers to source directly from farmers and the private sector needs to be encouraged to start its own markets to compete with the APMC mandis. Plus, a push to big-box retail could stem wastage and bypass commission agents. The BJP could make a start by reviewing its ill-advised opposition to FDI in multibrand retail.
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