Stock Limits on Wheat and Pulses

Context:

The Ministry of Consumer Affairs, Food & Public Distribution has recently implemented restrictions on the quantity of wheat that traders, wholesalers, retailers, big chain retailers, and processors can stock. These measures aim to ensure food security and prevent hoarding and unfair speculation. Additionally, the ministry has invoked the Essential Commodities Act (ECA), 1955 to impose stock limits on Tur and Urad for similar reasons.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

1. Why are stock limits being imposed?
2. Government orders regarding wheat stock limits
3. Government seeks several outcomes through the imposed orders
4. Essential Commodities Act (ECA) 1955

Why are stock limits being imposed?

Concerns over wheat production:

• Unseasonal rains, hailstorms, and higher temperatures in February 2023 have raised concerns about the overall wheat output.
• This lower production can lead to higher prices that may surpass the government’s purchase prices and affect supply stability.
• Initial estimates indicate a potential 20% decrease in wheat procurement.

Crop damage:

• Approximately 5.23 lakh hectares of wheat crop in Madhya Pradesh, Rajasthan, and Uttar Pradesh were estimated to be damaged due to hailstorms.
• The India Meteorological Department had issued warnings about adverse effects on wheat crops due to higher temperatures during the reproductive growth period.

Price rise in pulses:

• Tur prices have been rising since mid-July 2022 due to slow progress in Kharif sowing compared to the previous year.
• Excess rainfall and waterlogging conditions in major tur-growing states like Karnataka, Maharashtra, and Madhya Pradesh have contributed to this situation.

Preventing price rise and ensuring availability:

• To control any unwarranted price rise, the government is taking pre-emptive steps to ensure overall availability and controlled prices of pulses in both domestic and overseas markets.

Government orders regarding wheat stock limits:

• Permissible stock limits have been set as follows:
  • Traders/wholesalers: 3,000 metric tonnes
  • Retailers: 10 metric tonnes at each outlet
  • Big chain retailers: 3,000 metric tonnes at all depots (combined)
• Processors are allowed to stock up to 75% of their annual installed capacity.
• Entities are required to declare their stock positions regularly on the Department of Food and Public Distribution’s portal.
• If stocks held exceed the prescribed limits, entities have 30 days from the day of issuing the notification to bring them under the prescribed limits.

Open Market Sale Scheme (OMSS) for wheat:

• The government has decided to sell 15 lakh tonnes of wheat from the central pool through the OMSS.
• Wheat will be sold via e-auction to flour mills, private traders, bulk buyers, and manufacturers of wheat products.
• The sale will be conducted in lot sizes of 10 to 100 metric tonnes, and additional batches may be released based on prices and demand.

Similar plan for rice:

• A similar plan is being considered for offloading rice to help moderate its prices.

Government seeks several outcomes through the imposed orders

• Stabilize Wheat Prices: The government aims to stabilize wheat prices in the market by preventing hoarding and speculation. The imposition of stock limits on traders, wholesalers, and retailers helps maintain a steady supply of wheat and avoids price volatility.
• Affordable Wheat for Consumers: By stabilizing prices, the government intends to make wheat more affordable for consumers. This ensures that the essential food commodity remains accessible to the public at reasonable rates.
• Prevent Supply Shortages: The government’s focus on monitoring and managing stock limits helps prevent supply shortages of wheat in the market. This ensures an adequate supply to meet the demand, especially for vulnerable sections of society who rely on government schemes like the Public Distribution System for food security.
• Maintain Food Security: Ensuring a consistent supply of wheat and avoiding price fluctuations contributes to maintaining food security in the country. By implementing measures to control the wheat market, the government aims to ensure that essential commodities are available to all sections of the population.

Essential Commodities Act (ECA) 1955

The Essential Commodities Act (ECA) of 1955 was enacted during a time when India faced food scarcity and relied on imports to feed its population. The act was introduced to prevent hoarding and black marketing of foodstuffs. Here are some key points about the Essential Commodities Act of 1955:

Objective

• The act was enacted to address the scarcity of foodstuffs in the country and to prevent hoarding and black marketing.
• It was introduced when India depended on imports and assistance to meet its food requirements.

Control of Essential Commodities:

• The act allows the central government to exercise control over the trade of a wide range of commodities deemed essential.
• The specific commodities considered essential are listed in the Schedule of the Act.
• The central government has the power to add or remove commodities from the Schedule.

Centre’s Role:

• The central government has the authority to notify a commodity as essential, in consultation with state governments.
• If the central government deems it necessary in the public interest, it can declare an item as essential.

Impact and Powers:

• When a commodity is declared essential, the government can regulate its production, supply, and distribution.
• The government has the power to impose stock limits on essential commodities.
• The act provides mechanisms for controlling prices and preventing artificial scarcity.

-Source: The Hindu