Continuing its battle against inflation, the government on Wednesday decided to bring onions and potatoes under the Essential Commodities Act (ECA), a move that would enable states to put stock holding limits and crack down on hoarding of these items.
The Cabinet Committee on Economic Affairs also approved an additional allocation of 5 million tonnes of rice for supply through the public distribution system (PDS). The extra allocation of rice ó the release of which would be as per the demand from states ó would be for the July 2014-March 2015 period or the until the National Food Security Act (NFSA) is implemented by the state concerned.
The Centre had recently asked state governments to implement the NFSA latest by October 5.
Analysts, however, discounted the efficacy of the extra grain supplies, saying a better policy would have been to offload the stocks in the open market. Higher rice stocks with Food Corporation of India and other procurement agencies create artificial scarcity in the market.
The decisions came as wholesale price inflation in essential items such as rice and onions rose significantly in the last fiscal, far exceeding a 5.97% headline inflation. Inflation in onions jumped 107.4% in the last fiscal, even on a high base of 24.6% in 2012-13, while that in potatoes hit 6.3% in 2013-14, mainly due to a favourable base of 60.45% in the previous year. Similarly, wholesale price inflation in rice surged to 16.51% in the last fiscal, compared with 12.69% a year earlier. The sharp price rise in such articles aided a rally in food inflation which hit 12.8% in the last fiscal, against 9.89% in the previous year.
Announcing the CCEA decision to put onions and potatoes under ECA ambit (a notification is due shortly), law minister Ravi Shankar Prasad said the stock holding limit on these two items will remain in effect for a year. At present, there are stock limits on pulses, edible oils and oilseeds till September 2014 and till November for rice and paddy. ďThis decision is expected to help in the efforts being taken to tackle the problem of rising prices and also improve the availability of these commodities to the general public especially vulnerable sections,Ē an official statement said.
Prasad said the government was taking various measures to curb the rise in onion and potato prices, which have risen in the past few weeks mostly in anticipation of deficient monsoon