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Essential Commodities Bill Passed: merits and demerits

Essential Commodities Bill Passed

Essential Commodities Bill

Essential Commodities Bill Passed

The Lok Sabha recently passed this bill by a voice vote.

  • The Bill is meant to replace an ordinance promulgated in June, in the wake of the COVID-19 lockdown

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Key provisions of the Essential Commodities bill:

  • It proposes to deregulate the production, storage, movement, and sale of several foodstuffs, including cereals, pulses, edible oils, and onions, except in the case of extraordinary circumstances.
  • What are the extraordinary circumstances mentioned in the Bill? (i) war, (ii) famine, (iii) extraordinary price rise, and (iv) natural calamity of grave nature.
  • Stock limit: The Ordinance requires that the imposition of any stock limit on agricultural produce must be based on price rise.
  • A stock limit may be imposed only if there is: (i) a 100% increase in the retail price of horticultural produce; and (ii) a 50% increase in the retail price of non-perishable agricultural food items.
  • How is it calculated? The increase will be calculated over the price prevailing immediately preceding twelve months, or the average retail price of the last five years, whichever is lower.

Powers of Central Government under the Essential Commodities Act, 1955:

  • The central government can designate certain commodities as essential commodities.
  • The central government may regulate or prohibit the production, supply, distribution, trade, and commerce of such essential commodities.


  • This will remove fears of private investors of excessive regulatory interference in their business operations.
  • The freedom to produce, hold, move, distribute, and supply will lead to harnessing of economies of scale and attract private sector/foreign direct investment into the agriculture sector.
  • It will help drive up investment in cold storages and modernization of the food supply chain.


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