In a sweeping marketing reform in the agriculture sector, the Centre on Friday said it will amend the Essential Commodities Act to deregulate food items like cereals, pulses and onion besides bringing a new law to give marketing choice to farmers for enhancing their income.
As a result of the amendment, the stock limit on food products like edible oils, oilseeds, potato and onion will not be imposed in normal cases but only in exceptional circumstances like natural calamities, famine with a surge in prices.
"No such stock limit shall apply to processors or value chain participants, subject to their installed capacity or any exporter subject to the export demand," the government said.
Finance Minister Nirmala Sitharaman said the government will amend the EC Act to make the agriculture sector more competitive and ensure better price realisation to farmers. This will also help in attracting investment in the farm sector.
The government will also frame a new law to provide marketing choices to farmers.
The central law will be formulated to provide adequate choices to farmers to sell their produce at an attractive price. It will enable interstate trade without restrictions and create a framework for electronic trading of farm products.
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"The aspect that we are talking about come under the Centre's list because particularly when it refers to interstate related matter, it has to be governed by central legislation," Sitharaman said.
It is a concurrent subject and central law is overarching, Economic Affairs Secretary Tarun Bajaj said.
"In this case major reform is being done where a farmer is allowed to sell his produce to whom over and wherever he wants to. Interstate is also allowed. This will help in reducing prices and also help in creating infrastructure," he said.
Interstate trade is a central subject, he added.
At present, farmers are bound to sell agriculture produce only through APMC (Agriculture Produce Marketing Committee) mandies, which restrict the free flow of farm products.
That apart, a legal framework will be created to enable farmers to engage with processors, aggregators, large retailers and exporters fairly and transparently.
"Risk mitigation for farmers, assured returns and quality standardisation shall form an integral part of the framework," the government said.
At present, farmers lack an enforceable standard mechanism for predictable prices of crops at the time of sowing, it added.
Earlier this year, the Economic Survey pitched for the scrapping of the Essential Commodities Act (ECA), saying the law is "anachronistic" that leads to harassment and is of no help in checking price volatility.
The ECA, 1955, was enacted to control the production, supply and distribution of, and trade and commerce in, certain goods considered as essential commodities. The Act itself does not lay out rules and regulations but allows the states to issue control orders related to dealer licensing, regulate stock limits, restrict the movement of goods and requirements of compulsory purchases under a levy system.