The Union government on Friday invoked the Essential Commodities Act to put curbs on the quantities of pulses traders, including retailers, can store at their end, a measure known as stock-holding limit, in a move to check rising prices of food commodities.
The step took effect on July 2 and will be in force till October 31. The government enforced stock limits for all pulses, except moong (a type of gram), according to a gazette notification.
Retailers and grocers can stock no more than five tonnes, while wholesalers can at any point have only 200 tonnes of pulses in their warehouses.
Millers cannot have more than 25% of their annual installed capacity as stocks, while importers too can’t hold more than 200 tonnes of stocks imported before May 15, 2021. Stocks imported after that date will also qualify for a limit of 200 tonne after 45 days from date of customs clearance.
The measures are essentially aimed at improving supplies by way of releasing more pulses into the market for retail sales.
Retail prices, as measured by the Consumer Price Index, jumped to 6.3% in May 2021 compared to a 4.23% rise in April, according to latest data.
Prices of food and beverages rose to 5.24%, driven by oils and pulses prices. The Union government this week also cut the import tariff on palm oil by 5% to make edible oil cheaper.
While the measures could ease consumer prices, economists have often said frequent interventions, such as enforcing stock-holding limits, tend to suppress farm incomes.
A landmark 2018 study by the Organisation of Economic Cooperation and Development, a grouping of 36 nations, and the Indian research firm ICRIER led by noted farm economist Ashok Gulati blamed policies to keep food prices low as one of the reasons for poor farm incomes.
However, policymakers say costlier food can stoke hunger among poor Indian households, who tend to spend the highest on food as a proportion of their monthly budget. “High inflation is also damaging for the economy,” said Leena Nandan, secretary of consumer affairs.