Govt amends Essential Commodities Act to enable better price realisation for farmers   

The Essential Commodities Act will be amended to eliminate punitive measures such as preventive detention, confiscation of vehicles and attachment of properties of suspected hoarders and black marketers.

The removal of restrictions, based on an expert panel recommendations, will enable merchants to directly purchase produce from farmers in large quantities. This can be particularly helpful in times of bumper harvests when farmers often dump produce in wholesale markets at throwaway prices.

Cheap food may benefit consumers, but hurts producers of food. It is a key reason for depressed farm incomes.

Under existing rules, the Essential Commodities Act limits quantities that traders can buy from farmers and hold as stock.

There are no permanent storage ceilings or commodities named in the Act but the law empowers the government to include or exclude items when ‘deemed necessary’.

For instance, the government had brought onions and potatoes under the purview of the Essential Commodities Act for a year to curb hoarding in July 2014. It then removed them after prices cooled.

Similarly, through 2015, controls under the Essential Commodities Act continued to be applied to pulses, edible oil and oilseeds and these measures were in force till September 2016. Sugar is a prime example of a widely consumed commodity that is regulated by the Act.

The NITI Aayog, in a report, ‘Raising Agricultural Productivity and Making Farming Remunerative for Farmers’, said there is “a need to have a relook at some of the provisions of the Essential Commodities Act which discourage large scale private investments in agricultural markets, without diluting its basic premise of ensuring supplies of essential commodities to public and preventing exploitation by unscrupulous traders.”

In the commodities market, the law is mainly used to target black-marketers who may hoard commodities. It is also used to rein in prices of items deemed essential under the Act by forcing traders to release stocks.

If a trader cannot buy or hold sufficient quantities of grains for a certain profit margins, he or she would not buy out surpluses that farmers may have to sell. This has been identified as one of the reasons why farm incomes have taken a hit.

The law came in handy during the 1980s when hoarding, or the unscrupulous trade practice of holding on to food stocks to artificially raise prices, used to be rampant. The law is still used to crack down on inflationary spells in food items, mainly by disallowing wholesalers and retailers from storing food items beyond stipulated quantities.