The Essential Commodities Act was amended during the last Parliament session, 65 years after it was first enacted. The government has promised it is a win-win reform for farmers, consumers and investors. Leena Nandan, secretary of the Centre’s department of consumer affairs, explained the underlying idea to Dipak Kumar Dash:
How are the amendments going to be helpful for all?
When the EC Act was conceptualised and first implemented it was the era of food shortages. At that time the need was to ensure that there was no hoarding and manipulation because the consumers, particularly weak and vulnerable, will suffer. Over the decades there has been a huge transformation; we have moved from food scarcity to food security. Therefore, when we have abundant produce we need to find how our farmers can get good prices, and to ensure proper storage and value addition. And at the end of it how better storage, better supply chain management and greater competition can ensure consumers get items at more affordable prices. That was the question looked at and the amendments are geared towards being a win-win for all three categories – farmers, consumers and investors.
How will that happen?
For about a decade pulses were under the ambit of the EC Act. Prices weren’t necessarily stable or lower because the law was applicable to this commodity. On some occasions when a commodity was brought under the EC Act, states still did not prescribe the stock limits. So, if the state government doesn’t prescribe any stock limit, it doesn’t impact prices of the commodity in that state. So, there were differences in the applications and there were differences in the impact of the invocation of the Act.
We have looked at everything from a regulatory mindset. When we are opening up the economy in every sector including industrial, manufacturing and services, the same liberalisation in the agriculture sector will bring in more competition and will ultimately benefit the farmers. The farmer loses, if he has bumper production and there is no proper transportation of his produce to other deficient areas. In such a situation, he ends up selling produce at throwaway prices. The investor doesn’t invest because there is a fear the government will put a limit on the stock he can hold. He is disincentivised and, of course, farmers feel the pinch. Between these two things, if we don’t have assured and regular supply and if we don’t have good storage facilities, the consumer will at some time or other face sharp hikes in prices. So, we aren’t able to safeguard the interest of the consumer in the long run. The way to address the gap was to bring in amendments which take care of everyone’s interests.
The provision to invoke the stock limit hasn’t been completely done away with. Why?
While introducing these reforms, the government also acknowledges that extraordinary circumstances might arise which need invoking stock limits for essential commodities. So, that safeguard has been retained. At the same time, extraordinary price rise has not been left vague and ambiguous. This department compiles information on prices of the essential commodities obtained from all states on a daily basis. This data is in the portal and can’t be modified or manipulated. This is analysed on a daily basis and it will continue.
The price trigger to invoke regulatory mechanisms has been defined clearly. It specifies if the price rise of an essential commodity breaches 100% of last year’s price then the average of previous five years prices will be considered, and the lower price will be the benchmark for comparison. If the prevailing price is 100% more than the benchmark price in the case of perishable items and 50% more in the case of non-perishable items then that will be considered as breaching the price trigger.
Invoking stock limits will be the last resort?
It will be the last resort. Steps need to be taken before that situation arises. Besides retail intervention, there are decisions taken on policy issues like import duty reduction and enhancing the quota for import of pulses. We might find that there are instances of price rise because of production issues. But we don’t need to rush to impose a stock limit. We need to augment.
Often the prices collected and compiled by your department are different from the actual prices in the retail market.
We are expanding our price collection mechanism. We have asked states to give the proposals. We have given handheld devices to many and we will provide this to more. We are also trying to validate data with other agencies such as the statistics ministry. We are expanding the number centres from where we get the daily prices.