Updated: September 24, 2020 8:29:36 am
At the Sealdah Koley market in Kolkata. (Express photo: Shashi Ghosh)
On Tuesday, Rajya Sabha passed the 2020 Essential Commodities (Amendment) Bill, which aims to deregulate products such as grains, legumes, oilseeds, edible oils, onions and potatoes. The bill was presented and passed at Lok Sabha last week. It replaces an ordinance that the government had enacted on June 5, along with two other ordinances in the agricultural sector. As with the other two ordinances (also passed as bills) that have sparked protests from farmers in Punjab and Haryana, there have also been concerns about the provisions of this bill.
What is the bill about?
This is a four-page bill that amends the Essential Commodities Act of 1955 by introducing a new subsection (1A) in section 3.
After the amendment, the supply of certain food products, including cereals, legumes, oilseeds, edible oils, potatoes, can only be regulated in extraordinary circumstances, including extraordinary price increases, war, famine and natural calamities of a serious nature. In effect, the amendment removes these elements from the scope of Section 3 (1), which empowers the central government to “control the production, supply, distribution, etc., of commodities.”
Previously, these commodities were not mentioned in Section 3 (1) and the reasons for invoking the section were not specified. The amendments establish that “said order to regulate the stock limit shall not apply to a processor or participant in the value chain of any agricultural product, if the stock limit of said person does not exceed the general ceiling of installed processing capacity, or export demand in the case of an exporter … “
How is a “commodity” defined?
There is no specific definition of commodities in the Essential Commodities Act of 1955. Section 2 (A) states that a “commodity” means a commodity specified in the Act Schedule.
The Law empowers the central government to add or remove a product from the List. The Center, if it is convinced that it is necessary to do so in the public interest, may report an item as essential, in consultation with state governments.
According to the Ministry of Consumer Affairs, Food and Public Distribution, which enforces the Law, the Program currently contains seven basic products: medicines; fertilizers, inorganic, organic or mixed; food products, including edible oils; all-cotton wood yarn; petroleum and petroleum products; raw jute and jute textiles; food crop seeds and fruit and vegetable seeds, livestock fodder seeds, jute seeds, cotton seeds.
By declaring a commodity essential, the government can control the production, supply and distribution of that commodity and impose a stock limit.
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The move is expected to attract private investment in the value chain of commodities removed from the commodity list, such as onions. (Express photo: Shashi Ghosh)
Under what circumstances can the government impose limits on stocks?
While the 1955 Act did not provide a clear framework for imposing limits on stocks, the amended Act provides for a trigger price. It says that agricultural food products can only be regulated in extraordinary circumstances such as war, famine, extraordinary price increases and natural calamities.
However, any action on the imposition of stock limits will be based on the trigger price.
Therefore, in the case of horticultural products, a 100% increase in the retail price of a basic product during the immediately preceding 12 months or above the average retail price of the last five years, whichever is less, will be the trigger to invoke the stock limit. .
For non-perishable agricultural food products, the trigger price will be a 50% increase in the retail price of the product during the immediately preceding 12 months or over the average retail price of the last five years, whichever is less.
However, exemptions from stock storage limits will be provided to processors and participants in the value chain of any agricultural products and orders related to the Public Distribution System.
“Price triggers will also minimize the above uncertainties associated with ordering below stock limits. This will now be more transparent and help better governance ”, said a source from the Ministry of Consumer Affairs.
“The last 10 years have seen periods of prolonged application of the EC Law. Once imposed, they were for extended periods: legumes from 2006 to 2017, rice from 2008 to 2014, edible oilseeds from 2008 to 2018. The amendments to the EC Law seek to eliminate this uncertainty by defining criteria for the process of imposing limits on stocks and processing is more transparent and responsible, ”said the source.
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Why was the need for this felt?
The 1955 Act was enacted at a time when the country was facing a food shortage due to persistent low levels of food grain production. The country relied on imports and assistance (such as the import of wheat from the US under PL-480) to feed the population. To prevent hoarding and black marketing of food products, the Essential Products Law was enacted in 1955.
But now the situation has changed. A note prepared by the Ministry of Consumption, Food and Public Distribution shows that wheat production has multiplied by 10 (from less than 10 million tons in 1955-56 to more than 100 million tons in 2018-19), while that rice production has more than quadrupled (from about 25 million tons to 110 million tons during the same period). The production of legumes has multiplied by 2.5, from 10 million tons to 25 million tons.
In fact, India has now become an exporter of various agricultural products.
The Essential Commodities (Amendment) Bill of 2020 aims to deregulate commodities such as onions and potatoes. (Express photo: Shashi Ghosh)
What will be the impact of the amendments?
The key changes seek to free agricultural markets from the constraints imposed by permits and mandi that were originally designed for an era of scarcity. The move is expected to attract private investment in the value chain of commodities removed from the essentials list, such as grains, pulses, oilseeds, edible oils, onions and potatoes.
While the purpose of the law was originally to protect the interests of consumers by controlling illegal business practices such as hoarding, it has now become a barrier to investment in the agricultural sector in general and in post-harvest activities in particular. Until now, the private sector had been hesitant to invest in cold chains and storage facilities for perishable items, as most of these products fell within the scope of EC Law and could lead to sudden stock limits. The amendment seeks to address such concerns.
Why is it opposed?
This was one of three ordinances / bills that have seen protests from farmers in some parts of the country. The opposition says the amendment will hurt farmers and consumers, and only benefit hoarders. They say that the price triggers envisioned in the bill are unrealistic, so high that they will hardly ever be invoked.
This article first appeared in print on September 24, 2020 under the title ‘Redefining Essentials’.
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