It is tough to please everyone. The clampdown on the hoarders of onions and potatoes following the sharp rise in their prices in the retail markets has elicited criticism that the Modi Government is resorting to the tools of the long-rejected socialist era. It is pointed out that fixing unduly high minimum export price for onions in order to moderate their price in the domestic market is also counter-productive and a throwback to the socialist years. Even the re-listing of onion and potatoes in the Essential Commodities Act, 1955, is being dubbed anti-market and anti-farmer. Maybe there is some merit in the above criticism. A new government, faced with an inordinately sharp rise in the price of what are essentially staples of every kitchen in much of the country has reason to be concerned about the popular reaction. Given that it can neither augment supply of these essentials overnight nor force the retailers to depress the prices against their will, it had to do whatever it felt was necessary to moderate the price rise. Seasonal factors play a major role in the rise of prices of onions and potatoes at this time of the year. Nonetheless, the new government in Delhi undertook raids on wholesale traders suspected of hoarding these items. The threat of arrest under the Essential Commodities Act might have dissuaded a number of traders to offload their hoarded goods in the market, but the truth is that this has had a marginal effect on the actual price of onions and potatoes in the retail market. It is essentially the hiatus of a month or two between the arrival of new crops and the onset of monsoons which disrupts supplies and even causes damage to the old produce and the new crops. As for raising the minimum export price for onions and potatoes, there will be little incentive for exports if the traders can realise the same or higher prices from the domestic markets. In short, neither the resort to the essential commodities law nor the fixing of minimum export prices is likely to be a durable solution to the seasonal spurt in the prices of onions and potatoes. What will help is a boost in production, a boost in the cold storage facilities throughout the producing areas, and the elimination of layers of middlemen between growers and retailers. There is no denying the fact that growers are shortchanged by middlemen who sell their produce at a huge mark-up. Therefore, the restrictions on farmers to sell their produce in the Agricultural Produce Marketing Committee Acts must be reconsidered. The high levies imposed on vegetable and fruit ‘mandis’ by the local governments too need to be reduced.
Since it is for each state to lift some of the more stringent restrictions in the APMC Act, it will take time. In the meantime, the government has advised the states to de-list onions and potatoes from the APMC law. In the Union Territory of Delhi, in fact, a direct farmers’ market is being planned, which should be up and running by September. The idea is to moderate the prices in other markets, including the wholesale Azadpur Market, Asia’s largest fruit and vegetable market. Indeed, the growing network of domestic retail chains owned by various corporate houses can help in keeping onion and potato prices in check by buying and cold-storing huge quantities for sale during the lean monsoon season. Also, imports of sizeable quantities of onions and potatoes to contain runaway rise in their prices could be of some help. But, eventually, it is the supply side concerns that would need to be addressed if a lasting solution is to be found to the annual panic in the corridors of power in New Delhi about the sky-high rise in the prices of what are every Indian’s kitchen staple. No government can perform miracles, not in a few weeks of its existence.
