Published on 17/05/2020 1:22:35 PM | Source: Kedia Advisory

Important Reforms in Essential Commodities Act And It`s Impact. USD 72 Billion Liquidity will help Economy - Kedia Advisory

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PM Modi’s ‘Aatma Nirbhar’ Relief Package

* Prime Minister Modi’s big announcement of Rs. 20 lakh crore stimulus relief packages, equivalent to 10% of India’s GDP

* This will help to deal with the economic crisis due to Covid-19.

* This booster shot will play an important role in the ‘Aatma Nirbhar Bharat Abhiyan’, which would make India self-reliant and face the post-COVID-19 repercussions.

* This move is a push for Indian local brands to advertise and make their products visible at a national level, to begin with, and eventually position themselves to face global competition.

* Experts are of the view that the amount reflects both fiscal and monetary measures that have already been undertaken, and those that will be taken up over the next few months.

What is Essential Commodities Act (ECA)? And what are its features?

* The Essential Commodities Act (ECA) was enacted by the Central Government in 1955 to control and regulate trade and prices of commodities declared essential under the Act.

* It aims to ensure the easy availability of essential commodities to consumers and to protect them from exploitation by unscrupulous traders.

* The State Governments are fully empowered under the Act and are thus the implementing agencies to implement the EC Act, 1955 along with the Prevention of Black marketing & Maintenance of Supplies of Essential Commodities Act, 1980.

* In case a state doesn’t want to accept the Centre’s suggestion on implementing any provision of the Act it can do so.

* Food and civil supply authorities execute the provisions of the Act.

* It ensures adequate availability of essential commodities at reasonable prices, by exercising powers delegated to them.

* The list of essential commodities is reviewed periodically at the National level.

What is Essential Commodities Act (ECA)? And what are its features?

* Currently, the restrictions like licensing requirement, stock limits and movement restrictions have been removed from almost all agricultural commodities.

* Wheat, pulses and edible oils, edible oilseeds and rice are the exceptions, where States have been permitted to impose some temporary restrictions in order to contain price increase of these commodities.

* The Central Government regularly monitors the action taken by State Governments/UT Administrations to implement the provisions of the Act.

* In 2017 the NITI Aayog pitched for completely removing agriculture commodities from the Essential Commodities Act, and a shift towards organised trading wherein lower number of traders with enough capital will dominate the market.

* This will reduce handling costs, bring economies of scale, reduce prices and increase returns for farmers.

What is Essential Commodities Act (ECA)? And What Are Its Features?

* The Act empowers the Central and state governments concurrently to control production, supply and distribution of certain commodities in view of rising prices.

* The measures under the provision of the Act include, licensing, distribution and imposing stock limits.

* The governments also have the power to fix price limits and selling the particular commodities above the limit will attract penalties.

* Black marketing of essential commodities is controlled to a large extent.

* The Drug Price Control Order (DPCO) and such other orders have been issued under the powers of the ECA.

* The act will be maintaining/increasing supplies/securing equitable distribution and availability of these commodities at fair prices.

* The Centre can include new commodities as and when the need arises and take them off the list once the situation improves.

* It improves supplies and brings down prices.

The essential commodities in India:

* Cattle fodder, including oilcakes and other concentrates.

* Coal, including coke and other derivatives.

* Components parts and accessories of automobiles.

* Cotton and woollen textiles.

* Foodstuffs, including edible oilseeds and oils

* Iron and Steel, including manufactured products of Iron & Steel.

* Paper, including newsprint, paperboard and strawboard.

* Petroleum and Petroleum products.

* Raw Cotton, either ginned or unginned and cotton seed.

* Raw Jute.

* Jute textiles.

* Fertilizer, whether inorganic, organic or mixed.

* Yarn made wholly from cotton.

* Seeds of food crops and seeds of fruits and vegetables,

* Seeds of cattle fodder and

* Jute seeds.

Govt to amend Essential Commodities Act

* FM Nirmala Sitharaman on Friday said that the government will amend the Essential Commodities Act, 1955 to deregulate food items, including cereals, edible oil, oilseeds, pulses, onion and potato.

* The amendment, besides deregulating production and sale of food products, will provide for no stock limit to be imposed on any produce. A stock limit will be imposed only under very exceptional circumstances like national calamities, famine with a surge in prices.

* No stock limit shall apply to processors or value chain participants, she said announcing the third tranche of economic relief package to deal with COVID-19 disruptions.

* Agriculture marketing reforms will be done to provide marketing choices to farmers. FM also announced new funds for fisheries, dairy development, herbal plantation and livestock vaccination.

* Rs.15,000 crore Animal Husbandry Infrastructure Development Fund will be set up to support investment in dairy processing, value addition and cattle feed infrastructure.

* To ensure 100% vaccination of all livestock against foot and mouth disease (FMD) Rs 13,343 crore will be provided. As much as Rs 10,000 crore will be provided for fishermen through Pradhan Mantri Matsya Sampada Yojana (PMMSY).

Deregulation & Road Ahead

* Increase in Private investment in warehouses , Agri infrastructure.

* Roles of Futures exchanges will be more centric

* Increase in purchase from processors and mills.

* Food and food processing companies can increase stocks.

* Farmer can sell at competitive prices.

* Consumer can also enjoy at competitive prices

* Increase in farm exports.

* No barriers on interstate trade of farm products.

* Legal framework to allow farmers to fix their own fair price.

* Standard mechanism that can be enforced to get a predictable price.


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