Money > Budget > Budget News & Analysis FEBRUARY 5, 2002 I 19:40 IST
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Govt removes 12 items from Essential Commodities list; decontrols sugar

The government on Tuesday gave permission to the removal of 12 items from the purview of Essential Commodities Act 1955 in order to lift controls pertaining to their processing, movement, storage and marketing.

Of the 29 items at present governed by the ECA, 12 will be removed from its purview and a notification to this effect will be issued shortly, an official spokesperson said in New Delhi after the meeting of the Union Cabinet.

The 12 items include textile machinery, textiles made from silk, textiles made wholly or in part from man-made cellulosic and non-cellulosic filament yarn.

Other items to be removed are man-made cellulosic and non cellulosic staple fibres and yarn made from four materials namely wool, man made cellulosic spun and non-spun fibre and silk.

However, food stuffs, cotton and woollen textiles, raw cotton, either ginned or unginned and cotton seed, raw jute, jute textiles and yarn wholly made from cotton will continue to be in the list of the essential commodities.

The government by a notified order can declare any commodity as 'essential' for the purpose of ECA 1955. Section 3 of the Act empowers the government to control production, supply, distribution, trade and commerce of such commodities.

This gives controlling powers to the state for trading and marketing these commodities in the country.

Under the Act government controls production and price, regulates storage, transport, distribution, disposal and consumption of the commodities.

Govt approves full decontrol of sugar

The government also cleared giving full effect to decontrol of sugar during the coming financial year beginning April 1, 2002.

Stating this after a meeting of the Union Cabinet, an official spokesperson said the sugar decontrol would be effected after futures trading in the commodity becomes operational.

Sugar at present is a controlled commodity on account of which 15 per cent of the release in the market is channelled through the Public Distribution System.

In the event of the full decontrol, to be effected in the next fiscal, millers will be able to unload the entire quantity in the open market.

There is a three monthly release mechanism under which each factory is allotted a quantum it can unload in the market and the aggregate nationwide quota is also fixed. This will, however, stay even after full decontrol.

In the previous Union Budget, Finance Minister Yashwant Sinha had described the full sugar decontrol process as irreversible and linked it with the futures trading in the commodity.

The two are intertwined as full decontrol ensures greater volumes for futures trading and better chances of price discovery.

The government has given in-principle clearance to three companies for sugar futures, E-Commodities Ltd and E-Sugar India of Bombay and Hyderabad-based NCS Infotech who have 10 months to put the process in place from December 2001.

As part of the phased decontrol, government has also switched over to three monthly release mechanism, however, mills can only sell one half of their quota in the first 45 days of a quarter to avoid any crash in prices.

Curbs on movement of grains to go

The Cabinet also decided to remove the requirement of licensing of dealers as also restrictions on storage and movement of wheat, paddy and rice, coarse grains, sugar, edible oilseeds and edible oil.

A central order would be issued under Section 3 of the Essential Commodities Act (ECA), 1955 removing the requirement of licensing and restrictions on storage and movement of these commodities, an official spokesperson told reporters.

In view of the relatively more comfortable food situation, it was felt that restrictions like licensing of dealers, limits on stock and control on movement are no longer needed, she said.

The government felt restrictions only hampered the growth of the agricultural sector and promotion of food processing industries in rapidly changing economic scenario and


Facilitating free trade and movement of foodgrains would enable farmers to get best prices for their produce, achieve price stability and ensure availability of foodgrains in deficit areas, the spokesperson said.

Removal of hurdles would also be in the interest of the consumers all over the country, specially for those in the lower income group, she said.

The Essential Commodities Act, 1955 provides for the control of the production, supply and distribution of essential commodities.

Powers to issue control orders under the Act have been delegated by the Centre to the state governments.

CII welcomes moves on divestment, ECA, drug policy

Welcoming the Cabinet nod for divestment of VSNL and IBP, the Confederation of Indian Industry stated that it would give an impetus to the privatisation process besides sending positive signals and improving the investment climate.

This would also help in garnering resources to reduce fiscal deficit. CII hoped that the process would gather momentum and the other identified PSUs would also be divested in due course of time.

The Confederation also welcomed the Cabinet decision to decontrol sugar and remove 12 items from the purview of the Essential Commodities Act. The full decontrol of sugar would allow millers to unload the entire quantity in the open market and the introduction of futures trading would ensure greater volumes and better chances of price recovery.

Welcoming the new drug policy, CII stated that it would provide a stimulus to indigenous R & D besides attracting investments into this sector. It would also improve the competitiveness of the Indian pharma sector, CII added.



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