Remove agriculture from Essential Commodities Act: Niti Aayog

NEW DELHI: Premier think-tank NITI Aayog has 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.

The idea has been discussed at the highest level of the government and the Centre is likely to reach out to states for such an enabling provision after full consultation with the ministry of consumer affairs, a senior government official told ET.

“The Aayog is of the view that removing stock restrictions from agriculture commodities will lead to organised trading, improve scale and logistics benefit and bring about more capital into trade with handful of big traders competing with each other,” the official said on condition of anonymity as the idea is still being worked out with ministry of consumer affairs.

The other argument in favour of the Aayog’s proposal is that with frequent changes in rules and stock limits, traders have no reason to invest in better storage infrastructure. Also, stock limits curtail the functioning of food processing industries which need to maintain large stocks of underlying commodity to run their operations smoothly. “In such a situation, large scale private investments are unlikely to flow into food processing and cold storage facilities which are essential for ensuring framers get better remuneration for their crops,” the official explained.

Ministry of consumer affairs, which is responsible for implementing the legislation, argued that lesser number of traders will lead to price manipulation as they would be tempted to hoard and black marketeer.

“The idea is good but two policies cannot co-exist, meaning there cannot be simultaneous MSP for agri products if we want to remove them from the Essential Commodities Act,” DK Pant of India Ratings said.

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