Amendment of Essential Commodities Act, 1955: Creating a Farmer Friendly Environment in India

Cabinet Approves Amendments In Essential Commodities Act, To Lift ...


by Nishant Tiwari    24 July 2020


The Essential Commodities Act (ECA) was enacted in the year, 1955 by the Parliament to ensure that the delivery of certain products is not blocked by hoarding or black-marketing. The government used this law to regulate the production, supply, and distribution of certain products to make them available to consumers at a fair price. The list of such products includes drugs, fertilizers, pulses, edible oils, petroleum, food, etc. and this list is modified from time to time.

In 2002 and 2003, the government removed some agricultural products from the Essential Commodities Act, 1955 through an order. But, in 2006, this order was revoked and those products were again incorporated into the scope of the ECA. In early May 2020, the Finance Minister Nirmala Sitharaman said that the ECA needs to be amended to ensure better price realisation for farmers and a new central law to provide options to the farmer to sell their products at remunerative prices, barrier-free interstate commerce and a framework for electronic commerce of agricultural products. The existing list has become obsolete, as, when the Act was introduced, it was days of scarcity and that is the reason behind commodities such as potatoes, onions were under the ECA. This means that these commodities are now outside the scope of the Essential Commodities Act, 1955.



On June 3, 2020, the Union Cabinet decided to enact three ordinances to facilitate farmers’ access to markets across the country to sell their products, help them sign contracts to obtain guaranteed returns, and exempt agricultural products from the Essential Commodities Act (ECA), 1955. It was part of the aid measures introduced by the government to soften the impact of the COVID-19-induced lockdown on the economy. Amendments approved to the 65-year-old ECA includes:

  1. Amendment to the Essential Commodities Act, 1955 to deregulate food, including cereals, pulses, and onions. This move will transform the agricultural sector and help to increase the farmers’ incomes.
  2. Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, to ensure barrier-free trade in agricultural products.

In addition to allowing better price realisation for farmers, the ECA amendment will also ensure that stock limits are not applied to processors or value chain participants, subject to their installed capacity or to any exporter subject to a demand for export. This amendment offers many advantages and the same is discussed in the next part of this article.



The amendment of ECA is a historic step to unlock the widely regulated agricultural markets in the country and it ensures lot of benefits for the farmers. Some of them are discussed below-

  • The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 will promote interstate and intrastate trade and commerce without barriers outside of physical facilities in markets notified under state agricultural produce marketing legislations. The ordinance basically aims to create additional business opportunities outside the APMC market yards to help farmers obtain remunerative prices due to additional competition. The measure will help small and marginal farmers who will save money on transporting their products to wholesale markets.


  • The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020, is expected to train farmers to engage with food processors, aggregators, wholesalers, large retailers and exporters on an equal footing, without any fear of exploitation.


  • The ordinance will create an ecosystem where farmers and merchants will enjoy the freedom to choose between selling and buying of agricultural products. There are restrictions on farmers selling agricultural products outside of the notified APMC market yards. Farmers are also restricted to sell their products only to registered licensees of state governments. By allowing the farmer more options, it will increase their income.


  • Adequate processing and storage facilities will reduce the wastage of the product and will increase the incomes of the farmers on the perishables.


  • To protect consumers, the amendment allows for regulation during war, famine, extraordinary price rise and natural calamity, while providing exemptions for exporters and processors at those times as well.


  • The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 aims to facilitate contract farming, where a private buyer contracts to buy a crop at a specified price at the beginning of a season. It will help in transferring the risk of unpredictability from the farmer’s market to the corporate sponsor.



At a time, when Asia’s third-largest economy is gradually re-opening its market after lockdown of more than two months to contain the COVID-19, the amendment of the Essential Commodities Act, 1955 is a move to increase the incomes of farmers’. The reforms will help to evacuate surpluses from production areas to demand areas seamlessly, to the benefit of agricultural producers and players across the agricultural value chain. These steps have been taken in line with India’s vision to advance as “one nation, one market” and it is expected to create a farmer-friendly environment.

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