Business Desk, ETV Bharat: Taking a step further towards agriculture reforms, the Parliament on Tuesday passed the Essential Commodities (Amendment) Bill 2020 that removes onions, potatoes, cereals, pulses, oilseeds and edible oils from the list of essential commodities.
The bill passed by both Rajya Sabha and Lok Sabha replaces the ordinances promulgated on 5 June 2020.
Here’s a quick look at how the government’s decision to deregulate these commodities impacts the farmers, consumers and other stakeholders:
What is Essential Commodities Act?
The Essential Commodities Act 1955 was put in place to control the production, supply, distribution and trade and commerce in certain commodities, especially foodgrains. This is done in order to maintain or increase supplies of any essential commodity or for securing their equitable distribution and availability at fair prices.
Which commodities are classified as essential commodities?
As per the law, any commodity specified in the Schedule of the Essential Commodities Act is an essential commodity. The central government may amend the Schedule to add or remove any commodity from the said Schedule after consultation with the state governments.
For instance, one of the latest items added to this Schedule are face masks and hand sanitisers that were declared essential commodities with effect from 13 March 2020 after the outbreak of the Covid-19 pandemic. This allowed the government to control their production, supply, and distribution.
What are the provisions of the recent amendment?
The Essential Commodities (Amendment) Bill 2020 removes onions, potatoes, cereals, pulses, oilseeds and edible oils from the list of essential commodities.
So, for instance, earlier the central government could regulate the supply of these commodities by imposing stock limits on the quantity that individuals/wholesale traders can stockpile. This helped governments to prevent hoarding, which could result in artificial price rise.
But with deregulating of these commodities now, farmers and marketers have the freedom to produce, hold, move, distribute and supply as per the market dynamics.
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Does the amendment protect consumers’ interest?
While liberalizing the regulatory environment, the government has also kept in mind that interests of consumers are safeguarded. It has been provided in the Amendment, that in situations such as war, famine, extraordinary price rise and natural calamity, such agricultural foodstuff can be regulated.
However, the installed capacity of any value chain participant and the export demand of an exporter will remain exempted from such stock limit imposition (whenever that happens).
How will the amendment help growers and sellers of these commodities?
The deregulation is likely to attract private investment in the value chain of these commodities. So far, private investors have shied from putting in their money in cold chains and storage facilities for perishable items due of fears of sudden impositions of stock limits by governments, which can curtail their profit.
But the amendment will help investors harness of economies of scale and thereby drive up investment in cold storages and modernization of food supply chain.
Investment in cold storages will also help farmers as they usually suffer huge losses when there are bumper harvests, especially of perishable commodities, leading to wastage of the agri-produce.
Can the move lead to price rise of these commodities in the long run?
It seems unlikely that it will happen as the Bill has a provision for invoking the stock limit on these commodities in case of a significant jump in their retail prices.
For non-perishable agricultural foodstuffs, the price trigger will be a 50% 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.
