Arguing that the Essential Commodities Act, 1955, was framed during the era of food scarcity, the NITI Aayog has proposed that the Act be scrapped because it is an “impediment in the free movement of commodities” given that the country is now self-sufficient in most. The move, part of a plan for structural reform in agriculture, is up for discussion at the state Chief Ministers’ gathering Saturday for the meeting of the Governing Council of the NITI Aayog to be chaired by Prime Minister Narendra Modi.
“Whether Essential Commodities Act, 1955 and Prevention of Black-marketing and Maintenance of Supplies of Essential Commodities (PBMSEC) Act, 1980 be scrapped altogether and replaced with a modern statute balancing the interests of farmers, consumers and supply chain participants?” is one of the items top on the agenda circulated to CMs, sources said.
From scarcity to surplus
In an age of surplus production, laws regulating trade of agricultural commodities need tweaking. Since agriculture is a state subject, proposal seeks to solicit views of CMs before it moves forward.
Alternatively, the proposal has suggested classifying commodities under the EC Act into two categories: Priority One — drugs, petroleum/petroleum products, and fertilizers; and Priority Two — foodstuffs and seeds of agricultural produce. The first category would continue to witness some controls, the second should be “decontrolled” with a caveat that controls “may” be imposed in “exceptional circumstances” like war, severe natural calamities or steep fall in production (over 10 per cent dip in a year) or sharp rise in prices (100 per cent or more over previous year).
Additionally, the proposal seeks the opinion of the Governing Council to do away with the imprisonment provision and instead adopt punishments inclined towards monetary penalties for any contravention.
The proposal holds significance given that the EC Act arms the government with powers to impose stock limits and movement restrictions on agricultural commodities. This has come to be seen as a reminder of old licence-permit raj era that creates uncertainty for investors and stands in the way of the much-required private capital infusion into the agricultural sector.
Though the Removal of Licensing Requirements, Stock Limits and Movement Restrictions on Specified Foodstuffs Order in 2016 had eased restrictions, the possibility of re-imposing restrictions hangs in the mind of those considering to make investments in the sector.
“…since they are part of ECA, the possibility of re-imposing restrictions cannot be ruled out if the circumstances warrrant. Non-compliance of the same invites stringent punishment including imprisonments which deters large scale investments in the sector. This situation needs to be corrected paving the way for greater market forces to ensure supply of essential commodities to the public,” reads the proposal.
It underlines that “restrictive and deterring nature of the ECA and its related statutes” have ensured that the sector hasn’t witnessed any massive investment despite 100 per cent FDI allowed.
When contacted, Ramesh Chand, Member, NITI Aayog, said: “If agriculture has to move to next stage of development, it has to be provided new kind of environment. You can’t go with business as usual. That requires big investment in agriculture – production as well as processing. Who will make those investment? “
He added: “It has to be the private corporate sector. Right now share of corporate private investment in total investment in agriculture is 2.4 per cent. This is nothing. If you look the at share of agriculture in total investments by private corporate sector in India, it is only 0.4 per cent while agriculture contributes 15 per cent in GDP. They say that unless you create enabling environment, we will not. This is my big worry,” Chand told The Indian Express.
Also on the table is the model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act as well as a separate model Agricultural Produce & Livestock Contract Farming and Services (Promotion & Facilitation) Act that seeks not only to modernise legislation designed at the height of food scarcity but also provides a separate legal framework for contract farming to attract private sector investment.
“A wrong impression has been created about this APML and contract farming act. That the power of existing APMC will go or the business of those existing players will come down. This is totally misplaced. In most of the states, not more than one third of the produce comes to the APMC mandis. It just sells informally outside the APMC. I feel that when we formalise and monetise the entire production, there will be enough business for existing player in the APMC and new players,” Chand said.
Apart from these two structural reforms in the agriculture sector, the fifth meeting of the Governing Council of NITI Aayog tomorrow is also slated to take up the issue of the current water shortage in the country and relief measures along with rainwater harvesting. The meeting is also likely to discuss the issue of aspirational districts and security with specific focus on left wing extremism-affected districts.