Core Group meeting – 8 th April 2010

1. Core Group meeting – 8th April 2010 Presentation by Department of Consumer Affairs on Agenda Items 2 and 3

2. Agenda Item Number 2 Gap between Farmgate and Retail Prices

3. Gap between farmgate and retail prices The difference between farmgate and consumer prices is mainly due to : (i) Marketing and packaging; (ii) Transportation and handling cost; (iii) Retailing cost; (iv) Retailers markup; and (iv) Various taxes

4. Reasons for high markup • Many layers of intermediation resulting in repeated costs • Wastage in transmission from one layer to another particularly fruits and vegetables • Poor post harvest practices and retail chain • Local levies • Sheer profiteering by traders (during periods of shortages)

5. Difference between wholesale and retail prices in Delhi (as on 5.4.2010)

6. Suggestions The gap between producers price and consumer price needs to be minimized by: Reduction in ‘in season’ – ‘off season’ price variation Reduction in trading markup

7. Suggestions (Contd.) Modern post harvest practices to reduce waste and improve quality Empower farmers to stagger sale of their produce (Warehousing/Financing/Hedging/ Forward sale) Encourage corporates to enter retail marketing of agri-produce Modern market architecture allowing private markets and contract farming as in model APMC Act.

8. New Market Architecture • Adoption of model APMC Act. by all the States • Promote National on line spot exchanges • Extensive dissemination of prices • Adoption of negotiable warehousing receipts • Attracting investment in post harvest technology and warehousing including cold chains

9. Models of State Intervention States should intervene directly to curb sudden spurt/dip in prices as done by Delhi Government recently Government of Delhi has worked with the traders/FCI to supply atta and pulses at less than the market price No subsidy is involved Apparently this has led to reduction in the wholesale-retail price gap Experience of other states can also be shared and each state can choose the methodology most appropriate for it.

10. Agenda Item Number 3 Amendments to EC/PBM Act

11. Essential Commodities ActSalient Features • Enables regulation and control of production and distribution of commodities which are declared as essential • Central Government can exercise powers under the Act and can also delegate functions to the State Governments. • In respect of food items, the powers have generally been delegated to the State Governments except for sugar where some controls are exercised by the Government of India.

12. Essential Commodities (Special Provisions) Act, 1981- Major Provisions • Summary trial of all offences and constitution of special courts • Minimum mandatory imprisonment • Offences under the Act are non-bailable • Appeal against order of confiscation with the State Governments instead of judicial authority. • Act was allowed to lapse in July, 1998.

13. Essential Commodities Act – 2006 Amendment • List of Essential Commodities brought down from 15 to 7 – items like cotton and woollen textiles, coal, cattle fodder, automobile parts , iron and steel were all deleted • Currently only foodstuffs, drugs, fertilizers, petroleum, jute, hank yarn (made from cotton) and certain seeds are included

14. Recent Developments • In 2002, Government of India issued Orders removing licensing requirements, stock limits and movement restrictions on specified foodstuffs • This decision was based on the recommendations of a Standing Committee of Union Ministers and Chief Ministers on “WTO and Agriculture” held in 2001 • In 2006, the Order was reviewed and State Governments permitted to impose licensing and stock limits on specified foodstuffs.

15. Recent Developments -II • These Orders have been continued from time to time and the scope has also been widened. Currently, Orders are in force till 30.9.2010 and cover rice, paddy, pulses, edible oils, edible oilseeds and sugar. • Stock limits on Wheat were permitted but from 1st April 2009 this permission was withdrawn • Haryana and UP are still continuing with the stock limits on wheat

16. Essential Commodities Act-Major amendments proposed • To enhance punishment, make offences non- bailable. • Re-introduction of the 1981 Act – this has very stiff provisions including summary trial and minimum punishment • Constitution of special courts • Expanding entry of foodstuffs (suggested by Standing Committee of Parliament)

17. Essential Commodities Act-Major amendments proposed II • Make prosecution mandatory where seizure more than Rs.5 lakhs. • Section 6C to be amended to give powers to the State Governments to consider cases of appeal. • Section 7(2) of the Act should be amended to increase the period of imprisonment and also fix a minimum amount of fine and the fines should be related to the scale of offence.

18. Essential Commodities Act – supporting administrative action • Authorising State Governments to fix ceilings for retail prices/margins for traders • Civil Supplies Officers to be given powers to file prosecutions on par with police officers • Web based standard reporting system

19. PBM Act – amendments proposed • Detention period to be enhanced to one year • Time limit for reporting by State Government to Central Government to be enhanced from 7 to 15 days • Time limit for approving detention order by the State Government to be increased from 12 to 15 days.