The Union Cabinet has approved an ordinance
to amend The Essential Commodities Act, 1955, to deregulate commodities such as
cereals, pulses, oilseeds, edible oils, onion and potatoes.
The ordinance, once assented by the President
of India and notified in the gazette, will become law. The text of the ordinance
is available at the e-gazette website.
Essential Commodities Act: What is the amendment?
Sources at the Ministry of Consumer Affairs,
Food and Public Distribution said that the ordinance has introduced a new subsection
(1A) in Section 3 of The Essential Commodities Act, 1955.
The amended
law provides a mechanism for the “regulation” of agricultural foodstuffs, namely
cereals, pulses, oilseeds, edible oils, potato, and supplies under extraordinary
circumstances, which include extraordinary price rise, war, famine, and natural
calamity of a severe nature.
There
is no specific definition of essential commodities in The EC Act. Section 2(A) of
the act states that an “essential commodity” means a commodity specified in the
“Schedule” of this Act.
The Act
gives powers to the central government to add or remove a commodity in the “Schedule.”
The Centre, if it is satisfied that it is necessary to do so in public interest,
can notify an item as essential, in consultation with state governments.
At present,
the “Schedule” contains 9 commodities — drugs; fertilisers,
whether inorganic, organic or mixed; foodstuffs, including edible oils; hank yarn
made wholly from cotton; petroleum and petroleum products; raw jute and jute textiles;
seeds of food-crops and seeds of fruits and vegetables, seeds of cattle fodder,
jute seed, cotton seed; face masks; and hand sanitisers.
The latest
items added to this schedule are face masks and hand sanitisers,
which were declared essential commodities with effect from March 13, 2020 in the
wake of Covid-19 outbreak.
By declaring
a commodity as essential, the government can control the production, supply, and
distribution of that commodity, and impose a stock limit.
Under
the amended EC Act, agri-food stuffs can only be regulated
under extraordinary circumstances such as war, famine, extraordinary price rise,
and natural calamity.
However,
any action on imposing stock limits will be based on the price trigger.
Thus,
in case of horticultural produce, a 100 per cent increase in the retail price of
the commodity over the immediately preceding 12 months or the average retail price
of the last five years, whichever is lower, will be the trigger for invoking the
stock limit for such commodities.
For non-perishable agricultural foodstuffs,
the price trigger will be a 50 per cent increase in the retail price of the commodity
over the immediately preceding 12 months or the average retail price of the last
five years, whichever is lower.
However, exemptions from stock-holding limits
will be provided to processors and value chain participants of any agricultural
produce, and orders relating to the Public Distribution System, officials said.
EXPLAINED
Over to the private sector
The key changes seek to
free agricultural markets from the limitations imposed by permits and mandis that were originally designed for an era of scarcity.
The move provides more choices for farmers to trade their produce, but its success
will depend on how the private sector leverages the opportunity.
So, why was an amendment needed in The EC
Act?
The EC Act was legislated at a time when
the country was facing scarcity of foodstuffs due to persistent abysmal levels of
foodgrain production. The country was dependent on imports
and assistance (such as wheat import form US under PL-480) to feed the population.
In this scenario, to stop the hoarding and
black marketing of foodstuffs, The Essential Commodities Act was enacted in 1955.
But now the situation has changed.
A note prepared by the Ministry of Consumer
Affairs, Food and Public Distribution shows that production of wheat has increased
by 10 times (from less than 10 million tonnes in 1955-56
to more than 100 million tonnes in 2018-19); during the
same period, the production of rice has increased more than four times from around
25 million tonnes to 110 million tonnes.
The production of pulses has increased by
2.5 times, from 10 million tonnes to 25 million tonnes.
In fact, India has now become an exporter
of several agricultural products. With these developments, the EC Act has become
anachronistic.
The amendments
will remove commodities such as cereals, pulses, oilseeds, edible oils, onion and
potatoes from the list of regulated essential commodities.
The move
is expected to attract private investment in the value chain of these commodities.
While
the purpose of the Act was originally to protect the interests of consumers by checking
illegal trade practices such as hoarding, it has now become detrimental for investment
in the agriculture sector in general, and in post-harvesting activities in particular.
The private
sector has so far hesitated investing in cold chains and storage facilities for
perishable items as most of these commodities are under the ambit of the EC Act,
and can attract sudden stock limits. But now the situation can change.