Centre invokes new Essential Commodities Act to set stock limits on onion

The Centre today imposed limits on the extent of onion stocks that traders and wholesalers can hold invoking a provision of the newly amended Essential Commodities Act of 1955.

The stock holding limits will be in force till December 2020.

As per the Central order, retailers won’t be allowed to hold more than two tonnes of onions with them while for wholesalers this limit will be 25 tonnes.

The Essential Commodities Act, 1955, amended a few weeks back, says the Centre will not impose stock holding limits unless there are extraordinary circumstances such as drought, floods, natural calamity or exceptional spike in prices.

Exceptional increase in prices in the case of perishables such as onions is defined in the Act as 100 per cent spurt in retail prices over that prevailing in the immediate 12 months or the average retail price of last five years, whichever is lower.

Onion prices, in the retail markets of some places such as Chennai have jumped by over 107 per cent between October 1 to 22, while in Mumbai and Kolkata it has increased by over 40 per cent during the same period, data from the department of consumer affairs show (see chart).

“The Central government has taken numerous steps in the last few weeks to stabilize onion prices including a ban on exports but the prices were rising due to damage to standing crop in Maharashtra and Karnataka which was being exploited by traders. Now, after today’s decision, no one can hoard the onions and manipulate the prices,” union consumer affairs secretary Leena Nandan told reporters.

She said the rabi onion which is the biggest among all the onion crop seasons in India is harvested around February and March and stored for the remaining months which continues till September- October. After which the next crop starts coming in the market.

However, this year the new crop arrivals have been delayed due to rains and there has been some damage as well, which the traders are exploiting to manipulate the prices.

“Against a production of 4.3 million tonnes in kharif, states say that the output now will be around 3.7 million tonnes,” Nandan said. India is estimated to have produced 26.1 million tonnes of onion in 2019-20, which is among the highest in last few years.

The exports of onions too have been heavy this year, which has also added on to the current shortage.

Nandan said that till September 2020, around 1.5 million tonnes have been exported this year which is equivalent to the full year exports of 2019-20 financial year.

Meanwhile, state-run Nafed has aggressively started liquidating its onion inventories to cool down prices. It held around 99,000 tonnes of the bulb, of which some 43,000 tonnes have already been sold via states and its own network.

“We are offering onions at Rs 25 a kg to the states,” Nafed Managing Director Sanjeev Chadha said. That apart, the Centre has also relaxed the import norms and directed state-run trading arm, MMTC to float tenders for import of fresh red onions in the next few weeks.

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