Govt. limits wheat stocks to control price rise, hoarding
Context
The Union government has decided to lower the stock limits of wheat for traders, wholesalers, retailers, big chain shops, and processors in all States and Union Territories due to rising wheat prices and concerns about hoarding ahead of the holiday season.
What is Stock Limit Reduction?
- In the context of agriculture, the term “stock limit reduction” refers to the government limiting the quantity of a commodity that dealers, wholesalers, and retailers may stock. For instance, following a 4% increase in wheat prices, the government cut the wheat stock limit from 3,000 tonnes to 2,000 tonnes. The purpose of the government’s price support strategy is to safeguard farmers from sudden decreases in farm prices.
- 200 tonnes is the wholesaler stock limit for pulses, and 5 tonnes is the retailer stock limit. Millers are permitted to stock 25% of their yearly capacity or the equivalent of the previous three months’ worth of production.
- Pulses were subject to stock limits by the government because India has an excess of the majority of agricultural products. Farmers were unable to obtain reasonable prices.
What was the need for the Government to introduce Stock Limitation Reduction?
- The government decided to lower the wheat stock limits for processors, big-chain shops, retailers, and traders to address an observed increase in wheat prices as well as to avoid any potential stockpiling of wheat in advance of the holiday season.
- The government attributed this rise in wheat prices to “artificial scarcity” produced by some people or organizations that had more wheat than they required. Hoarding-induced artificial scarcity may result in price increases and supply restrictions that could be detrimental to consumers.
- To control wheat supplies, maintain price stability, and guard against potential price gouging and market shortages, the government made this choice.
What are the other steps taken along with Stock Limit reduction?
- Required Registration: Registration on the wheat stock limit site is necessary for all organizations engaged in stocking wheat.
- Updates on Stock: Registered parties are required to submit regular updates on their wheat stock interests. They must specifically update their stock levels every Friday.
- Punitive Action for Non-Compliance: Organizations that do not register on the portal or transgress the recently enacted stock limitations may be subject to sanctions. Sections 6 and 7 of the Essential Commodities Act of 1955 allow for this type of action.
- Stock Reduction Period: A 30-day grace period is provided to entities with wheat holdings that exceed the recently established ceiling of 2,000 MT. They are anticipated to reduce their supply at this time to adhere to the new limit.
- Government oversight: Representatives from the central and state governments will closely watch how these stock limits are applied. By ensuring that the new rules are followed, it is intended to stop the country from experiencing artificial shortages.
What are other ways in which we can curb the hoarding of food products?
- Enforce Strict limitations: Governments have the authority to impose strict limitations on stock limits for commodities like grains, pulses, and edible oils. Based on the state of the market, these upper bounds ought to be examined and modified from time to time.
- Regular Inspections and Monitoring: Set up a system for routine monitoring and inspections of storage facilities and warehouses to look for excessive hoarding and stockpiling.
- Transparent Reporting: Require companies that deal in and store food commodities to keep transparent records of their stock levels and submit frequent reports to the appropriate authorities.
- Market research and observation: To spot potential hoarding behaviours early on and take preventative measures, invest in market information and monitoring technologies.
- Price Alerts & Monitoring: Implement price monitoring tools and alert systems to look for rapid price increases that could be signs of hoarding.
Conclusion:
In conclusion, the government’s efforts are intended to control wheat supplies, avoid creating an artificial scarcity, and maintain stable prices for necessities during the holiday season. Reduced stock limitations, required registration, monitoring, and assurances for the supply of necessities are a few of these approaches.
