ECA Amendment 2020: A Blessing in Disguise?

Essential Commodities
Certain commodities like onions, potatoes, cereals, pulses, edible oilseeds, oils are removed from the list of essential commodities in the Essential Commodities Amendment, 2020.

Essential Commodities (Amendment) Bill, 2020 proposed by Danve Raosaheb Dadarao, Minister of State for Consumer Affairs, Food and Public Distribution, has been passed by both the Houses of Parliament. This amendment removes cereals, pulses, potatoes, onions, edible oilseeds and oils from the list of ‘Essential Commodities‘. The Bill also replaces the Ordinance promulgated by the Hon’ble President of India on 5 June 2020.

Essential Commodities Amendment, 2020

The amendment removes cereals, pulses, potatoes, onions, edible oilseeds and oils from the list of ‘Essential Commodities’. In addition to this, the regulations for these commodities have been relaxed with regard to their supply and a stock limit has also been imposed. However, the Central Government has retained the power to regulate the supply of these commodities in situations of war, famine, extraordinary inflation and natural calamity of grave nature, by releasing a notification in the Official Gazette. Likewise, the Central Government may intervene or prescribe any stock limit when there is a price rise. This Essential Commodities (Amendment) Bill, 2020 modifies the regulations to tackle inflation and volatility in the market.


The Essential Commodities Act, 1955 was enacted when India was importing agricultural commodities as the produce was scarce. Considering the then-existing conditions, laws were framed to prevent hoarding and black marketing of these commodities.

Over the last six decades agricultural production has increased but number of storage facilities remain the same.

  1. Today, India has a surplus of agricultural produce and yet farmers are unable to demand reasonable prices for their commodities.
  2. Instead the farmers are enduring huge losses, despite having an excellent harvest, due to lack of cold storage facilities and warehouses.
  3. The farmers are at a higher risk of financial instability in cases of perishable produce.
  4. Due to the non-availability of warehouses and storage facilities, farmers are forced to sell their produce at a loss in highly volatile markets, keeping in mind the increase in demand of seasonal produce at a given point of time.
  5. Due to the existing shortage of cold storage and warehousing facilities, farmers also incur wastage of agricultural produce which is often exposed to unsuitable weather conditions.

To address the issues faced by farmers, the Parliament appointed a High Powered Chief Ministers Committee for ‘Transformation for Indian Agriculture’. This committee recommended the removal of stringent regulations governing stock, movement and price control of agricultural commodities, thereby creating a level playing field for farmers to sell their produce as well as attract private investments in the sector.

The objective behind this amendment is to safeguard the interests of customers, farmers, and investors. The minimal intervention of the government is to attract investment in the agricultural sector which will improve the storage facilities and create a seamless supply chain. In addition to this, the amendment empowers the farmers to export their produce.

The expected private investment will relieve the farmers from the clutches of middlemen and allow them to contract a negotiated price for the produce. Thus, providing farmers not only the liberty to choose their buyers but also an option to choose the right produce and reap the best returns for it.

This will create a transparent, competitive, and predictable environment for the farmers for buying and selling commodities.

Shortfalls of the Amendment

  1. The Amended Bill only emphasizes upon liberating farmers from the clutches of the middlemen but does not assure that the existing ‘Mandi Systems’ will not be removed.
  2. In the case of cartelization of private players, the bill does not specify as to how the government will protect the farmers if Mandi Systems are not in place.
  3. If the crops fail due to rain or drought or any other natural calamity beyond the control of farmers, the bill puts no light on how the government is going to support the farmers from the private players such as from litigation, claiming compensation from farmers, etc.
  4. Even though farmers are encountering many issues with local bodies, they still have to put their beliefs in the existing system.
  5. Given the above and many other reasons and compulsions, farmers are terming this as an ‘Anti-Poor and Anti-Farmers’ Move.
  6. The primary concern of farmers at large is that this amendment contains loopholes that could ultimately benefit private investors only.

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