ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Fixed Fate, Free Will

Abeyance of the Essential Commodities Act is easier said than done.


The fifth governing council meeting of the NITI Aayog, held on 15 June 2019, had called upon the state governments to undertake structural transformations of the Indian agricultural sector through the reforms of the marketing regulations, such as the Essential Commodities Act (ECA), 1955 and the Model Agricultural Produce Market Committee Act (APMC Act). In the context of the agrarian distress across the country, reforming these acts is expected to provide a breather, especially to the deteriorating farm incomes. The idea for reforming the ECA, particularly at a time when surplus management has emerged as a pressing problem for the farm sector, deserves mention. With the ECA being a deterrent for market integration—a necessary condition for Pareto optimality of spatial competitive equilibrium—its relaxation would imply that excess demand (supply) and hence price signals from one market will be transmitted to other markets. In other words, farmers will get the right price for their produce, while increase in availability will give (price) relief to consumers.

However, in the absence of further clarity from theNITI Aayog or the government on the trajectory of the reforms, scepticism pervades the commoner’s mind. Will the commoner lose protection against irrational spikes in food prices if the government does not exercise its direct control over these? Recall that, even with the ECA, governments have not been able to control price volatility effectively. Historically, the retail prices of the “essential” food items had largely escalated with government declarations of stockholding limits. For instance, the tightening of the government-determined quotas and releases of sugar in 2003 saw a rise in sugar prices by ₹ 250 a tonne, and the stocking limits enforced between January and July 2014 saw an escalation in the retail prices of urad, moong and masur by₹ 14 a kilogram (kg),₹ 8 a kg and₹ 9 a kg respectively, and that of rice by ₹ 1– ₹ 2 per kg. Given such evidences, while (buffer) stocking and trade appear to be potentially better instruments for regulating prices, there is much cynicism about the feasibility of implementing any deregulation/abeyance of the ECA.

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Updated On : 26th Jun, 2019
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