New Delhi, Feb 2 (IANS) In a bid to arrest spiralling prices, government-owned National Agricultural Cooperative Marketing Federation of India (NAFED) will sell sugar at Rs.41 and onion at Rs.16 per kg in Delhi, lower than the prevailing rates, it said Tuesday.

NAFED managing director C.V. Ananda Bose said sugar and onions will be sold much below the market level. 'The sale of sugar would start from next week, while the sale of onions has started today (Tuesday),' Bose said in a statement.

NAFED has collaborated with the Delhi government and would supply arhar dal, moong, urad, parimal rice and edible oil 30 percent cheaper than the market rate from Feb 5.

'NAFED initiatives in price control has created a perceptible dent in price stabilisation in the country. It has undoubtedly created a deepening impact in the market,' Bose said.

Although the move is a small step, an official in the ministry of consumer affairs, food and public distribution said this was an indication of the government's seriousness to tackle spiralling sugar and food prices.

This move also comes following the intervention of Agriculture Minister Sharad Pawar during a review last week of the market intervention plans of the NAFED to bring down the prices.

Refusing to take the blame for the skyrocketing food prices, Pawar Friday said sugar would soon become cheaper and abundant in India so much so that the country will have a storage problem.

Prime Minister Manmohan Singh had expressed concern at a meeting earlier this month with the Indian Sugar Mills Association (ISMA) and Pawar over sugar output projections this year and their possible impact on consumer prices, an official said.

The government has released 1.79 million tonnes of sugar for February, which it said is adequate to meet the internal demand for the period.

Current data of sugar processed up to December-January shows a drop of around 2.5 percent across the country, compared to the like period last year.