Parliament passes the Essential Commodities (Amendment) Bill 2020

The Essential Commodities (Amendment) Bill 2020

On 22nd September 2020, Rajya Sabha passed the Essential Commodities Amendment Bill 2020. Earlier, the bill was introduced by the Minister of State for Consumer Affairs, Food & Public Distribution, Shri Danve Raosaheb Dadarao in the Lok Sabha on 14th September, 2020 and was passed by Lok Sabha on 15th September, 2020. The bill replaces ordinance promulgated on 5th June 2020 to amend the Essential Commodities Act, 1955.

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Background of Essential Commodities Amendment Bill 2020 :

While India has become surplus in most Agri-commodities, farmers have been unable to get better prices due to lack of investment in cold storage, warehouses, processing and export as the entrepreneurial spirit gets dampened due to Essential Commodities Act. Farmers suffer huge losses when there are bumper harvests, especially of perishable commodities. The legislation will help drive up investment in cold storages and modernization of food supply chain. It will help both farmers and consumers while bringing in price stability. It will create competitive market environment and also prevent wastage of agri-produce that happens due to lack of storage facilities.

The EC (Amendment) Bill 2020 aims to remove fears of private investors of excessive regulatory interference in their business operations. The freedom to produce, hold, move, distribute and supply will lead to harnessing of economies of scale and attract private sector/foreign direct investment into agriculture sector. It will help drive up investment in cold storages and modernization of food supply chain.

The Essential Commodities (Amendment) Bill, 2020: Salient Features

  • The Act empowers the central government to control the production, supply, distribution, storage, and trade of essential commodities.  The Bill seeks to increase competition in the agriculture sector and enhance farmers’ income.  It seeks to provide that stock limits on agricultural produce can be applied only in extraordinary circumstances based on price rise. 
  • Regulation of food items: The Act empowers the central government to notify certain commodities (such as food items, drugs, fertilisers, and petroleum products) as essential commodities.  The central government can regulate or prohibit the production, supply, distribution, and trade of such essential commodities under the Act.  The Bill provides that the central government can regulate the supply of certain food items (as may be notified), including cereals, pulses, potato, onions, edible oilseeds, and oils, only under extraordinary circumstances.  Such circumstances include: (i) war, (ii) famine, (iii) extraordinary price rise, and (iv) natural calamity of grave nature. Hence, the bill includes provisions to remove commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities. 
  • Imposition of stock limit: The Act empowers the central government to regulate the stock of an essential commodity that a person can hold.  The Bill specifies that stock limits should be imposed only based on price rise.  A stock limit may be imposed on agricultural produce only if there is: (i) a 100% increase in the retail price in case of horticultural produce, or (ii) a 50% increase in the retail price in case of non-perishable agricultural food items.  The increase will be calculated over the price prevailing twelve months ago, or the average retail price of the last five years, whichever is lower. 
  • Exemption:  The Bill provides that any stock limit imposed on agricultural produce will not apply to a processor or value chain participant if the stock held by such person is less than: (i) the overall ceiling of installed processing capacity, or (ii) demand for export in case of an exporter.  A value chain participant includes any person engaged in value addition to the produce at any stage, starting from production in the field to final consumption.  These stages include processing, packaging, storage, transport, and distribution of agricultural produce. 
  • Applicability to Public Distribution System: The provisions of the Bill regarding the regulation of food items and the imposition of stock limits will not apply to any government order relating to the Public Distribution System or the Targeted Public Distribution System.  Under these systems, food grains are distributed by the government to the eligible persons at subsidised prices.

1. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020

2. The Farming Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

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