Page 571 - ES 2020-21_Volume-1-2 [28-01-21]

198 Economic Survey 2020-21 Volume 2

suffer huge losses when there are bumper harvests of perishable commodities. With adequate
processing facilities, much of this wastage can be reduced thus providing remunerative prices
to producers as well as ensuring greater supply to consumers. Amendment to EC Act would
provide a much needed fillip to the value chain participants as their fears of sudden regulation
of stock limit in these commodities would be adequately addressed.
Help in price stabilization: What is needed today is the entry of market players who can
contribute to price stability for farmers through their investments. Exempting agri-food
commodities from restrictive provisions of EC Act will attract organised sector to agriculture
trade, much needed for price stabilization, investments in cold storages and logistics, and
modernization of the food supply chain. This will also remove inherent fears of investors about
excessive regulatory interference emanating out of EC Act. 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 agriculture sector.

Safeguarding Consumers: The Government, while liberalizing the regulatory environment in
order to boost farmers’ income and attract investment to the agriculture sector, has also ensured
that 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. Whenever there is unprecedented price rise, provision has been
made for independent and objective assessment that this price rise needs to be dealt with through
imposition of stock limits. The price of that commodity during the preceding year will be
compared with the average prices over the preceding five years; the lower of the two figures will
be the base figure and if prevailing price of that commodity is 100 per cent higher (for perishable
commodity), or 50 per cent higher (for non-perishable commodity), this will be the trigger for
imposing stock limits. However, the installed capacity of a value chain participant and the
export demand of an exporter will remain exempted from such stock limit imposition.

From the perspective of protecting consumers, Government now has many other tools such as
buffers of various essential food items (cereals, pulses and onions) and appropriate trade policy
instruments such as export restriction and import liberalizations, there is planned intervention of
Government for managing prices.

Circumstances when stock limits may be imposed
The amendment provides for objective criteria for taking any decision on the imposition of stock
limits on such agri food stuff. The Essential Commodities (Amendment) Act, 2020 provides
the circumstances under which the supply of agricultural food stuffs including cereals, pulses,
potato, onion, edible oilseeds and oils shall be regulated, and they are as follows: war, famine,
extraordinary price rise and natural calamity of grave nature. The condition for imposition
and regulation of stock limit of agricultural produce is “100% increase in the retail price of
horticultural produce; or 50% increase in the retail price of nonperishable agricultural foodstuff
over the price prevailing immediately preceding one year or average retail price of last 5 years
whichever is lower.” Based on the objective criteria of the price of onion as on Oct 21, 2020 of
Rs.55.6 per kg, in comparison with the price on Oct 21, 2019 of Rs.45.53 per kg and the average
retail prices of the last five years of Rs.25.86 per kg, the decision to regulate the sale of onion by
imposing stock limits to check hoarding, was taken. A notification to this effect was issued on
Oct 23, 2020. The stock limits are fixed as 25 MT for wholesalers and 2 MT for retailers.