India proposes to deregulate prices of onions, potatoes, pulses and other essential food — prices won’t be capped and one can store as much as needed

• Finance Minister Nirmala Sitharaman has announced that the Essential Commodities Act will no longer regulate essential commodities like cereals, edible pills, onions and potatoes.
• If there any exceptions to be made, they will only be considered during times of natural calamities or famine.
• In order to prevent seasonal fluctuations, like with onion prices, the government is working towards improving storage facilities and other measures.

Agricultural items — including cereals, edible oils, oilseeds, pulses, onions and potatoes — will no longer be covered under the Essential Commodities Act and face deregulation. This means the government will no longer be setting the maximum retail price (MRP) during times of excess supply or demand.

Finance Minister Nirmala Sitharaman, in her third instalment of announcements this week, said that this will help enable price realisation for farmers by attracting investments and making agriculture more competitive.

“Now, farmers are producing, there’s an abundance of crops which sometimes leads to issues. For instance, sometimes they want to export but we don’t permit them to export because we want to be sure that the prices in India don’t go up. Because of a flip-flop sometimes, farmers don’t get the benefits. Some other times, the consumers suffer,” she explained.

So, what will happen when onion prices surge?
“There has been a lot of discussion around perishable items like onions, which are seasonal. We are working with state governments to improve storage facilities, drying processes, and allow them to export, whenever possible,” said Sitharaman.

The stock limit will only be imposed under very exceptional circumstances, like national calamities and famine when there’s a surge in prices. However, no stock limits will be imposed on processors or value chain participants, who are subject to their installed capacity. They will also not be imposed on any exporter to the export demand.

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