Wednesday, April 17, 2024

Farm Harm Law –II: Centre Removes the State’ power to regulate supply of Essential Commodities

The agricultural farm produce is equated with food stuff in Essential Commodities (Amendment) Act 2020 also. The Statement of Objects and Reasons mentions a High-Powered Committee of Chief Ministers to have recommended removal of stringent restrictions on stock, movement, and price control of agricultural foodstuffs for attracting private investments in agricultural marketing and infrastructure. However, there is no data about when and what the High-Powered Committee said and its justification.

The Paragraph 2 of Statement says:

2. While India has become surplus in most agricultural commodities, farmers havebeen unable to get better prices due to lack of investment in cold storage, warehouses,processing and export as entrepreneurs get discouraged by the regulatory mechanisms in the Essential Commodities Act, 1955. A High-Powered Committee of Chief Ministers who examined this issue, recommended removal of stringent restrictions on stock, Governmentand price control of agricultural foodstuffs for attracting private investments in agricultural marketing and infrastructure. If that is so, what stopped the Centre to consult all the Chief Ministers before bringing this amendment.

According to the objects, this Act intends to increase the competition to enhance the income of farmers, ease of doing business and to remove the fear of frequent statutory controls. The agriculture is more a business for the Central Government.  By this amendment sub-section (1A) to section 3 was inserted, which says that “notwithstanding the provisions of sub-section (1), (a) the supply of such agricultural foodstuff as are notified by the Government shall be regulated only under extraordinary circumstances which mayinclude war, famine, extraordinary price rise and natural calamity of grave nature.(b) any action for imposing stock limit shall be based on price rise, subject tothe conditions and exemptions specified therein.

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Unleashing black marketeers

The Essential Commodities Act 1955 deals with the control of the production, supply, and distribution of certain commodities. Section 3 of this Act empowers the Union government to control production, supply and distribution of the essential commodities. Though there is no specific definition for ‘essential commodities’, Section 2(A) of this Act states that an essential commodity means a commodity specified in the “Schedule” of this Act. At present there are nine commodities in the list—drugs, fertilizers (organic, inorganic or mixed), foodstuffs including edible oil, hank yarn made from cotton, petroleum and petroleum products, raw jute and jute textiles, seeds of food-crops, fruits, vegetables, cattle fodder, cotton; face masks and sanitisers. The Act gives powers to the government to add or remove a commodity in the ‘Schedule’. Face masks and sanitisers were added to the list on March 13, 2020 in the wake of the COVID-19 outbreak.

Impacting the Consumers

Now the 2020 Amendment provided that stock holding limit on commodities would only be imposed under exceptional circumstances like national calamities or famine with a surge in prices. Also, processors and value chain participants are exempted from the stock limit.  This means that they cannot prevent black marketing and hoarding. The consumers will also be left to the manipulations of the market and hoarding.

Another stroke on consumers will be that this amendment removed commodities like edible oil, onion and potato from the list of essential commodities, which means that the government cannot regulate its supply except under “extra ordinary circumstances”. The newly inserted Subsection (1A) says: “The supply of food stuffs, including cereals, pulses, potato, onions, edible oilseeds and oils as the Central government may, by the notification in the Official Gazette, specify, may be regulated only under extra ordinary circumstances which may include war, fan\mine, extra ordinary price rise and natural calamity of grave nature.”

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It also says that any action on imposing stock limit will be based on price rise. “An order for regulating stock limit of any agricultural produce may be issued under this Act only if there is (i) 100 per cent in the retail price of horticultural produce, or (ii) 50 per cent increase in the retail price of non-perishable agricultural foodstuffs.

Who’s income doubles?

This amendment could be a right step if it boosts the farmer’s income as claimed, if it would increase, experts apprehended that it may also lead to increase in rural poverty and have an adverse impact on the public distribution system.  Because Foodstuffs like pulses, onions and edible oil are common man’s essential commodities for every day.  If the government refuses to regulate the supply of these essential food items, the hoardings could be high, and prices might shoot up. Then who’s income doubles?

The Forum of Traders Organisations, a body of traders, said that amendment to the Act will allow big businessmen to hoard essential commodities such as cereals, pulses, edible oil, onion and potato leading to rise in prices. Government claims that these changes are important in 1955 law to double the income of the farmers. The farmers and the opposition criticise the amendment saying that it will hurt farmers and consumers, and will only benefit hoarders.

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Constitutional Issue:

This amendment Act being highly centralizing Act, will erode the Constitutional rights of the States.

The 1955 mainly empowered Government to prohibit hoarding and black marketing of essential commodities. If the price of any commodity is going up due to short supply, Government was given power to order the state governments to fix the stock-holding limit of the commodity for a fixed period. Section 3(1) of this Act says:

“…if the Central government is of opinion that it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and availability at fair prices, (or for securing any essential commodity for the defence of India or the efficient conduct of military operations), it may, by order, provide for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therein.”

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But the trade in Agricultural produce is the exclusive subject of the States, which Parliament cannot interfere. There could be States where the menace of hoarding, he said, is so rampant that the State government may wish to regulate and place stock limits. If there are any State law, they will be rendered ineffective, and when they venture to make a law, it may not survive. There should have been at least one provision that the Amendments will apply only if the State government, by notification, adopts the Amendment Act in that State. Without such provision, the Amendment hits the federalism and state’s authority.

Prof. M. Sridhar Acharyulu
Prof. M. Sridhar Acharyulu
Author is Dean, Professor of law at Mahindra University at Hyderabad and former Central Information Commissioner. He published a number books in English and Telugu.


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