Essential Commodities (Amendment) Bill, 2020

  • Rajya Sabha passed the Essential Commodities (Amendment) Bill, 2020 which is aimed at deregulating commodities such as cereals, pulses, oilseeds, edible oils, onion and potatoes.

       What is the Bill about?

  • Bill amends the Essential Commodities Act, 1955, by introducing a new Subsection (1A) in Section 3.
  • After the amendment, the supply of certain foodstuffs — including cereals, pulses, oilseeds, edible oils, potato — can be regulated only under extraordinary circumstances, which include an extraordinary price rise, war, famine, and natural calamity of a severe nature.
  • In effect, the amendment takes these items out from the purview of Section 3(1), which gives powers to central government to “control production, supply, distribution, etc, of essential commodities”.

       How is an ‘essential commodity’ defined?

  • There is no specific definition of essential commodities in the Essential Commodities Act, 1955.
  • Section 2(A) states that an “essential commodity” means a commodity specified in the Schedule of the Act.
  • The Act gives powers to the central government to add or remove a commodity in the Schedule.
  • The Centre, if it is satisfied that it is necessary to do so in public interest, can notify an item as essential, in consultation with state governments.
  • According to the Ministry of Consumer Affairs, Food and Public Distribution, which implements the Act, the Schedule at present contains seven commodities —
    • drugs; fertilisers, whether inorganic, organic or mixed;
    • foodstuffs including edible oils;
    • hank yarn made wholly from cotton;
    • petroleum and petroleum products;
    • raw jute and jute textiles;
    • Seeds of food-crops and seeds of fruits and vegetables, seeds of cattle fodder, jute seed, cotton seed.


       Under what circumstances can the government impose stock limits?

  • While the 1955 Act did not provide a clear framework to impose stock limits, the amended Act provides for a price trigger.
  • It says that agricultural foodstuffs can only be regulated under extraordinary circumstances such as war, famine, extraordinary price rise, and natural calamity.
  • However, any action on imposing stock limits will be based on the price trigger.
  • Thus, in case of horticultural produce, a 100% increase in the retail price of a commodity over the immediately preceding 12 months or over the average retail price of the last five years, whichever is lower, will be the trigger for invoking the stock limit.
  • For non-perishable agricultural foodstuffs, the price trigger will be a 50% increase in the retail price of the commodity over the immediately preceding 12 months or over the average retail price of the last five years, whichever is lower.

       Why was the need for this felt?

  • To prevent hoarding and black marketing of foodstuffs, the Essential Commodities Act was enacted in 1955.
  • But India has now become an exporter of several agricultural products.

       What will be the impact of the amendments?

  • The key changes seek to free agricultural markets from the limitations imposed by permits and mandis that were originally designed for an era of scarcity.
  • The move is expected to attract private investment in the value chain of commodities removed from the list of essentials, such as cereals, pulses, oilseeds, edible oils, onions and potatoes.
  • While the purpose of the Act was originally to protect the interests of consumers by checking illegal trade practices such as hoarding, it has now become a hurdle for investment in the agriculture sector in general, and in post-harvesting activities in particular.
  • The private sector had so far hesitated about investing in cold chains and storage facilities for perishable items as most of these commodities were under the ambit of the EC Act, and could attract sudden stock limits.
  • The amendment seeks to address such concerns.