Essential Commodities (Amendment) Bill, 2020 – Full Overview
Introduction
The Rajya
Sabha passed the Essential Commodities (Amendment) Bill, 2020 on 22nd
September 2020. The Bill seeks to deregulate cereals, pulses, oilseeds,
edible oils, onions, and potatoes from the list of essential commodities.
The Bill was
initially introduced in the Lok Sabha on 14th September 2020 by Shri
Danve Raosaheb Dadarao, the Minister of State for Consumer Affairs, Food
& Public Distribution, to replace ordinances promulgated earlier on 5th
June 2020. It was passed by the Lok Sabha on 15th September 2020.
The Bill
aims to:
- Reduce excessive regulatory
interference.
- Allow free production, storage,
movement, distribution, and supply.
- Attract private sector and foreign
direct investment (FDI) in agriculture.
- Expand cold storage facilities.
- Modernize the food supply chain.
Responding
to discussions in Rajya Sabha, Minister Danve Raosaheb Dadarao stated that the
amendment is crucial to:
- Reduce agri-produce wastage due to lack
of storage.
- Create a favorable environment for
farmers, consumers, and investors.
- Contribute towards making India
self-sufficient.
- Fulfill the government’s promise to double
farmers’ income by encouraging investment (PRS Legislative Research).
Background
- India has transitioned from a
food-deficient to a food-surplus country.
- Farmers, however, continue to struggle
to fetch fair prices due to:
- Poor investment in cold storage.
- Lack of warehouses, processing
facilities, and export mechanisms.
- Under the Essential Commodities Act,
1955 (ECA 1955):
- States could impose stock limits and
restrict the movement of essential goods.
- Governments were required to impose
stock limits on pulses, edible oils, vegetables, etc., to prevent
hoarding.
According to
the Economic Survey 2019-20 (Government of India, Economic Survey
2019-20, Volume I, Chapter 7):
- Frequent stock limit impositions did not
control inflation or price volatility.
- It enabled rent-seeking behavior
and harassment of traders.
- Examples where stock limits worsened
price volatility include:
- Dal (2006)
- Sugar (2009)
- Onions (September 2019).
Furthermore,
a 2018 OECD-ICRIER Report (OECD-ICRIER Agricultural Policies Report
2018) highlighted that restrictive export policies under ECA kept Indian
farmers poor by preventing them from benefiting when global crop prices surged.
Thus,
reforming ECA is expected to:
- Boost investment in cold storage.
- Strengthen the food supply chain.
- Benefit farmers and consumers.
- Stabilize market prices.
Key Features
of the Bill
1. Regulation
of Food Items:
o The Central
Government can designate commodities as essential and regulate their
production, supply, distribution, trade, and commerce.
o The Bill
restricts regulation of cereals, pulses, potatoes, onions, edible oilseeds, and
oils only under exceptional circumstances such as:
§ War
§ Famine
§ Extraordinary
price rise
§ Natural
calamities of severe nature.
2. Stock
Limitations:
o Stock limits
on agricultural produce can only be imposed if:
§ Retail
prices of horticulture produce rise by 100%.
§ Retail
prices of non-perishable agricultural food items rise by 50%.
o Price
increase will be calculated based on:
§ Either the
average retail price for the previous 12 months, or
§ The average
of the past 5 years, whichever is lower.
3. Exceptions
for Processors and Value Chain Participants:
o Stock limits
will not apply if:
§ Stocks are
within the installed capacity of processors, or
§ Stocks meet
the export demands for exporters.
4. Exemption
for Public Distribution System (PDS):
o Any
government order related to the Public Distribution System (PDS) or Targeted
Public Distribution System (TPDS) will be exempted from the Bill’s
stock restriction rules.
5. Consumer
Protection:
o While
liberalizing the regulatory framework, consumer interests will be safeguarded
to prevent hoarding and inflation.
Expected
Benefits
- Freedom to produce, hold, move,
distribute, and supply will allow the agriculture industry to realize economies
of scale.
- Increased private and foreign
investment in agriculture.
- Rise in investments in cold storage
and modernization of supply chains.
- Competitive market environment
development.
- Reduced agri-produce wastage due
to improved storage facilities.
- Price stabilization for
farmers and consumers.
Issues and
Criticisms
- Centralization Concerns:
- Critics argue that the Bill overly
centralizes power, limiting state governments’ ability to regulate
hoarding and black-marketing.
- Risk of Hoarding and Inflation:
- Relaxation of stock limits could lead
to illicit market practices and hoarding by large traders.
- Potential for monopoly control
over essential commodities, leading to price spikes.
Sources
backing criticisms:
- PRS Legislative Research Bill Summary
- The Hindu Editorial on ECA Amendments
Conclusion
India’s
agricultural sector needs reform that matches its transition from scarcity
to surplus production.
The Essential
Commodities (Amendment) Bill, 2020 is a significant step toward:
- Doubling farmers’ incomes.
- Improving ease of doing business in
agriculture.
- Attracting investments and creating
infrastructure.
However, to
fully realize its potential, it is crucial to carefully monitor and enforce
regulations to prevent hoarding and exploitation while protecting small
farmers and consumers.