The Essential Commodities (Amendment) Bill, 2020 – Things to be known

Hi friends have you ever thought of why the prices of commodities like cereals, pulses, edible oil, onion, tomato, potato will not increase suddenly or increase by large margins? and many of things you will get through Public Distribution System (PDS) i.e., through ration shops. It’s because of essential commodities act.1955 the supply, distribution, prices were regulated by the government and things we will at get fair prices. Recently the central government has passed an amendment bill in the parliament. So in this blog I am going to explain you about the essential commodities act, the changes brought by the amendment bill.

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*The essential commodities act.1955

*The essential commodities (Amendment) bill.2020

*Changes after amendment of act

*Impact of new bill on farmers and consumer 

The Essential Commodities Act.1955

The original act is to provide, in the interest of general public for the control of the production, supply and distribution of, and trade and commerce, in certain commodities which we later call as essential commodities .This bill was passed in April.1, 1955. The act defines the following commodities as essential commodities:

a. Cattle fodder including oil cakes and other concentrates.

b. coal including coke and other derivatives

c. components and accessories of automobiles.

d. Cotton and wooden textiles

e. Food stuffs including oil seeds and edible oil: food crops includes Sugarcane also

f. Raw cotton, cotton seeds, raw jute.

The Central government from time to time amended the act by adding and removing the commodities according the requirements. At present there were nine commodities in the list: Drugs, fertilizers (organic, inorganic or mixed ), foodstuffs including edible oil, hank yarn made from cotton ,petroleum and petroleum products, raw jute and jute textiles ,seeds of food crops ,fruits, vegetables ,cattle fodder, cotton : face masks and sanitizers (added on 13 March ,2020) .

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The Essential Commodities (Amendment) bill 2020

The bill was introduced by Minister of State for consumer affairs, food and public distribution, Shri. Danve Raosaheb Dadarao in the Lok Sabha on 14 th September. This act made provisions to remove commodities like cereals, pulses, oil seeds, edible oils, onion and potatoes from the list of essential commodities. It aims to remove fears of private investors of excessive regulatory interference in their business operations .This legislation will help in more investment in cold storage's, modernization of food supply chain, bringing price stability, create competitive market environment and prevent wastage of agri-produce. 

Need of Amendment:

* The central government claims that India has become surplus in most Agri-commodities, farmers have been unable to get better prices due to lack of investment in cold storage, warehouses, processing and export as the entrepreneurial spirit gets dampened due to Essential Commodities Act.

*According to the Economic Survey report the imposition of frequent and unpredictable blanket stock limits on commodities under EC act neither reduces the price nor the price volatility. Further such intervention does enable opportunities for unproductive income and harassment.

* Farmers suffer huge losses when there are bumper harvests, especially of perishable commodities due to lack of storage facilities.

Changes after the Amendment:

* The supply of such foodstuffs, including cereals, pulses, potato, onions, edible oilseeds and oils, as the Central Government may, by notification in the Official Gazette, specify, may be regulated only under extraordinary circumstances which may include war, famine, extraordinary price rise and natural calamity of grave nature.

*Any action on imposing stock limit shall be based on price rise and an order for regulating stock limit of any agricultural produce may be issued under this Act only if there is:

 (i)  Hundred per cent. Increase in the retail price of horticultural produce; or

(ii) Fifty per cent. Increase in the retail price of non-perishable agricultural foodstuffs.

* Order for regulating stock limit shall not apply to a processor or value chain participant of any agricultural produce, if the stock limit of such person does not exceed the overall ceiling of installed capacity of processing, or the demand for export in case of an exporter.

                      The expression "value chain participant", in relation to any agricultural product, means and includes a set of participants, from production of any agricultural produce in the field to final consumption, involving processing, packaging, storage, transport and distribution, where at each stage value is added to the product.

Benefits from new bill:

*The EC (Amendment) Bill 2020 aims to remove fears of private investors of excessive regulatory interference in their business operations.

*The freedom to produce, hold, move, distribute and supply will lead to harnessing of economies of scale and attract private sector/foreign direct investment into agriculture sector.

* It will help drive up investment in cold storages and modernization of food supply chain.

* This amendment will create a positive environment not only for farmers but also for consumers and investors and will definitely make our country self-reliant.

* The amendment will strengthen the overall supply chain mechanism of the agriculture sector and also help to achieve the government’s promise to double the farmer’s income by promoting investment in this sector and promote ease of doing business.

Difficulties/ Negative impacts:

* Removing many commodities from the essential commodities list may lead to increase in rural poverty and may have an adverse impact on the public distribution system (PDS).

*Excluding the foodstuffs like pulses, onions and edible oils the daily essential commodities from list means the government not regulating the supply of these commodities means chance of hoarding high by the traders by creating artificial shortage of supply which will have direct effect on the consumers.

*Due to bulk procurement by the large traders or hoarder the price of these commodities will jump at farm level .AS this act allow big businessmen to hoard essential commodities leading to rise in prices.

*Some expert say that the new amendments to EC acts were highly centralizing in nature .It erodes the constitutional rights of state.

*The Minister said that the EC act was brought in the country when we were not self-sufficient in food grain production but now the situation so we bring the amendment .We agree that there was increase in food production over the years but at ground reality the rural poverty, the purchasing capacity of the poor people have not changed yet .They will suffer from price rises.

                              The Government, while liberalizing the regulatory environment, has also ensured that interests of consumers are safeguarded. Instead of sudden removal of many commodities from essential commodities the government should have done it in phased manner after the seeing the impact of removal of certain commodities.

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