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
I don't think the Act is a hurdle for the farmers in getting reasonable prices of their products. As all are aware that the minimum support prices for the essential agricultural commodities are reviewed by the governments (central & state) every year and fixed upwards taking all incidental charges and margins into account. Are you aware of the fate of the products in excess of government purchase? The farmers are forced to sale their excess crops in markets at much cheaper than the government fixed minimum prices! The act is not applicable to vegitable, fruits and other perishable produces and what happens to the farmer producers? When we pay Rs 20 or 30 for a KG of tomato, can we imagine the actual share of the farmer growers in this money. It is not more than Rs 5 to 7. Similar is the case in respect of other crops outside the purview of the Act. Should we still seek deregulation of the Act? more