How India Should Control the Cost of Essential Commodities

Inflation is discussed in percentages. Families experience it in rupees. A government may say inflation is 4%, 5% or 6%. But the housewife buying vegetables does not purchase the Consumer Price Index. The pensioner does not eat the inflation rate. And the daily-wage worker cannot tell his children that although dal, milk, vegetables and cooking oil have become expensive, the macroeconomic indicators remain reassuring.

That is why the price of essential commodities is not merely an economic issue. It is an issue of household security. India's retail inflation rose to 4.82% in August 2026, while food inflation reached 5.95%. The government's September economic review has also warned that elevated crude-oil prices, geopolitical tensions and supply disruptions could generate imported inflation. The question, therefore, is not whether government should intervene. It must. The real question is: How should it intervene without destroying the very incentives required to produce tomorrow's food?

The Great Price-Control Paradox

Price control sounds wonderfully simple. If onions cost Rs.80 a kilogram, order traders to sell them at Rs.40. Problem solved. Except economics has an inconvenient habit of refusing to obey government notifications.

A farmer will not indefinitely grow a crop at a loss because the government wants consumers to receive it cheaply. A trader will not transport perishable goods across 1,000 kilometres if his legitimate margins disappear. And investment will not flow into warehouses, cold chains and processing facilities if returns are administratively suppressed.

A price ceiling can reduce the price printed on the board while simultaneously reducing the quantity available behind the counter. That is the paradox. India already possesses considerable statutory power. The Essential Commodities Act, 1955 permits regulation of production, distribution, pricing and trade in designated essential commodities and provides mechanisms to deal with hoarding and market manipulation. Such powers are necessary. But they should function as a fire extinguisher, not as the central heating system of the economy.

India's Problem Is Often Volatility, Not Permanent Scarcity

Consider onions. As of August 26, 2026, the government's reported all-India average retail prices included approximately Rs.37.87 per kg for onion, Rs.38.33 for tomato, Rs.22.63 for potato, Rs.86.71 for chana dal and Rs.123.30 for tur dal. The government estimated 2025–26 onion production at about 30.7 million tonnes and had begun releasing onions from its buffer to moderate seasonal price pressures. This reveals something important.

India can simultaneously produce enormous quantities of food and periodically experience painful price spikes. Why?

Because food does not teleport from farms to kitchens. It must be harvested, sorted, stored, transported, financed, traded and retailed. Every weakness between those stages becomes part of the consumer's bill. The Ministry of Food Processing Industries cites a NABCONS study estimating post-harvest losses of approximately 6.02–15.05% for fruits and 4.87–11.61% for vegetables.

Imagine producing 100 units and losing ten before they can be consumed, and then debating how to regulate the price of the remaining 90. Sometimes India's price problem begins long before the commodity reaches the market.

Pulses Expose the Structural Weakness

Pulses provide an even clearer example. India is the world's largest producer, consumer and importer of pulses. In 2024–25, it produced approximately 25.7 million tonnes but imported another 7.3 million tonnes. Imports represented roughly 23% of consumption. After deficient rainfall in important producing regions, the government has been considering reductions in duties on some imported pulses. This is precisely where intelligent price management differs from simplistic price control.

If tur dal becomes expensive because production has fallen, ordering retailers to sell it cheaply does not create a single additional kilogram of tur. Increasing supply does. India needs a permanent Essential Commodities Price Stabilization Strategy built around several principles.

1. First, build larger, smarter and commodity-specific strategic buffers. India already operates the Price Stabilization Fund for commodities including pulses and onions. The model is fundamentally sound: buy when supply is abundant and prices are weak; release stocks when shortages cause abnormal price increases. But intervention must become more predictive.
   
   Weather forecasts, sowing acreage, mandi arrivals, reservoir levels, crop disease, satellite imagery, wholesale prices, import contracts and retail-price data should feed into an AI-enabled early-warning system. Government should know that an onion shortage is approaching before the consumer discovers it at the vegetable shop.
    
2. Second, trade policy must become counter-cyclical rather than reactive. When credible forecasts show a serious domestic shortage, import duties should be temporarily reduced and imports contracted early. When domestic harvests are strong, policy should protect farmers from an import-induced collapse. This balance matters enormously. Cheap imports may protect today's consumer while discouraging tomorrow's farmer. Price policy must therefore protect both ends of the food chain.
    
3. Third, India should treat storage and logistics as anti-inflation infrastructure. Cold chains are not merely agricultural infrastructure. Warehouses are not merely buildings. Refrigerated transportation is not merely logistics. They are instruments of price stability.
   
   Every tomato saved from spoilage increases effective supply without requiring another acre of farmland. Investment in pack houses, decentralized cold storage, modern warehouses, reefer transport, food processing and farm-level aggregation could achieve something that price-control orders cannot: permanently reduce the structural cost between farm and fork.
    
4. Fourth, attack artificial scarcity ruthlessly. There is a moral and economic distinction between legitimate inventory and deliberate hoarding intended to exploit scarcity. The government already monitors prices of dozens of essential food commodities through hundreds of reporting centres and can use stock disclosure requirements, stock limits and other interventions when conditions warrant them. That system should become more technologically sophisticated. 
   
   GST invoices, mandi arrivals, warehouse stocks, e-way bills, imports and wholesale-retail spreads can help authorities identify unusual inventory accumulation. Instead of conducting theatrical raids after prices explode, regulators should detect suspicious supply behaviour while it is developing.
    
5. Fifth, shorten the distance between farmer and consumer. When a farmer receives Rs.20 while a city consumer pays Rs.60, the Rs.40 difference deserves investigation, not automatic condemnation, because transportation, wastage, storage and retailing have legitimate costs, but economic scrutiny.
   
   Farmer-producer organizations, cooperatives, digital agricultural markets and direct procurement by organized retailers can create competing channels. The objective should not be to abolish intermediaries. It should be to abolish unnecessary intermediation.
    
6. Sixth, where temporary price shocks genuinely hurt poorer households, government should prefer targeted consumer support over universal price suppression. If cooking oil suddenly becomes expensive, subsidizing vulnerable households through targeted transfers or distribution may cost less — and distort markets less — than forcing the entire economy to sell the commodity below a sustainable price. A millionaire does not need subsidized onions merely because a poor household does.

The Government Cannot Control the Monsoon. It Can Control Preparedness.

Food inflation in India is unusually vulnerable to weather because significant agricultural production remains exposed to rainfall variability. Climate change will make price management even more difficult. The answer cannot be an endless cycle:

Shortage → price spike → public anger → export restriction → import liberalization → emergency stock release → price collapse → farmer distress → lower planting → next shortage. That is crisis management masquerading as policy. India needs to move towards: Forecast → anticipate → procure → store → import when necessary → release strategically → protect vulnerable consumers → preserve farmer incentives. That is price stabilization.

There is another uncomfortable truth. Monetary policy alone cannot solve an onion shortage. Higher interest rates may suppress aggregate demand, but they cannot make tomatoes grow faster, repair a broken cold chain or bring rainfall to a drought-affected district. Food inflation frequently requires microeconomic surgery rather than macroeconomic chemotherapy.

Final Thoughts: Control ‘Scarcity,’ Not Prices

The political temptation to "control prices" is understandable. Essential commodities are different from televisions, smartphones or luxury cars. A family can postpone buying a television. It cannot postpone eating. Government therefore has an unavoidable responsibility to ensure that basic necessities remain accessible. But affordability cannot be created sustainably by decree.

If the state forces prices too low, producers withdraw. If it permits uncontrolled speculation, consumers suffer. If it imports recklessly, farmers suffer. If it protects producers indefinitely through high tariffs during shortages, consumers suffer. The real challenge is not choosing between the farmer and the consumer. It is designing a system in which farmers receive remunerative prices without consumers paying scarcity prices. That requires strategic buffers, intelligent imports, better storage, efficient logistics, competition, transparent markets, aggressive action against hoarding, predictive data systems and targeted protection for vulnerable households.

India does not need a government that decides what every kilogram of dal should cost.

It needs a government capable of ensuring that enough dal reaches the market for competition to decide a reasonable price. There is a fundamental difference.

The best price-control policy is ultimately one that rarely needs to control the price because it has already controlled the causes that make prices explode.

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