Page 570 - ES 2020-21_Volume-1-2 [28-01-21]

Prices and Inflation 197

Necessity of Amendment

The Essential Commodities (Amendment) Act 2020 was the culmination of a series of
consultations and deliberations by the High Powered Committee for Transformation of Indian
Agriculture comprising the Department of Agriculture and Farmers’ Welfare, NITI Aayog, and
the Chief Ministers of the States of Punjab, Maharashtra, Odisha, Madhya Pradesh, Gujarat,
Arunachal Pradesh and Uttar Pradesh. The Committee had deliberated on several issues
pertaining to the sector and made key recommendations, including, inter alia, the amendment
of the Essential Commodities Act in order to boost investment in the sector, particularly for
enhancing storage capacity for agricultural produce.
As the country was reeling under the adverse effects of COVID-19 pandemic, and the resilient
agriculture sector showed its potential of making a significant contribution to economic activity,
the need of the hour was to undertake reforms for boosting investment and growth. It was
imperative that an enabling environment based on ease of doing business be created, and
removing the fear of frequent statutory controls under the EC Act, was one such reform measure
that had already been recommended by the afore-mentioned High-Powered Committee.
Amendments balance the interest of all the stakeholders: Amendments to the EC Act
balance the interest of all the stakeholders including farmers, exporters, processors, other value
chain participants and consumers by removing the fear of “excessive regulatory interference”.
At the same time, power has been retained with the Government for regulation under certain
extraordinary circumstances.
The Amendment not only takes exporters, processors and other value chain participants out of
the ambit of the stock limits under the EC Act but also puts in place a well-defined mechanism
for imposition of these limits. Now price triggers have been well defined - an increase of 100 per
cent for perishable and 50 per cent for non-perishable foodstuffs.
Provide farmers greater choice in selling their produce: Amendments to the EC Act along
with the other Ordinances allowing sale and purchase of farm produce outside notified market
yards, facilitating contract farming and allowing farmers to engage in direct marketing, would
greatly benefit the farmers and help them realise better price for their produce. Now physical
market participants can directly buy from the farmers without the fear of excessive regulation
and stock limits under the EC Act. This would improve the bargaining power of farmers.
Attract private investment: “Excessive regulatory interference” under the EC Act was coming
in the way of investment in the agriculture sector particularly in post-harvesting activities.
Private sector was hesitant in investing in cold chains and storage facilities for perishable items
as most of these commodities were under the ambit of the EC Act and stock limits were attracted
suddenly. Now any limits under EC Act shall not be applicable to exporters, processors and
other value chain participants. This would now attract private investment which would help
farmers in better storage and prices.

Promote value chain participants which would minimize farm wastages: The Annual
Report of MoFPI (2018-19) quotes a study by Central Institute of Post-Harvest Engineering &
Technology (CIPHET) which estimates the annual value of harvest and post-harvest losses of
major agricultural commodities at Rs.92,651 crore using the production data of 2012-13 at 2014
wholesale prices. Most of the wastage is occurring in the case of fruits and vegetables. Farmers