Cabinet okays amendment to Essential Commodities Act among other steps to give boost to rural India
Prime Minister Narendra Modi chairing a meeting of the Union Cabinet in New Delhi on June 3, 2020.

Cabinet okays amendment to Essential Commodities Act among other steps to give boost to rural India

New Delhi, June 3, 2020

The Cabinet today approved amendments to the Essential Commodities Act in a step that the government said would boost farmers’ income and benefit traders and consumers.

The Cabinet also approved three other ordinances to remove restrictions and simplify rules regarding the marketing of agricultural produce as part of measures aimed at giving a boost to rural India.

An official press release said that, 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 the restrictions placed by the Essential Commodities Act.

Farmers suffer huge losses when there are bumper harvests, especially of perishable commodities. With adequate processing facilities, much of this wastage can be reduced, it said.

With the amendment to the Act, commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes will be removed from the list of essential commodities. This will 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 the agriculture sector. It will help drive up investment in cold storages and modernization of the food supply chain, the release said.

According to it, 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.

However, the installed capacity of a value chain participant and the export demand of an exporter will remain exempted from such stock limit imposition so as to ensure that investments in agriculture are not discouraged, the release said.

The amendment announced will help both farmers and consumers while bringing in price stability. It will create a competitive market environment and also prevent wastage of agricultural produce that happens due to lack of storage facilities, it said.

The Cabinet also approved 'The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020'. The ordinance was necessitated as the farmers suffer from various restrictions like being unable to sell their produce outside the notified APMC market yards.

The farmers are also restricted to sell the produce only to registered licensees of the State Governments. Barriers exist in the free flow of agriculture produce between various States owing to the prevalence of various APMC legislation enacted by the State Governments, the release said.

According to it, the ordinance will create an ecosystem where the farmers and traders will enjoy the freedom of choice of sale and purchase. It will also promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations.

It will open up more choices for the farmer, reduce marketing costs for the farmers and help them in getting better prices. It will help farmers of regions with surplus produce to get better prices and consumers of regions with shortages, lower prices. The ordinance proposes electronic trading in transaction platform for ensuring a seamless trade electronically.

The farmers will not be charged any cess or levy for sale of their produce under this Act. Further, there will be a separate dispute resolution mechanism for the farmers.

The ordinance aims at creating additional trading opportunities outside the APMC market yards to help farmers get remunerative prices due to additional competition. This will supplement the existing MSP procurement system which is providing stable income to farmers. It is expected to pave the way for creating "One India, One Agriculture Market".

Another ordinance approved by the Cabinet was "The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020".

The release said Indian agriculture is characterized by fragmentation due to small holding sizes and has certain weaknesses such as weather dependence, production uncertainties and market unpredictability. This makes agriculture risky and inefficient in respect of both input and output management.

The ordinance will empower farmers for engaging with processors, wholesalers, aggregators, wholesalers, large retailers, exporters etc., on a level playing field without any fear of exploitation. It will transfer the risk of market unpredictability from the farmer to the sponsor and also enable the farmer to access modern technology and better inputs. It will reduce the cost of marketing and improve the income of farmers.

The ordinance will act as a catalyst to attract private sector investment for building supply chains for supply of Indian farm produce to global markets. Farmers will get access to technology and advice for high-value agriculture and get a ready market for such produce, the release said.

Farmers will engage in direct marketing thereby eliminating intermediaries resulting in full realization of price. Farmers have been provided adequate protection. Sale, lease or mortgage of farmers’ land is totally prohibited and farmers’ land is also protected against any recovery. Effective dispute resolution mechanism has been provided for with clear timelines for redressal, it added.


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