The Union Cabinet on Wednesday approved an amendment to the Essential Commodities Act to deregulate food items, including cereals and onion. 

Calling the "historic" amendment to the Essential Commodities Act a "visionary step towards the transformation of agriculture and raising farmers’ income," the government said it will remove fears of private investors of excessive regulatory interference.

Farm produce like cereals, pulses, oilseeds, edible oils, onion and potatoes will be removed from the list of essential commodities. 

The freedom to produce, hold, move, distribute and supply will lead to harnessing of economies of scale and attract the private sector, foreign direct investment into the agriculture sector, the government said in a press release, adding that it will help drive up investment in cold storages and modernization of food supply chain.

The government said while liberalising the regulatory environment, it has also ensured that the interests of consumers are safeguarded.  

"It has been provided in the Amendment, that in situations such as war, famine, extraordinary price rise and natural calamity, such agricultural foodstuff can be regulated.  However, the installed capacity of a value chain participant and the export demand of an exporter will remain exempted from such stock limit imposition so as to ensure that investments in agriculture are not discouraged," the press release said.

The amendment announced will help both farmers and consumers while bringing in price stability, it said, adding that it will also prevent wastage of agri-produce that happens due to lack of storage facilities.

In another major decision, the Union Cabinet headed by Prime Minister Narendra Modi also approved 'The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020' which will remove restrictions for farmers in selling agri-produce outside the notified APMC market yards. 

"The Ordinance will create an ecosystem where the farmers and traders will enjoy freedom of choice of sale and purchase of agri-produce. It will also promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations. This is a historic-step in unlocking the vastly regulated agriculture markets in the country," the government said.

"It will open more choices for the farmer, reduce marketing costs for the farmers and help them in getting better prices. It will also help farmers of regions with surplus produce to get better prices and consumers of regions with shortages, lower prices. The ordinance also proposes an electronic trading in transaction platform for ensuring a seamless trade electronically," it added. 

The ordinance basically aims at creating additional trading opportunities outside the APMC market yards to help farmers get remunerative prices due to additional competition. It will pave the way for creating One India, One Agriculture Market and will lay the foundation for ensuring golden harvests for our hard working farmers, the statement said. 

The Cabinet also approved ‘The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020’ which will empower farmers for engaging with processors, aggregators, large retailers, exporters etc, on a level playing field without any fear of exploitation. 

It will transfer the risk of market unpredictability from the farmer to the sponsor and also enable the farmer to access modern technology and better inputs, the government said.