Raising farm incomes may top budget agenda
The Act imposes restrictions on the agricultural economy by limiting quantities traders can buy from farmers and hold as stock.Updated: Jan 17, 2020 05:02 IST
The forthcoming Union Budget may do away with the penal provisions of the Essential Commodities Act in a move many experts see as a radical piece of agricultural reform -- one that could increase farm incomes.
The government is considering repealing penal provisions of the Essential Commodities Act (ECA) such as preventive detention, confiscation of vehicles and attachment of properties so that merchants can directly purchase produce from farmers in large quantities, people familiar with the development said on condition of anonymity.
The Act imposes restrictions on the agricultural economy by limiting quantities traders can buy from farmers and hold as stock. There are no permanent storage ceilings or commodities named in the Act but the law empowers the government to include or exclude items when “deemed necessary” -- something that makes life difficult for traders and merchants.
A change is being considered and several arms of the government and many states are in favour of the proposal, one of the people cited in the first instance said. The consumer affairs ministry recently sought inputs from other ministries and states on rationalising the Essential Commodities Act, 1955, allowing competitive rates to farmers for their produce and aiming to boost investments in the agricultural sector.
“In mid-December, a committee also took a view that penal provisions of ECA that are against the interest of farmers should be dispensed with. But it is likely that the existing regulation will continue to be effective on food items supplied through PDS [public distribution services],” the first person said. The inter-departmental committee is also represented by officials of states, he added.
Ajay Vir Jakhar, chairman, Bharat Krishak Samaj, said farmers have been demanding the repeal of the penal provisions of ECA for a long time. “The Act allowed officials and politicians to manipulate commodity markets and, generally, in most cases, whenever the government intervened, it destroyed livelihoods.”
In a report, “Raising Agricultural Productivity and Making Farming Remunerative for Farmers”, NITI Aayog said there is “a need to have a relook at some of the provisions of the Essential Commodities Act which discourage large scale private investments in agricultural markets, without diluting its basic premise of ensuring supplies of essential commodities to public and preventing exploitation by unscrupulous traders”.
The government has been actively working in this direction since June 2019 as the Fifth Governing Council Meeting of NITI Aayog, held under the chairmanship of Prime Minister Narendra Modi, emphasised on the need for transforming agriculture through structural reforms with special emphasis on the Essential Commodities Act and the Agriculture Produce Marketing Committee (APMC) Act, the first person added.
In the commodities market, the Essential Commodities Act is mainly used to target black-marketers, who may hoard commodities. It is also used to rein in prices of items deemed essential under the Act by forcing traders to release stocks.
Analysts say that if traders cannot buy or hold sufficient quantities of grains for certain profit margins, they will not buy out surpluses from farmers. Thus, the restrictive clauses, particularly the penal provisions of the law, become one of the key reasons for tardy growth of farmers’ income.
A committee of secretaries, tasked with recommending measures for the rural sector, has also advocated a review of the essential commodities law, a second person said.
A review meeting held recently recommended that the powers of preventive detention under the Act may be abolished. If any state sees the need for the provision of preventive detention, then it may do so with a state-specific amendment, according to the proposals reviewed by HT.
Additionally, the review meeting proposed doing away with the seizure of vehicles and other movable and immovable property.
The government believes there should be an omnibus clause to make reporting of stocks, sale and purchase voluntary.
The consumer affairs ministry has sought states’ suggestions on revising criminal provisions in the Act to make it “more attuned to government’s policy regarding ease of doing business”, the second person said.
Although, the objective of the Essential Commodities Act is to ensure adequate availability of essential commodities to general public at fair prices, this should not be at the expense of farmers, this person added.
Experts said doing away with the Act is a progressive move that will facilitate a symbiotic relationship between the farmer and the industry. “Now we can hope for industry investment in storage infrastructure and expect higher commodity trade volumes -- leading to more stable prices and higher price realisation for farmers,” Jakhar said.
RS Mani of the Tamil Nadu Agricultural University said, “Many provisions of the Essential Commodities Act have outlived their utility. Changes in the Act will allow farmers to face the markets more freely. That will be a big agricultural reform.”
The law came in handy during the 1980s when hoarding, or the unscrupulous trade practice of holding on to food stocks to artificially raise prices, used to be rampant. The law is still used to crack down on inflationary spells in food items, mainly by disallowing wholesalers and retailers from storing food items beyond stipulated quantities.