THE ESSENTIAL COMMODITIES (AMENDMENT) BILL, 2020
INTROUCTION:
- The Act empowers the central government to control the production, supply, distribution, storage, and trade of essential commodities.
- The Bill seeks to increase competition in the agriculture sector and enhance farmers’ income.
- It seeks to provide that stock limits on agricultural produce can be applied only in extraordinary circumstances based on price rise.
KEY FEATURES:
- Regulation of food items: The Bill provides that the central government can regulate the supply of certain food items (as may be notified), including cereals, pulses, potato, onions, edible oilseeds, and oils, only under extraordinary circumstances.
- Such circumstances include: (i) war, (ii) famine, (iii) extraordinary price rise, and (iv)natural calamity of grave nature.
- Imposition of stock limit: The Act empowers the central government to regulate the stock of an essential commodity that a person can hold. The Bill specifies that stock limits should be imposed only based on price rise.
- A stock limit may be imposed on agricultural produce only if there is:
- A 100% increase in the retail price in case of horticultural produce, or
- A 50% increase in the retail price in case of non-perishable agricultural food items.
- o The increase will be calculated over the price prevailing twelve months ago, or the average retail price of the last five years, whichever is lower.
- Exemption: The Bill provides that any stock limit imposed on agricultural produce will not apply to a processor or value chain participant if the stock held by such person is less than:
- The overall ceiling of installed processing capacity, or
- Demand for export in case of an exporter.
- A value chain participant includes any person engaged in value addition to the produce at any stage, starting from production in the field to final consumption. These stages include processing, packaging, storage, transport, and distribution of agricultural produce.
POSITIVE IMPACT OF BILL
- Reduce regulatory interferences – It will remove fears of private investors of excessive regulatory interference in their business operations.
- Freedom to trade – the freedom to produce, hold, move, distribute and supply will lead to harnessing economies of scale.
- Increase investments – less regulations will attract private and foreign direct investments into the agricultural sector.
- Improve infrastructure – Investments in cold storages and modernization of the food supply chain.
- Decrease wastages – which occur due to lack of storage facilities.
- Price stability – it will help both farmers and consumers.
- In sync with markets – Essential commodities Act was passed when India faced shortages in food production. Now amendments were required as India produces excess of food grains.
POSSIBLE NEGATIVE IMPACT OF BILL
- Infringe upon state power – It is highly centralized law and infringe upon states power as they will not be able to regulate hoarding.
- Black marketing and hoarding – The stock limit relaxations under the ECA may lead to black marketing and hoarding rather than benefitting the producers.
- Inflation – unnecessary and excessive stocking may lead to inflation for consumers.
- Monopoly of few – Monopoly of large corporates by stocking large amount of produce thus controlling prices and dictating these prices to farmers.
- Impact on PDS – Excessive stocking and hoarding may dismantle PDS.
- Unrealistic stock limits – Stock limits are so high that they will hardly be invoked leaving Act toothless