Strengthen Essential Commodities Act

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Strengthen Essential Commodities Act

Tuesday, 23 June 2020 | indra shekhar singh

By deregulation, we are copying the US’ failed post World War-II farm policy which led to the creation of agri-commodity giants

As agri-business celebrates the removal of pulses, oilseeds, cereals and so on from the purview of the Essential Commodities Act (ECA), Indian farmers and consumers don’t have reason to celebrate. The Government’s advisors, in an attempt to bring in more “agri-dollars”, may have misled the Narendra Modi Government by opening doors for cartelisation of these commodities, while at the same time dismantling the consumers’ and farmers’ only defence against monopoly. For evidence, we need to look no further than 2015. Modi 1.0 was completing one year in office as prices of pulses skyrocketed to over Rs 200 a kg. After the Income Tax Department investigated the matter, a Rs 2.5 lakh crore dal scam was unearthed. The I-T Department’s Appraisal Report in the Case of Pulse Importers and Traders Group said, “The abnormal price situation in India was created by a coordinated collusive activity orchestrated by a few trading and financial entities.” They found that “physical stocks of pulses (were) cornered in domestic and international markets. Significant long positions on the future were taken on exchanges to create an artificial scarcity at the wholesale and retail levels.”

International agri-business and grain traders had shrewdly circumvented the ECA by leveraging their overseas presence and created a monopoly by “procuring and hoarding stocks of pulses in national as well as overseas markets.” They manipulated domestic dal prices to plummet so that they gained maximum from the stocks bought at low prices. The super profit earned in this manner was not offered to tax and was siphoned off either abroad or converted into unaccounted cash through entry operators. It was then that the Government, using the ECA, raided and seized over 70,000 metric tonnes (MT) of pulses from hoarders and traders and broke the cartel. The entire supply chain was complicit in the scam and in fact the IT Department investigated the National Commodity and Derivatives Exchange (NCDEX) too, for its role in aiding this crisis. It turned out that the feat was jointly managed by the international agri-business, local suppliers/traders and agri-commodity brokers at the NCDEX.

Now, the Government’s advisors have removed all barriers to stocking limits. The people responsible for the dal scam can now legally operate and even be absolved of their past crimes.

A curious case: Cotton is not only a fibrous cash crop for Indian farmers but is also an oilseed. Many experts have raised bio-safety concerns on GMO Bt cottonseed being blended freely into our edible oils.  Nevertheless, the demand for cottonseed oil is ever-growing. Much like pulses, oilseeds were removed from the ECA, too. There are unconfirmed reports of cottonseed being removed from the ECA as it is also an oilseed. Interestingly enough, the Modi Government has had a taste of Bt Cotton monopoly, where it used  ECA to prevent unfair business practices and control prices of cottonseed in 2015. This was done because illegal trait value was being charged.

To the rescue: The ECA had repeatedly come to the aid of the Indian Government, legal traders, farmers and consumers. Of late, it helped break the cotton seed and dal cartels. However, the safeguard measures of emergency control laid out by the Government in the Ordinance for protecting different stakeholders is not strong enough. The Government must  keep all seeds for sowing under the purview of the ECA and add clauses to strengthen this law. India’s cotton farmers are already highly indebted and 84 per cent of farmers’ suicides are reported from the cotton-farming belts. No illegal trait fees and royalties should be charged and cotton seed should remain under the ECA.

Don’t ape the US: The Government needs to study the dal scam and the IT Department’s findings. We need to bring pulses and oilseeds back under the ECA. By deregulation, we are blindly copying the US’ post World War-II farm policy, which has failed for US farmers and led to the creation of agri-commodity giants. The liberalisation of farm-gate has destroyed farmers not just in the US, but in Mexico, Brazil and elsewhere, too. Indian farmers will be the biggest losers and consumers won’t be far behind either. Consumers will gradually feel the burn of such deregulation, too. The Centre must tread carefully. Before dismantling the ECA, the Government must revisit the dark history of the East India Company, which was the world’s first agri-business trans-national corporation.

(The writer is Director, Policy and Outreach, NSAI)

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