With inflation crippling the economy, imposing limits on food-grain stocking is increas-ingly being considered as a weapon to mitigate prices. Acting on the Centre's directive, Karnataka has now joined the likes of Delhi and Uttar Pradesh by slapping stock limits on essential commodities including wheat, pulses and edible oils.
"As per the Union government's directive, the government of Karnataka has issued orders in exercise of the powers conferred by the Essential Commodities Act, 1955," B Shivappa, Additional Director, Food Civil Supply and Consumer Affairs Depart-ment informed BusinessStandard.
As per the new norms, prescribed under the Kar-nataka Essential Commodities Licensing (Amendment) Order, 2008, a licensed trader in Karnataka can now store only up to 1,000 quintals of wheat, 1,000 quintals of pulses, 800 quintals of edible oil, 2000 quintals of oil seeds, 1500 quintals of rice, 3000 quintals of paddy and 150 kilo litres of kerosene at any given point of time.
In the case of wheat and pulses the stock restrictions hold good for a period of six months and for edible oils, oil seeds and rice, the restriction period is one year, which may be extended later.
State food authorities and the police would be authorised to search storehouses to ensure that nobody violates norms. "The purpose is to put a curb on hoarding. Imposing stock limits may increase supply in the open market and prices will subsequently fall," said Shivappa.
However, in the post-liberalisation era, there are few takers for this hypothesis. Experts are of the opinion that supply control policy will not work in the present scenario. On the other hand it will lead to malpractices and black market.
"Stock limit was taken as a measure in the traditional economy. However, it has no meaning in the liberalised economy. Imposing quantitative restrictions signals that we are back to the Licence Raj," said R S Deshpande, professor and Head, agricultural development and rural transformation centre, Institute for Social and Economic Change, Bangalore. According to him, it is very difficult to implement the stock limits legally as there will be unholy nexus between some influential traders and the implementing officials.
Coming to stock limits, traders in Bangalore city have another point to make. Rameshchandra Lahoti, president, The Bangalore Wholesale Foodgrains and Pulses Merchants Association remarked: "We cater to about two crore people in and around Bangalore city, whereas traders in remote areas cater to less than 50,000 population. How can all traders be treated on par and imposed the same stock limits?" Rameshchandra has written a letter to the food and civil supplies department asking to raise the quantity limits for traders in Bangalore city.
"Stock limits will only create problems in the supply chain and prices, instead of coming down, may go up," he said. Instead, he maintains, the government should ban future trading in all the essential commodities to control spiralling prices.
D S Sridhar, president, central organisation for oil industry and trade, says re-imposition of controls may result in harassment of traders by authorities. "It is likely that even the traders who are not violating norms will be made scapegoats," he remarked.
Stock limit restrictions under the Essential Commodities Act were withdrawn in 2002 by the NDA government and dealers were allowed to freely buy and stock foodgrains. It was the UPA government, which, about one-and-a-half years' ago, restored the the power of states to control the supply and distribution of essential commodities.
The central government's Cabinet Committee on Prices (CCP) has now been urging all states to impose the stock limit norms.
Meanwhile, according to reports, a group, chaired by Planning Commission member Anwarul Hoda has pointed out that stock limits have failed to check prices. "The re-imposition of controls on wheat and pulses has not had any favourable effect on the prices and on the other hand, it has only added to the costs of dealing with the commodities at the retail level," the group is learnt to have said in its report submitted to the Planning Commission.
