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Focus: GS-III Indian Economy

Why in news?

Formalising its plan to unlock the growth potential of farm incomes by allowing unrestricted sale of produce, the Centre on 3rd June 2020, approved three major legislative reforms through ordinances intended to create “one India, one agriculture market” while attracting private investments in a sector crippled by varying regulations.

Ordinance on Contract Farming

  • The three legislative reforms include laws on promoting barrier-free inter-state and intrastate trade in agriculture produce, empowering farmers to engage with processors, aggregators, wholesalers, large retailers and exporters through advance contracts on pre-agreed prices.
  • The ordinance on contract farming — Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 — looks to transfer the risk of market unpredictability to the sponsor and also enable the farmer to access modern technology and better inputs.

Ordinance to Amend ECA

  • The reforms also include an amendment to the Essential Commodities Act which removes cereals, pulses, oilseeds, edible oils, onion and potatoes from list of essential commodities.
  • The amendment in the ESA will give freedom to hold, move, distribute and supply such farm commodities and attract private sector and foreign direct investment into agriculture sector.
  • The amendment to the ESA has provisions to regulate agricultural items in situations such as war, famine, extraordinary price rise and natural calamity.

Is this a case of Center legislating on a State Subject?

The Ordinances are said to be within the domain of the central government as it deals with inter-state trade of agriculture produce which was covered under the “Central” list.

Essential Commodities Act

  • The ECA is an act which was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or black-marketing would affect the normal life of the people.
  • The ECA was enacted in 1955. This includes foodstuff, drugs, fuel (petroleum products) etc.
  • It has since been used by the Government to regulate the production, supply and distribution of a whole host of commodities it declares ‘essential’ in order to make them available to consumers at fair prices.
  • Additionally, the government can also fix the maximum retail price (MRP) of any packaged product that it declares an “essential commodity”.
  • The list of items under the Act includes drugs, fertilizers, pulses and edible oils, and petroleum and petroleum products.

How Essential Commodities Act works?

  • If the Centre finds that a certain commodity is in short supply and its price is spiking, it can notify stock-holding limits on it for a specified period.
  • The States act on this notification to specify limits and take steps to ensure that these are adhered to.
  • Anybody trading or dealing in a commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity.
  • A State can, however, choose not to impose any restrictions. But once it does, traders have to immediately sell into the market any stocks held beyond the mandated quantity.

What are Food Items covered under it?

  • The items covered include rice, wheat, atta, gram dal, arhar dal, moong dal, urad dal, masoor, dal, tea, sugar, salt, Vanaspati, groundnut oil, mustard oil, milk, soya oil, palm oil, sunflower oil, gur, potato, onion and tomato.
  • Based on the deliberations, Government takes various measures from time to time to stabilize prices of essential food items which, inter-alia, include appropriately utilizing trade and fiscal policy instruments like import duty.
  • The govt. can impose stock limits and advise State for effective action against hoarders & black marketers etc. to regulate domestic availability and moderate prices.

-Source: Times of India

April 2024