As onion prices soar, govt sets stock limit for traders

Onion prices are currently more than 100% of the past five years’ average, prompting the government to declare them as an essential commodity and imposing limits on how much traders can store.

Retail traders of onion can stock onion only up to two tonne of the vegetable, while wholesale traders are permitted store up to 25 tonne, the consumer affairs ministry said Friday, a measure aimed at discouraging hoarding of the bulb, as prices spiral during the ongoing festive season.

Rains in Maharashtra, Karnataka and Telangana have disrupted harvests and damaged crops, trimming supplies to markets.

“The all-India average retail price variation of onions as on 21 October when compared to last year is 22.12 % (from ₹45.33 to ₹55.60 per/kg) and when compared to last five years’ average is 114.96 % (from ₹25.87 to 55.60 per/ kg). Therefore, the prices have increased by over 100% when compared with average of last 5 years and thus the price triggers under EC Act have been reached,” the ministry said.

Price levels needed to invoke stock limits under the recently amended Essential Commodities Act have been breached and the stockholding limits will be in place till December 31, consumer affairs secretary Leena Nandan said. The Essential Commodities (Amendment) law, passed last month in Parliament, allows the government to regulate perishable commodities when an extraordinary price rise occurs.

The ministry statement further said: “In order to moderate the price rise, the government took a pre-emptive step by announcing a ban on onion export on 14 September so as to ensure availability to domestic consumers at reasonable rates, before the expected arrival of Kharif onion.”

It added: “Thus the retail price rise was moderated to some extent, but recent reports of heavy rainfall in the onion growing districts of Maharashtra, Karnataka,Andhra Pradesh and Madhya Pradeshhave created concerns about damage to Kharif crop.”

On Twitter, consumer affairs minister Piyush Goyal said: “To control rising onion prices and curb hoarding, PM @NarendraModi government has taken the third step. Imposed stock limit of 2 tonne on retailers and 25 tonne on wholesalers.”

The two earlier steps were to impose a ban on exports on Sept 5 and offloading of onions from the a federally held reserve.

“Past experiences show that during sustained supply-side pressures, measures such as stock-holding limits may not dramatically alter the demand-supply mismatch,” said Abhishek Agrawal of Comtrade, a commodities trading firm.