At a meeting chaired by Prime Minister Narendra Modi, the Union Cabinet on 3 June 2020 approved amendment to the six-a-and-a-half decade old Essential Commodities Act (ECA), in order to deregulate food items, including cereals, pulses and onion. The move would transform the farm sector and help raise farmers' income, said Agriculture Minister Narendra Singh Tomar.

 

What

  1. The Cabinet also approved 'The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020' to ensure barrier-free trade in agriculture produce.
  2. The government also approved 'The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020' to empower farmers to engage with processors, aggregators, wholesalers, large retailers and exporters.
  3. This will go a long way in helping India's farmers while also transforming the agriculture sector. The proposed amendment to the Essential Commodities Act will allay fears of private investors of excessive regulatory interference.
  4. The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020' will promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations.
  5. These proposals were part of the Rs 20-trillion economic package announced to help those affected due to the lockdown clamped to fight the spread of Covid-19 disease.
  6. The amendment to the EC Act will allow clamping of stock limits on agricultural commodities only under “very exceptional circumstances” like natural calamities and famines. 
  7. Besides enabling better price realisation for the country’s farmers, the amendment ensures no such stock limit shall apply to processors or value chain participants, subject to their installed capacity or to any exporter subject to the export demand.
  8. An announcement in this regard was made by Finance Minister Nirmala Sitharaman on May 15 when she unveiled the third tranche of measures to cushion the impact of the lockdown on the economy under the Aatmanirbhar package.
  9. On May 17, the Ministry of Consumer Affairs, Food and Public Distribution had circulated a draft of the ordinance to amend the EC Act
  10. The ECA draws from the days of the Bengal famine and the Defence of India Rules of 1943. Describing the EC Act as “anachronistic”, the Economic Survey 2019-20, too, recommended the “jettisoning” of this law.

Flashback

  1. The three reforms are: Amending the Essential Commodities Act, 1955 (ECA); a new Central law on agricultural marketing; and, a legal framework to facilitate contract farming. 
  2. All three are long overdue. It is a pity that it required a pandemic-induced economic crisis to push these, but that’s India – reform comes only when the back is against the wall.
  3. The ECA, a scarcity-era law, enabled the central government to control the production, supply and distribution of specific essential commodities
  4. The list of items is decided by the Centre in consultation with the states, and individual state governments decide the stockholding limits after consulting the Centre. 
  5. But the stock limits (with extremely stiff penalties) not only hampered operations of private trade as well as food processing units (which need to buy in bulk and store) but also disincentive agriculture infrastructure companies which need to deal in large volumes in order to be viable.
  6. This is one of the reasons why agriculture infrastructure is so woefully lacking despite numerous fiscal concessions over the last couple of decades. 
  7. The Rs 1 lakh crore Agri Infrastructure Fund also announced would have had zero effect on the ground if ECA had continued in its present form.