The Central government’s effort to have greater powers relating to the regulation of the necessary commodities needed to maintain normalcy in people’s lives, made them push for an amendment in the Essential Commodities Act of 1955 through an ordinance on June 5, 2020.
By: Nishtha Srivastava, UPES, Dehradun.
Owing to the ill-effects of Covid-19 across the world which has managed to bring the entire country down, this particular ordinance has made the 1955 law come at par with the changing times as objects such as face masks and hand sanitizers found their place as an essential commodity after the sudden outbreak of the virus.
However, as the situation normalized, it was removed as on July 1, 2020.
What does the word “essential commodity” actually mean?
Section 2A of the Essential Commodities Act of 1955 defines it as a commodity that has been mentioned in the ‘Schedule’ of the Act[i]. Also, the power to add or remove any of the commodities to or from the Schedule, lies with the Central government in consultation with the State government, if such addition or removal is as per the public interest.
Therefore, when we look at the Schedule, it comprises of a range of commodities across diverse fields such as fertilizers, drugs, food items inclusive of oilseeds and oils, hank yarn made wholly from cotton, petroleum and petroleum products, raw jute and jute textiles and seeds belonging to food crops, fruits, and vegetables, cattle fodder, jute, and cotton.
Why was this amendment ordinance needed?
The purpose of the parent act was to let every citizen of India have access to all the essential commodities at fair prices without any discrimination. However, the year 2020 brought with itself the outbreak of the deadly Coronavirus which completely changed the lives of everyone, forcing even the government to adapt itself to the new changes.
This is why, the Essential Commodities Amendment (Ordinance), 2020 got promulgated to insert the new “essentials” in the terms of the Act.
Therefore, through this Act, the government can monitor and manage the production, supply, and distribution chain of the items mentioned in the Schedule of the Act.
As the pandemic COVID-19 broke out across the world in March 2020, it forced all the countries to be put up under lockdown, which got back to normal only last month in August. Due to this, every industry right from agriculture, manufacturing, education, distribution to service sectors, etc came to a halt, causing huge losses. However, the burden of it fell majorly on the poor sector of the country who were rendered jobless without a single penny, in a helpless state.
Keeping this in mind, the changes brought in by the government in the Essential Commodities Amendment Ordinance 2020 are significant.
1) Certain regulations only under “extraordinary circumstances”
Regulation of commodities includes their production, supply, distribution, trade, and commerce.
With the 2020 ordinance, the Act has now created a category of items that will be regulated only in the case of extra-ordinary circumstances such as, war, famine, extraordinary price rise, and natural calamity. It includes cereals, pulses, oilseeds, edible oils, onion, and potatoes.
2) Imposition of stock limits: Before this amendment, issuance of excessive control orders had managed to put a blanket limitation on the stockholding of the agricultural produce by different sectors irrespective of whether they had been held by an organization or an individual.
However, with this ordinance, now the imposition of the stock limit will be based on two factors:
a) If there is a 100 percent increase in the retail prices of horticulture produce or
b) 50 percent increase in the retail prices of non-perishable agricultural foodstuffs.
The increase will be calculated upon: the price prevailing immediately preceding twelve months, or the average retail price of the last five years, whichever is lower.
Apart from this, two categories have been added who are exempted from such imposition: a) Processor of agricultural produce; b) Value chain participant of any agricultural produce.
3) Paving the way for private players: Through the earlier act, the government from time to time managed to disrupt the free flow of the commodities as there were discouraging investments in the warehousing and storage sectors and excessive limitations on stockholdings which promoted more and more hoarding of essential commodities by the traders to maintain the price as well as supply stability.
However, with the promulgation of this ordinance, the entry of private players has been eased. This will not only help in increased competition in the agricultural sector but also help in gaining more investors who were earlier afraid of the unpredictable imposition of limits.
4) Betterment of export – Due to the issuance of multiple control orders, restricting the conditions and movement of essential commodities time, and again in the past years, there has been a fluctuation of prices ultimately making India a non-reliable country for export. However, with the new amendment, better economic freedom will be provided to the farmers.
How much is this Act analogous to the idea of the betterment of the agricultural sector?
1) Use of ambiguous terms like “extraordinary circumstance”, “natural calamity”, “horticultural produce”, “perishable agricultural foodstuff” etc in the provisions can create confusion in the minds of the people while dealing with these commodities.
In other words, due to the ambiguous words, a dispute regarding the correct interpretation of these words may arise in the future.
2) This change is a part of the Central government’s policy to deal with the pandemic “Atma Nirbhar Abhiyan” through which agriculture has become the focal point for the government. However, it should be kept in mind that these unprecedented times have had a major effect on other sectors such as textiles, petroleum, etc. Such blind focus may have a detrimental effect on them as well.
3) Such a step was taken to handle the unaware and unknown virus that took the whole world by storm causing humongous loss of opportunities, health, and productivity in all the sectors be it goods, commerce, or service. However, now that the restrictions have been lifted and the country is almost halfway through normalcy (pre-COVID scenario), the basic purpose of preventing hoarding up of essentials and providing ease of working to agriculturists seems outdated and not of much use.
Today, the world is in a precarious condition wherein any mishap can happen at any time due to this pandemic. Though the government, through this, has put up efforts to help the farmers by opening up opportunities for private players to buy the stock in case of excess production and likewise, it is pertinent to understand that the helpless and starved poor sector is on an alarming high. In such a situation, the government needs to work towards less violation and greater implementation of the provisions to provide maximum benefit to the citizens. Moreover, it will be interesting to see how this new change will be able to directly prove advantageous to the farmers.
[i] Section 2A, Essential Commodities Amendment Ordinance, 2020
[ii] Siraj Hussain, The Fine Print of the Essential Commodities Amendment Ordinance must be carefully parsed (Sept. 16, 2020, 09:17 PM), https://thewire.in/agriculture/the-fine-print-of-the-essential-commodities-act-ordinance-must-be-carefully-parsed.