Context: The Lok Sabha passed the Essential Commodities Amendment Bill by a voice vote.
- The Bill proposes to deregulate the production, storage, movement and sale of several foodstuffs, including cereals, pulses, oilseeds, edible oils, onion and potatoes, except in the case of extraordinary circumstances.
- Under the amended EC Act, agri-food stuffs can only be regulated under extraordinary circumstances such as war, famine, extraordinary price rise, and natural calamity.
- The Bill is meant to replace an ordinance promulgated in June, in the wake of the COVID-19 lockdown.
- It says stock limits can only be imposed if retail prices surge 50% above the average in the case of non-perishables and 100% in the case of perishables.
What is the definition of an ‘essential commodity’?
- There is no specific definition of essential commodities in The EC Act.
- Section 2(A) of the act states that an “essential commodity” means a commodity specified in the “Schedule” of this Act.
- The Act gives powers to the central government to add or remove a commodity in the “Schedule.”
- The Centre, if it is satisfied that it is necessary to do so in public interest, can notify an item as essential, in consultation with state governments.
At present, the “Schedule” contains 9 commodities
- fertilisers, whether inorganic, organic or mixed;
- foodstuffs, including edible oils;
- hank yarn made wholly from cotton;
- petroleum and petroleum products;
- raw jute and jute textiles;
- seeds of food-crops and seeds of fruits and vegetables, seeds of cattle fodder, jute seed, cotton seed;
- face masks (recently removed); and
- hand sanitisers (recently removed).
- By declaring a commodity as essential, the government can control the production, supply, and distribution of that commodity, and impose a stock limit.
So, why was an amendment needed in The EC Act?
- The EC Act was legislated at a time when the country was facing scarcity of foodstuffs due to persistent abysmal levels of foodgrain production.
- The country was dependent on imports and assistance (such as wheat import form US under PL-480) to feed the population.
- In this scenario, to stop the hoarding and black marketing of foodstuffs, The Essential Commodities Act was enacted in 1955.
- But now the situation has changed. In fact, India has now become an exporter of several agricultural products. With these developments, the EC Act has become anachronistic.
What will be the impact of the amendments?
- The move is expected to attract private investment in the value chain of these commodities.
- While the purpose of the Act was originally to protect the interests of consumers by checking illegal trade practices such as hoarding, it has now become detrimental for investment in the agriculture sector in general, and in post-harvesting activities in particular.
- The private sector has so far hesitated investing in cold chains and storage facilities for perishable items as most of these commodities are under the ambit of the EC Act, and can attract sudden stock limits.