Essential Commodities Act deregulated
It’s a law that gives the Centre and state governments the power to regulate the production, supply , distribution and prices of commodities. The act came into being in 1955 when the economy was dealing with food shortage and famine. However, the act does not serve any purpose in the current situation.
Essential Commodity Act – A Hurdle !
The act has been considered a major impediment in the growth of agriculture sector as traders are scared to buy more on the fear of imposition of stock holding limits at any time. Investment in warehouses infrastructure has been slow and low as they could be raided by authorities for holding excess stock. Agri commodity market participants have been vocal about the harassment by authorities under the act.
The NITI Aayog has in past called the Essential Commodity Act as a hindrance to farm exports. The Economic Survey 2019-20 called Essential Commodity Act as one of the anachronistic legislations
Various governments in India have tried to help farmers though subsidy programs, loan waivers, direct benefits transfers, and then an act like Essential Commodity Act disincentives investment in warehouses and storage.
The Road Ahead
While the fine print is still awaited on the form and time line of the amendment, there will now be no limit on the quantity that traders can buy and hold as stock. Earlier, the traders would not buy surplus and that was identified as one of the reasons that the farm incomes have taken a hit.
With the deregulation of many commodities under the Essential Commodity Act, the expectations are :
Private investment in warehouses , agri infrastructure.
Increase in purchase from processors and mills.
Food and food processing companies can increase stocks.
Farmer can sell at competitive prices.
Increase in farm exports.
No barriers on interstate trade of farm products.
Legal framework to allow farmers to fix their own fair price.
Standard mechanism that can be enforced to get a predictable price.
Interestingly, the removal of onion from the Essential Commodity Act is being seen as a bold move since there is a long history of government intervention whenever onion prices surge. more