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Amendments in ECA a step backward in reforms: CII

Written by: Staff

New Delhi, Sep 17: Confederation of Indian Industry (CII) has called the recent amendments brought about in the Essential Commodities Act (ECA) a step backward in the ongoing reform process.

''The Amendments in the ECA reimposing the restrictions regarding licensing, stock limits and movement on wheat and pulses to contain prices, which have been implemented in certain states and are reportedly being contemplated for implementation in certain other states is a step backward in the ongoing reforms process,''CII said in a statement here.

The CII statement added that when policy makers are becoming increasingly alive to the enormous economic multiplier of a competitive food value chain, such a move will undermine competitiveness and thereby constrain investments across the value chain.

Recognising the need to support agriculture-based value addition in view of the potential for large scale employment generation in rural India, the government has been implementing various reform initiatives.

A key component of such reforms has been the progressive relaxation of controls under the ECA and related legislations to facilitate better market connectivity for millions of farmers through removal of distortions to trade and retailing. ''The recent amendments to the Act tends to project a wrong signal which is not warranted in the present circumstances,'' the CII said.

It added that this kind of a measure cannot bring about an effective and lasting solution. ''Given the limited stocks available with traders and processors, the release of such stocks into the market can, at best, relieve pressures on prices for a short time.' Since, it is increasingly becoming apparent that the price rise in agricultural commodities is more driven by genuine shortage of grains, prices can be expected to rise once again very quickly soon after.

Moreover, CII said by imposing stock limits on genuine actual users and processors, the latter's investment in processing has been placed at a grave risk since they would have to resort to purchases of the same stock later, which they have released at a higher price with significant detrimental effects on margins.

''Over time, this is expected to have a detrimental chain effect on the farm sector.' Such moves are also expected to reduce distribution efficiencies and distort price parity with imports, CII said.

The need of the hour is to encourage investment in the food processing and value addition to agriculture by inducing competitiveness across the value chain.

CII, in a presentation to the Prime Minister, had indicated an investment opportunity of over Rs 1,50,000 crore in the Food sector with employment potential in excess of nine million over the next few years.

Such employment generation is critical to sustain the targetted rates of economic growth and benefit from the demographic dividend.

It is also a key priority area under the National Common Minimum Programme.

The deregulations brought about in the area of agriculture marketing had provided a major fillip to private-sector investors to commit large investments in the sector, CII said adding, this has also led to farmers getting higher prices for their produce.

Any retrograde step, at the current moment, when investment interest in agriculture is on the upswing will not provide the right signal, the confederation said.


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