Information about the Issue

The Essential Commodities (Amendment) Act, 2020 was promulgated on June 5th 2020 (as an ordinance), along with two other Bills together constituting the three agricultural laws passed by the government. This law amended the existing Act by removing and deregulating commodities like potatoes, onions, edible oilseeds, cereals, pulses and oils from the list of essential commodities. As an outcome, their supply will now be regulated by the Central Government only under extraordinary circumstances and stock limits will be imposed only in case of 100% and 50% increase in rates of horticultural products and non-perishable agricultural products respectively. The subsequent Bill was cleared in the Rajya Sabha on 19the September, 2020 to become an Act. 

The Act has been criticised for the lack of ample time given for proper discussion on its provisions. The adoption of voice vote over traditional voting methods further led to allegations of a rushed decision as the Upper House was nearly empty on the day of the Bill was voted on due to COVID-19 and more importantly there had been no consultation with Farmers’ organisations before drafting the said provisions. There are also well founded reasons to suggest that some of the provisions under the new Act need modifications, in the absence of which they can prove to be defy the purpose of formulating pro farmer trade policies for essential commodities in the country.

Bare reading of the provisions suggests that the law runs the risk of doing more harm than good as per our interpretation of the specific limitations of the Act. Specific concerns associated with the provisions of the Act are mainly related to:

  1. Authority of State Governments
  2. Definition of terms
  3. Lack of regulation against hoarding & black marketing
  4. Lack of regulation for price rise of staples and PDS procurement

Legal and Constitutional Limitations of the Act

Under Section 3 supply of foodstuffs in case of extraordinary circumstances, will be regulated by the Central Government. This does not provide the State governments any power to regulate and impose stock limits on these commodities. However, the Constitution gives both the Centre and the States powers to control the production, supply and distribution of products of agriculture. The said provision therefore, by not conferring the State power to regulate the supply of commodities, questions the federal framework of the Constitution.

The usage of terminology like ‘extraordinary circumstances’, ‘extraordinary price rise’, ‘natural calamities of grave nature’ are problematic as they are open to interpretations with scope for disputes. These ambiguities can cause problems in situations which may differ in each State. 

There is no explicit mention of regulation for instances of hoarding and black-marketing, which leaves room for such activities in case of commodities removed from the list of essential commodities.

Under Section 1 1A the government intervention to regulate and impose stock limits are dictated by rigid conditions over a broad price rise. This can be difficult for consumers as the commodities in question are part of the staple diet of the common people. Since value-chain participants and PDS are exempted from stock limits even during extraordinary circumstances, this wide channel is open to possible manipulations. 

The Act allows bulk procurement of essential commodities by large players from farmers. This can cause a price jump of products at farm level and increase government procurement cost for Public Distribution System (PDS). This can have adverse effects on PDS and ration shops. This price jump at farm level will cause inflation in the rural markets. 

What are we doing in this regard?

We have written a letter to the Union Minister of Consumer Affairs, Food & Public Distribution; Vice Chairman, NITI Aayog; the Economic Advisory Council to The Prime Minister; Member, NITI Aayog; Secretary (Consumer Affairs), and the Director (Price Monitoring Divisions & IC) elucidating our concerns and recommending specific changes in the Act.

Highlighting the existing limitations in the provisions of the Act and elucidating our concerns, we stated that certain provisions can undermine the rights of consumers as well as the farmers as per the new framework of price regulation and monitoring. In this context, our recommendations to modify the Act are as follows:

  1. Add a mandatory provision about the Minimum Support Price (MSP) on the deregulated commodities to assure the farmers that the MSP remains unharmed. 
  2. Add a list of commodities constituting ‘horticultural products’ under 1A) b) i) & ‘non-perishable agricultural products’ under 1A) b) ii).
  3. Confer power to States to regulate commodities during extraordinary situations and provide the State discretion to impose stock limits for the commodities when needed depending on the conditions. 
  4. Draft clear rules protecting food security of the consumers with respect to the deregulated essentials, which are now exposed to hoarding and black-marketing. 
  5. Formulate a special body to mitigate the prospect of hoarding and black-marketing so that the unlimited storage of essential commodities is not manipulated.
  6. Modify the penultimate clause of 1A of Section 3 to individually list the members of the value chain to be exempted rather than a broad and ambiguous term such as value chain participants. 
  7. Bring down the rate of increase in prices to impose a stock limit so that the government intervenes much before the prices hit a 100% or 50% increase in rates of horticulture products and non-perishable agricultural products.
  8. Ensure that under 1A b) of Section 3 states that the subsidised rates of products in PDS will remain unchanged and people in the BPL category will always be provided foodstuffs under a price fixed by the government.  
  9. Rethink the absolute deregulation of commodities and put a cap on completely opening the market to manage the prices of essential food products considering the probability of unforeseen circumstances such as the one exhibited by COVID 19.
  10. Include extraordinary circumstances other than ‘war’, that can affect the supply of these commodities in the Act.
  11. Allow the States to control and regulate crops grown locally to be sold outside their States, under the new clause of Section 5 dealing with the delegation of powers.
  12. Add a clause under 1A b) of Section 3 for stocking and storage of seasonal crops under proper license and permit from the concerned authority (preferably the District Collector) to be relieved from regulations as it is important to devise a method to distinguish between this genuine stock up and hoarding.

We will continue following up with the government in this regard. We will update this post with further information about the issue.

How can you help?

  • You can share our updates regarding the issue, to help us increase the outreach of this campaign.
  • If you can help us identify any other such laws/policies that need provisional improvements, write to us.
  • You can volunteer to support our advocacy efforts, as per your skill set.

Write to us at work.lexquest@gmail.com.

Important Documents:

  1. Letter to stakeholders by LQF dated 10th November, 2020

  2. The Essential Commodities (Amendment) Act, 2020