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Essential Commodities (Amendment) Bill, 2020: Explained

Essential Commodities (Amendment) Bill, 2020 is passed by the Lok Sabha. It’ll replace the Essential Commodities (Amendment) Ordinance which was promulgated in June, 2020.

According to Shri Danve Raosaheb Dadarao, “this bill will create a positive environment not just for farmers but also for consumers and investors.”

Essential Commodities (Amendment) Bill, 2020: Explained_40.1

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Key Features of the Bill

– The bill seeks to get rid of commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities.

– It’ll also remove the fears of private investors of excessive regulatory interference in their business operations.

– The bill ensures that the interests of the consumers are safeguarded by regulating agricultural foodstuff in situations including war, famine, extraordinary price rise and natural calamity.

– While liberalizing the regulatory environment, the Government has also ensured that the interests of consumers are safeguarded.

– However, the installed capacity of a value chain participant and therefore the export demand of an exporter will remain exempted from such stock limit imposition so as to make sure that investments in agriculture aren’t discouraged.

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020


The Essential Commodity Act, 1955 was used to limit inflation by allowing the Centre to enable control by state governments of trade in a huge variety of commodities. The stock limits were imposed by the states to limit the movement of any commodity that is deemed essential. It led to discouraging the hoarding of several items such as food commodities like pulses, edible oils and vegetables. Also, the Economic Survey of 2019-10 highlighted that government intervention under the ECA 1955 often distorted agricultural trade while being totally ineffective in suppressing inflation. These interventions enable opportunities for rent-seeking and harassment.

As we all know that India has become surplus in various agri-commodities but the farmers are unable to urge better prices due to the shortage of investment in cold storage, warehouses, processing and export because the entrepreneurial spirit gets dampened due to Essential Commodities Act.

When there are bumper harvests, farmers suffer huge losses mainly of perishable commodities. Therefore, the legislation will help in increasing the investment in cold storage and modernisation of food supply chain. In bringing price stability, it’ll also help both farmers and consumers. Indeed, it’ll create a competitive market environment and also prevent wastage of agricultural produce that happens due to lack of storage facilities.

Government Schemes/Programmes for Welfare and Development of Minorities

About Stock limit

The Bill requires that imposition of any stock limit on agricultural produce must be dependent on price rise. And a stock limit could also be imposed only if there is a 100% increase in the retail price of horticultural produce and 50% increase within the retail price of non-perishable agricultural food items.

It will be calculated over the price prevailing immediately preceding twelve months, or the average retail price of the last five years, whichever is lower.

 Benefits of the Bill

– The freedom to produce, hold, move, distribute and supply will lead to the harnessing of economies of scale. It will also attract private sector or foreign direct investment into the agricultural sector.

– It’ll help in increasing the investment in cold storages and modernization of the food supply chain.

– It’ll generate a competitive market environment and also prevent wastage of agricultural produce that took place due to lack of storage facilities.

– Further, the bill also helps both farmers and consumers in bringing stability in price.

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Issues related to the Bill are:

– The law is highly centralised and can infringe or contravene upon State’s powers because they will not be able to regulate such as the menace of hoarding, black marketing etc.

– Relaxation within the stock limit under ECA may lead to black marketing and hoarding instead of benefiting the producers. It will be going to cause an increase in inflation and the monopoly of few people over prices of certain goods.

But we can’t ignore the fact that when ECA 1955 was brought that time India was not self-sufficient in food grains production. But now India has become surplus in several agri-commodities. Therefore, the amendment within the ECA 1955 is a crucial step taken by the government to achieve the target of doubling the income of the farmers and also make it easy for doing business.

Essential Commodities (Amendment) Bill, 2020: Explained_50.1

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