The Essential Commodities (Amendment) Bill, 2020

The Essential Commodities (Amendment) Bill, 2020

THE ESSENTIAL COMMODITIES (AMENDMENT) BILL, 2020

Author: Khushi Paliwal, University College of Law, Mohanlal Sukhadia University

INTRODUCTION

The words ‘essential commodities’ itself refer to certain products/ commodities which are essentially required by each and every human in the country. By keeping this in mind the Parliament of India has passed an Act in the year of 1955 to ensure the proper regulation regarding essential commodities. It is the subject that comes under the Ministry of Consumer Affairs, Food and Public Distribution. 

Recently, the existing Act of 1955 has been replaced by the Essential Commodities (Amendment) Bill, 2020 which was introduced and passed in Lok Sabha on Sept 14, 2020, and Sept 15, 2020, respectively and Rajya Sabha agreed upon the same on Sept 22, 2020.

Along with this two other ordinances were also brought (also passed as bills now) i.e. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 resulted into the nationwide farmers’ protests especially in Punjab and Haryana.

A BRIEF BACKGROUND

The basic objective behind The Essential Commodities Act 1955 was to prevent hoarding and black marketing of foodstuffs. This act was legislated at a time when India was facing a scarcity of foodstuffs due to persistently low levels of foodgrains production. At that time we Indians were dependent on imports and assistance (such as wheat imports from the US under PL-480) to feed the population. 

There is no specific definition of essential commodities in the Essential Commodities Act 1955. Section 2(a) states that an “essential commodities” means a commodity specified in the Schedule of the Act. This Act gives powers to the central government to add or remove a commodity in the Schedule. The Ministry of Consumer Affairs, Food and Public Distribution implement the Act and these seven essential commodities were marked under the Act:

  • Essential drugs
  • Fertilizers can be organic, inorganic or mixed
  • Foodstuffs can include edible oilseeds and oils
  • Hank yarn made wholly from cotton
  • Petroleum and petroleum products
  • Raw jute and jute textile
  • Seeds of food crops, fruits, vegetables, cattle fodder, jute and cotton seeds.

When a commodity is declared as essential then complete control comes into the hands of the government regarding its production, supply, distribution of that commodity and imposition of stock limit.

WHAT WAS THE NEED TO BRING AMENDMENT IN THE EXISTING ACT?

The 1955 Act was legislated at a time when the country was facing a scarcity of foodstuffs. In short, India was not agriculturally independent or self-sufficient in it. Indians were unable to produce according to their demands and that is why they seek help from outside nations and used to import. But today the situation is fully different. India has now become an exporter of several agricultural products to multiple nations. We export all types of fruits, vegetables, nuts, beverages, oils, dairy products, sweeteners etcetera and that too to more than 190 countries in the world. 

From the very beginning, the agricultural markets in India are run by state Agriculture Produce Marketing Committee (APMC) laws. This committee was brought to ensure the objectives of fair trade between buyers and sellers for effective price discovery of farmers’ produce. These APMC laws provide:

  1. Licenses to buyers, commission agents, and private markets.
  2. Levy market fees or other trade charges.
  3. Proper infrastructure for regulating the market trade. 

In 2018-19, a committee called ‘The Standing Committee on Agriculture’ was established and did detailed observation over the working of APMC and came out with a report which said that the APMC laws are not implemented in its true sense and need to be reformed urgently. Issues included in the report are: 

  1. Most APMCs have a limited number of traders operating, which leads to cartelization and reduces competition.
  2. Undue deductions in the form of commission charges and market fees.
  3. Traders, commission agents, and other functionaries organise themselves into associations, which do not allow easy entry of new persons into market yards, stifling competition.
  4. The Acts are highly restrictive in promotion of multiple channels of marketing (such as more buyers, private markets, direct sale to businesses and retail consumers, and online transactions) and competition in the system.

During 2017-18, the central government released the model APMC and contract farming Acts to allow restriction-free trade of farmers’ produce, promote competition through multiple marketing channels, and promote farming under pre-agreed contracts. The same above-mentioned Standing Committee also noticed that the states are not working according to the suggested reforms in the model Acts. After this the central government recommended the formation of a committee of Agriculture Ministers of all states to design a legal framework so the procedures could be implemented effectively. 

A STEP FURTHER 

In July 2019 the Committee of seven Chief Ministers with high profiles was set up to discuss adoption and time-bound implementation of model Acts and the changes that need to be done in the Essential Commodities Act, 1955. The present three ordinances passed recently by the Parliament were the ultimate result of this committee. 

THE ESSENTIAL COMMODITIES (AMENDMENT) ORDINANCE, 2020

The main target of the government behind this ordinance is to provide opportunities for farmers to enter into a contract on a long term basis, more availability of buyers and allow them to purchase in bulk. Apart from this, the Act we are following earlier has mentioned seven commodities as essential on which the government can practice its full-fledged control. But now due to the latest amendment, the central government may regulate the supply of certain food items including cereals, pulses, potatoes, onions, edible oilseeds, and oils, only under extraordinary circumstances. These extraordinary circumstances include: war, famine, extraordinary price rise and natural calamity of grave nature and this has been added under sub-section (1A) in Section 3. Earlier, these commodities were not mentioned under Section 3 and reasons for invoking the section were not specified.

This amendment also has a clause of “price trigger” to counter extraordinary price rise and impose stock limits. Example,

  • Horticultural produce, a 100% increase in the retail price of a commodity over the immediately preceding 12 months or over the average retail price of the last five years whichever is lower.
  • Non-perishable agricultural foodstuffs, a 50% increase in the retail price of the commodity over the immediately preceding 12 months or over the average retail price of the last five years whichever is lower.

Also, this ordinance does not repeal the existing APMC laws but limits the regulation of APMCs to the physical boundaries of the markets under their control. So that it will result in more efficiency in providing cost-effective services and for farmers selling their produce outside the APMC markets, the prices prevailing in APMC markets can serve as a benchmark price, helping in better price discovery for farmers.  

WHAT IMPACT DOES THE AMENDMENT ACT CREATE?

The amended act not only removes the barriers but also liberalizes the trade to its fullest. At the same time, it helps in enhancing the infrastructure, with the help of the Gramin Agricultural Markets scheme which aims to improve civic facilities in 22,000 Gramin Haats across the country and made this a fully funded central scheme and scaled to ensure the presence of a Haat in each panchayat of the country. So that the farmers need not suffer from the unavailability of a transparent, easily accessible, and efficient marketing platform.

In addition, better transportation facilities, the National Rural Employment Guarantee Scheme, the Agri-Market Infrastructure Fund where the Fund will be set up by NABARD to provide Rs 1,000 crore to states at a concessional interest rate for the development of marketing infrastructure in Gramin Haats are key competencies of this policy. 

WHY IS IT BEING CRITICIZED?

Many prominent personalities like Harsimrat Badal, the Union Minister for Food Processing Industries, Kavitha Kuruganti of the Alliance for Sustainable and Holistic Agriculture and political parties such as the Congress and Biju Janata Dal claimed that the bill does not consider the realities of interlocked farm markets and has many loopholes. Many farmers, NGOs, activists and lawyers have thoroughly studied the bill and put forward the following contentions –

  1. Now the food traders are free to buy from any market and the specific market such as APMC remains unhighlighted. 
  2. There might be chances of exploitation of farmers in the hands of big food corporations and middlemen plus it will become difficult to calculate what is being traded and at what price. This may result in more corruption, inefficiency in the system and illegal trading of certain goods.
  3. As there is no mention of MSP (Minimum Support Price), a basic remunerative price in the complete amendment then it might weaken the system when it comes to price exchange. 
  4. The bill allows tax- or levies-free markets, whereas APMCs charge between 4.5% to 8% in mandi levies. This will lead to a loss in revenue.
  5. Large corporations are better equipped to hoard and stockpile since they have better storage facilities, unlike the average farmer or NGO and this may increase the gaps between the rich and the poors. 
  6. The price limits that have been set are too high and thus likely to be triggered very rarely, if at all.

CONCLUSION 

It is beneficial for a diverse country like India to have control over its supply and distribution channel among its people, especially when it comes to essential commodities. The hard times of COVID-19 made us more aware of the essential requirements of ours and these three latest ordinances whose major focus is on the socio-economic growth of farmers and country’s production could reduce the chances of lack of food supply chain and its mismanagement. So that the sudden inflation or deflation of essential goods’ prices and a lot of produce going to waste or remain unused do not take place one more time in the future. Thus, the complete system would result in less interference of government and introduce more modernize methods to preserve one’s production and earnings.

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