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While onions were re-included in the Act 10 years after it was delisted by the previous United Progressive Alliance (UPA) regime, potatoes got included on the list for the first time.
The decision was taken by the Cabinet Committee on Economic Affairs.
Stockholding limits, which will be set by state governments, will prohibit individuals from storing onions and potatoes beyond the prescribed ceiling. The Act is aimed at ensuring easy availability of essential food items and protecting consumers from exploitation by unscrupulous traders. The law provides for regulation and control of production, distribution and pricing of commodities.
"With this, we are giving the right to state governments to take stern action against hoarding and black marketing," Law Minister Ravi Shankar Prasad told reporters here. He said the government now hoped states would act against hoarding and black marketing of onions and potatoes.
A notification in this regard will be issued on Wednesday. The minister said any decision on banning export of onion and potatoes would depend on the circumstances then.
The order will be in force for one year after which it will be reconsidered. Six state governments - Delhi, Chhattisgarh, Madhya Pradesh, Mizoram, Tripura and West Bengal - had demanded re-introduction of onions and potatoes in the ECA to help them take action against hoarders.
These were removed from the Act in 2004 by then agriculture and food minister Shared Pawar. In the previous NDA government, the order was enforced from 1999 to 2004.
At present, pulses, edible oils and oil seeds are under stock limits till September 2014. Storage curbs on rice and paddy will remain till November this year.
Earlier in the day, the government had raised the minimum export price (MEP) on onion to $500 a tonne (Rs 29,755) from $300 a tonne (Rs 17,853) to improve domestic supplies, 17 days after it brought back the MEP.
Last month, exports of potatoes were also curbed by imposing an MEP of $450 a tonne.
To augment supply of grains to weaker sections, CCEA also cleared a decision by a high-level committee under Finance Minister Arun Jaitley to immediately allocate five million tonnes of rice for below and above poverty line families between July 2014 and March 2015 in those states where the Food Security Act is not applicable.
The rice will be distributed through public distribution system (PDS).
The additional rice, which will be over and above the normal PDS allocation, will be released from July to March.
"We have sufficient supply. There is no need to panic. We are taking all possible measures to improve supply and control prices," Prasad said.
Stating that there were complaints that prices are rising despite adequate supply in the country, Prasad said the CCEA discussed the emerging situation "seriously". Hoping that monsoon rains would improve from next week, Prasad said good rain will wash away concerns of drought-like situations in certain parts of the country.
"Let's not panic. Rain gods will be smiling on India. Today (on Tuesday) it rained heavily in Delhi and Mumbai. The government hopes the rain will be okay in the coming weeks," Prasad said.
Meanwhile, in the national capital, retail prices of onion are in the range of Rs 25 to 30 per kg, up from Rs 15 to 20 a kg in May. The wholesale price at Lasalgaon in Nashik is Rs 18.50 per kg, up by about 80 per cent from June 1 levels. Onion production is estimated to have risen to 19.2 million tonnes during 2013-14 crop year (July-June) from 16.8 million tonne in 2012-13.
