NEW DELHI: The Cabinet on Wednesday extended the stock limit on onion for one year till July 2016 in its bid to curb the rise in its prices.

The validity of the order that empowers states to impose stock limits on traders for holding onion and ban hoarding beyond the set limit, expires on Thursday. The decision will enable state governments take effective de-hoarding measures under the Essential Commodities Act.

Though last year consumer affairs ministry had brought both onion and potato under the essential commodities category, only three states – Odisha, West Bengal and Telangana - have so far fixed the stock limit.

Sources said that the Cabinet decision to extend the validity has been taken as onion prices in both wholesale and retail markets have started increasing due to less supply of good quality onion. Last month agriculture ministry had informed consumer affairs ministry that the damage of rabi crop would be around 20% due to unseasonal rain and hailstorm.

Officials said that high quantity storage losses are likely to reduce availability of onions and would put pressure on prices till the arrival of new kharif crop from mid-September. To prevent the export of onion, last week the government had increased the minimum export price (MEP) of onion to $ 425 per tonne.