State push back on Centres stock holding limit plan

Written by fe Bureau | New Delhi | Updated: Jul 5 2014, 06:09am hrs
FmFinance minister Arun Jaitley, food minister Ramvilas Paswan and agriculture minister Radha Mohan Singh arrive for the State Food Ministers Conference in New Delhi on Friday PTI
The government on Wednesday invoked the anachronistic Essential Commodities Act to impel states to clamp down on imagined hoarders of onions and potatoes, but in the meeting of state food ministers on price rise called by the Centre here on Friday, many states including Maharashtra, the largest producer of onions, said they would rather refrain from imposing stock limits on the two items.

The apparent reason for the states reluctance is that if anyone hoards these items, it could also be farmers, who want to benefit from the short interval of relatively high prices before fresh crops arrive in September. Raiding the farmers is the last thing governments do, especially when assembly polls are around the corner in some of the sates.

Sources said a number of states ministers who attended Fridays meet to chalk out a strategy to control prices expressed reservations on putting stock holding limits on potatoes and onions as it could impact farmers income, and also cited the lack of adequate manpower with the states food department.

But that did not prevent food minister Ram Vilas Paswan from sounding more strident against hoarders. The food ministry, he said, would make the Essential Commodities Act more stringent by making offences under it non-bailable. The Centre has also mooted the creation of a price stabilisation fund, which could be used by the states for carrying out market intervention to ensure that prices do not spike.

Finance minister Arun Jaitley, who chaired the state food ministers meeting, said some rise in the prices of potatoes and onions (much less than the spike last year) was not an issue of scarcity but of improving supplies through efficient distribution. There is no dearth of stocks, he said, allaying fears of a price spiral.

Under the agreed action plan for the next six months, the Centre has asked states to map stocks of essential commodities such as rice, wheat and pulses and take necessary steps to augment supplies.

States will set up price monitoring cells for essential agricultural commodities for keeping a watch on the price moment, a food ministry official said.

States, the official said, would also be setting up a revolving fund for bulk purchase of agricultural commodities when prices start to rise. These commodities would be then distributed through the public distribution system.

Meanwhile, agriculture minister Radha Mohan Singh insisted that an artificial shortage created by hoarders is responsible for the increase in prices of some of the food items. There is a need to improve supply chains and storage facilities for the smooth supply of perishable commodities such as fruits and vegetables. Besides, there is an urgent need for market integration, improved market infrastructure and better market information, Singh noted.

While asking states to take strong action against hoarders of potatoes and onions, Jaitley said the test of good governance is how to 'de-hoard' the stock kept by intermediaries into the market to rein in prices. The government imposed a minimum export price (MEP) on onions and potatoes recently. It notified the inclusion of onions and potatoes under the ECA on Thursday.

Onion prices rose 47% in the week between June 24 and July 1 in Delhi, according to Agriwatch. Headline retail inflation eased from a three-month peak of 8.59% in April to 8.28% in May, although higher food prices helped drive overall wholesale price inflation to hit a five-month high of 6.01% last month. Retail food and beverage inflation eased a bit to 9.40% last month against 9.66% in April, while wholesale price food inflation rose to 9.50% in May from 8.64% a month earlier.