The Cabinet Committee on Economic Affairs (CCEA) on 2 July 2014 approved the inclusion of onion and potato under the purview of stock holding limits under the Essential Commodities Act 1955. The inclusion will remain in force for a year.
CCEA’s decision was taken after six states, Delhi, Chhattisgarh, Madhya Pradesh, Mizoram, Tripura and West Bengal requested the centre for such a measure.
With this inclusion, the State governments have been empowered to undertake de-hoarding operations of onion and potato based on local conditions, to control the prices. This de-hoarding operations include limits/licensing requirements and others.
The decision will help in tackling the problem of price rise and improve availability of these commodities to general public especially vulnerable sections.
Other decision taken by CCEA to tackle food price inflation
• CCEA increased the minimum export prices (MEP) of onion by 67 percent to 500 US dollar per tonne from 300 US dollars/tonne. A higher MEP would mean that exports will become costlier and no longer profitable for traders. Earlier on 26 June 2014, the Union Government had imposed an MEP of 450 US dollars/tonne for potato.
• It also approved additional allocation of 50 lakh tonnes of rice for distribution to Below Poverty Line and Above Poverty Line families for the July 2014 to March 2015 period. The allocations were approved in view of the persistent demand from States and Union Territories for more foodgrains to meet their targeted public distribution system requirements. This will mitigate the problems of people affected by food price inflation, particularly in States where the National Food Security Act has not been implemented so far.
• It also approved the continuation of the scheme to modernize and strengthen intellectual property offices. The overall project cost would be 309.6 crore rupees. The scheme will address the increase in the number of filings of intellectual property applications.
The reasons for such a move by CCEA
• In May 2014, inflation based on the wholesale price index rose at the quickest pace since December 2013 to 6.01%. The increase in WPI was led by an increase in food prices, especially that of potatoes, fruits, eggs and fish.
• In the coming months, the threat of inadequate rainfall is expected to exert further pressure on food prices. Rainfall in June was 42% lower than normal.
• A lot of speculative elements get into the pricing of onions and potatoes and this has a cascading impact on prices of other vegetables as well.
About Essential Commodities Act, 1955
The Essential Commodities Act, 1955 was enacted to ensure the easy availability of essential commodities to consumers and to protect them from exploitation by unscrupulous traders. The Act provides certain rights to maintain and increase supplies by securing equitable distribution and availability at fair prices and they are
• Regulation and control of production
• Distribution and pricing of commodities
At present the stock limits are imposed on pulses edible oils and oilseeds till September 2014, while on rice and paddy, the stock limits are imposed till November 2014.
About Stockholding limit under ESA, 1955
A stockholding limit ensures that traders cannot stock more than a prescribed quantum. If it is found that traders are holding more than the prescribed limit, they can be fined and, in some cases, even prosecuted. Currently, stock limit provisions exist for various foodgrains and cereals under the Essential Commodities Act, 1955
When: on 2 July 2014