Continuing from yesterday (See Farm Sector Reforms – 3)
The Parliament passed The Essential Commodities (Amendment) Bill
2020. The stated objective of the amendment is to make sure that farmers get
remunerative prices for their produce, and large scale private investment in
agriculture related infrastructure (cold stores, warehouses and agro processing
industry) could be attracted. This amendment was considered necessary to
achieve the objectives of The Farmers (Empowerment and Protection) Agreement on
Price Assurance and Farm Services Bill, 2020, that enables contract farming and
forward contracts in agriculture produce.
The Essential Commodities (Amendment) Bill 2020, basically
changes the following two things:
1.
The power of central government to regulate the
supply of food commodities, including cereals, pulses, potato, onions, edible
oilseeds and oils etc., has been limited to the extraordinary circumstances
like war, famine, extraordinary price rise and natural calamity of grave nature
etc.
Prior to this amendment the powers to impose restriction on
supply and trade of essential commodities were unrestrained. Even the
“essential commodities” and “circumstances” in which the government could
regulate the supply were not defined clearly in the law. The recent ban on
export of onion is one example of arbitrary action of the government under the
extant law.
2.
An objective criterion has been specified to
define the circumstance under which stock limits could be imposed in respect of
any agriculture produce. As per the latest amendment, stock limits may be
imposed on any agriculture produce only if there is 100% or more increase in
retail price of horticulture produce (vegetables and fruits) OR 50% or more
increase in retail prices of non-perishable agriculture produce like cereals
and pulses. The price increase will be seen in relation to the lower of (i)
average price prevailing in preceding 12 months or (ii) average retail price in
preceding 5 years.
Such stock limits if specified shall not apply in relation to
(i) already contracted export obligation; and (ii) stock of food processing
units to the extent of rated processing capacity of such units.
Apparently, the new legal changes do not alter the status quo in
respect of the following:
(a)
Sugar industry, which is one of the major
agriculture processing industry in the two largest states of UP and
Maharashtra. The stock limits on sugar, export quotas, administrative prices
for sugarcane etc will continue as before.
(b)
Industries like paper, plywood, etc have been
using contract farming to procure tree wood from farmers. The new law does not
appear to change status quo in respect of these also.
It is feared that the relaxations given under the latest
amendments in Essential Commodities Act, could be easily misused to hoard
stocks of essential commodities and create artificial scarcities. In my view,
many of these fears are emanating from the empirical evidence from the decades
of 1960s and 1970s, where the food grain hoarders exploited the poor people.
But that was when the foreign trade in food commodities was restricted. There
are little chance that the prices of an agriculture commodity could be
manipulated sustainably even over a period 3-4months. I am therefore not
worried about hoarding etc.
