Sitharaman brings farm sector reforms, to deregulate onion, potato prices

The Essential Commodities Act was framed in 1955 to deal with chronic shortages and prevent unscrupulous elements from taking advantage by hoarding essential items.
In a measure that could help improve the supply chain, Finance Minister Nirmala Sitharaman on Friday announced that food items such as cereals, edible oils, oilseeds, pulses, onions and potatoes will henceforth not fall under the purview of the Essential Commodities Act.

Measures such as stock limits will be imposed only under exceptional circumstances like natural calamities and famines.

Though a pale shadow of its former self, the Essential Commodities Act, vested state governments with a lot of powers, many of which will not exist once the Act is amended at the Central level.

“The Essential Commodities Act, along with amendments to APMC Act, measures to smoothen inter-state trade, and contract farming, will all help in building efficient supply chains, thus benefitting farmers as well as consumers,” Ashok Gulati, Infosys Chair Professor for Agriculture at the Indian Council for Research on International Economic Relations (ICRIER), told Business Standard.

Gulati said the proposed changes ensure that stock holding limits will not be imposed on processors, exporters and value chain agents across cereals, pulses, and oilseeds.

Speaking about the second tranche of measures as part of the relief package in the wake of the Covid-19 crisis, Sitharaman said Prime Minister Narendra Modi had come out with a plan to ensure that farmers get better price for their produce, and also get a larger share of the rupee spent by consumers.

The Essential Commodities Act was framed in 1955 to deal with chronic shortages and prevent unscrupulous elements from taking advantage by hoarding essential items. It empowered the government to control the production, supply and distribution of certain items.

The Centre authorised state governments to impose stock limits on identified food items, issue licences to produce, sell and distribute under the Act. The Narendra Modi government in 2016 had removed the licensing requirement, stock limits and restrictions on movement of certain food items. These included items like wheat and wheat products, edible oils, hydrogenated vegetable oils, onions and potatoes.

Exporters, retailers with multiple outlets or large departmental stores, food processors and importers were also kept out of the licensing requirement, stock limits and movement restrictions under ECA according to the 2016 amendments. However, despite the dilution, the Centre retained overarching powers to enforce the various provisions of ECA.

Officials said according to the plan, all discretionary powers vested with the central government to impose ECA through the states would be completely withdrawn and the Act would come into force only in case of three exceptional circumstances. These include natural calamities, emergencies such as war or national conflict, and when production of a certain commodity falls below a threshold, say a drop of over 10-15 per cent.

A senior official said the intention behind the changes was that there were instances when big businesses shied away from investing in building farm infrastructure like storage facilities and warehouses out of fear of clampdowns by authorities under the ECA. “This would give a certain amount of certainty to investors,” the official said.


New central contract law

The Centre is considering introducing a central law on contract farming under the Contract Act of 1872 to enable farmers to directly engage with processors, aggregators, large retailers and exporters in a fair and transparent manner. This was part of the risk mitigation measures for farmers announced by Finance Minister Nirmala Sitharaman in her package on Friday. BS Reporter
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