The Cabinet Committee on Economic Affairs' (CCEA) decision assumes political significance not just in the context of the government's attempts to rein in inflation, but also because it means a reversion to the system prevalent in the Atal Behari Vajpayee government that was overturned by the UPA regime soon after it came to power in 2004.
Several states, including Mamata Banerjee-led West Bengal, had asked the Centre to take this step to enable them to fight inflation by cracking down on hoarders trying to create an artificial scarcity in these commodities, union law, justice and telecom minister Ravi Shankar Prasad said.
"The government was getting complaints that despite adequate supplies, onions and potato prices are shooting up. We have also received complaints about hoarding and six states had asked for invoking the Essential Commodities law," Prasad said after the cabinet meet on Wednesday.
The notification to bring potatoes and onions under the law, whose enforcement is the responsibility of state governments, will be issued on Thursday, for a period of one year.
Apart from West Bengal, the state governments of Delhi, Chhattisgarh, Madhya Pradesh, Mizoram and Tripura had demanded the move.
The objective of control orders under the Essential Commodities Act, like the one cleared for potatoes and onions by the Modi Cabinet, is to enable states to undertake effective de-hoarding operations by fixing stock limits in respect of these commodities in view of rising prices.
Each state can set its own stock limit, by taking into account their local demand-supply situation.
The government will take a view on extending the control orders for these two vegetables for a longer period next year, said the minister.
Taking a dig at the UPA government for bringing onions and potatoes out of the 1955 law's purview in 2004, Prasad said: "Between 1999 and 2004 (the previous NDA government's tenure), onions and potatoes were under the Essential Commodities Act. There was a state of confusion after that."
"We are ending the indecision on this issue and now states have the power to act on hoarders, which we hope they will take firm, effective and prompt action against," the minister said. Onion prices shot up 80% in June at the Lasalgaon APMC, a key wholesale market for the vegetable in Maharashtra.