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The Essential Commodities (Amendment) Bill, 2020

The Essential Commodities (Amendment) Bill, 2020

Context:

Parliament has passed The Essential Commodities (Amendment) Bill, 2020. The Bill replaces an Ordinance promulgated in June 2020 and amends the Essential Commodities Act, 1955.

Background:

  • The Essential Commodities Act, 1955 was used to curb inflation by allowing the Centre to enable control by state governments of trade in a wide variety of commodities.
  • The states imposed stock limits to restrict the movement of any commodity deemed essential. It helped to discourage the hoarding of items, including food commodities, such as pulses, edible oils, and vegetables.
    • However, the Economic Survey 2019-20 highlighted that government intervention under the ECA 1955 often distorted agricultural trade while being totally ineffective in curbing inflation.

Details:

  • The Bill was passed in Rajya Sabha by a voice vote, in the absence of the Opposition, which boycotted proceedings.
  • The Bill aims to remove fears among private investors of excessive regulatory interference in their business operations.
  • The bill removes cereal, pulses, oilseed, edible oil, onion, and potatoes from the list of essential commodities.
  • It ensures that the interests of consumers are safeguarded by regulating agricultural foodstuff in situations such as war, famine, extraordinary price rise, and natural calamity.
    • However, the installed capacity of a value chain participant and the export demand of an exporter will remain exempted from such regulation so as to ensure that investments in agriculture are not discouraged.

Significance:

  • The freedom to produce, hold, move, distribute, and supply will lead to harnessing economies of scale and attract private sector/foreign direct investment into the agriculture sector.
  • It will help drive up investment in cold storage and modernization of the food supply chain.
  • The government, while liberalizing the regulatory environment, has also ensured that the interests of consumers are safeguarded. It has been provided in the amendment that in situations such as war, famine, extraordinary price rise, and natural calamity, such agricultural foodstuff can be regulated.
  • This amendment prevents wastage of agricultural produce due to a lack of storage facilities.
  • With the Food Corporation of India controlling stocks before, there were less investment and buyers. Farmers often hoarded for six months to get a better price, and their products often rotted. The possibility of export will benefit farmers.”
  • The Bill ensures farm sector transformation and a stable regime while increasing farmer income, 

Source: Indian Express