Essential Commodities Amendment: Key Features

Varun Hariharan

03 Oct, 2020

The Government amended the Essential Commodities Act in September 2020. This amendment replaces the Essential Commodities Ordinance, 2020 (EC Ordinance) which was brought out in June 2020. The EC ordinance was brought out with a view of making some changes in the Essential Commodities Act, 1955. The amendment in September 2020 has repealed the EC ordinance which was brought out in June. This write up will look into the key features of the amendment.

What is the meaning of Essential Commodities?

As per the dictionary meaning, an essential commodity is a requirement for the sustenance of any form of a living being. This can be general food grains and other forms of supplements which form a part of the livelihood of individuals.

Under the Essential Commodities Act, 1955, there is no specific definition given to Essential Commodity. However, section 2(A) of the Act defines an essential commodity as “any form of item which is included under the list of the Schedule which is specified under the Act”. This is just a general meaning of the term essential commodity.

From the above definition, the government has the power to increase or decrease the list of essential commodities under this Act.

What are the items present in the list of essential commodities?

Through the Act, the government has included the following items under the list of essential commodities:

• Any form of medical equipment or drugs.
• Food items for daily consumption including any form of edible oil.
• Fertilizers (both liquid and solid) – These can either be organic or inorganic.
• Cotton Yarn or any other hank yarn.
• Petroleum-Based Products.
• Textiles such as Raw Jute and Other Products.
• Cattle Food.
• Seeds of Fruits, Vegetables and other forms of edible plants.
• Face Masks.
• Hand- Sanitizers.

The above list is all the forms of essential commodities.  Face Masks and Sanitizers were included in the list from 13 March 2020, as a result of the devastating effects of the Covid-19 Pandemic.

As per the above list, the government will have the power to control and regulate the supply of all the items. Control means, the government will also have the power to add or negate any items in the list of EC.

Which bill did this Amendment Repeal?

The September amendment in the EC bill brought out major changes to the essential commodities act. It repealed the Essential Commodities Ordinance 2020 which was brought on in June. There are different views about the changes brought out by the amendment.

Features of the Amendment to the Bill

There are different features brought about as a result of the amendment.

The amendment brought out the following features:

• This amendment changed how the Essential Commodities Act^[1], 1955 operated. Such an amendment is supported, as it majorly benefitted farmer’s right to livelihood. Apart from this, farmers will also be able to make a sale directly to private companies.
• The government can regulate stock Holding limit on essential commodities. The stock-Holding limit is the amount of control the government has on the commodities. As per this amendment, stock holding limit on essential commodities can only be imposed during exceptional circumstances. These circumstances would include events such as Act of God, natural calamities, war, external aggression, famine, and other circumstances.
• The government would only regulate commodities such as pulses, cereals, potatoes, and onion and edible items during the above extraordinary circumstances. This amendment is present under section 1A of the amendment bill.
• The government can only impose any form of stock limit of stock imposing limit if the following circumstances are met:
  • If there is a 100% price rise in agricultural or horticulture produce. This price rise should be the retail price of the agricultural or horticulture produce.
  • If there is a 50% increase in the retail price of non-perishable agricultural foodstuffs.
  • Such imposition will be calculated on the price of the agriculture or horticulture produce in the prevailing 12 months or the average retail price, which is charged. The lower of the above value will be taken.
• The ordinance will not apply to any processor, or any form of value chain participant of the agriculture or horticulture produce. For this, the stock which is held by a person or a company should not be more than:
  • The overall processing capacity of the installed system; or
  • Demand for the exporter in case of any form of exports.
• Value chain participant can be any form of individual or entity that is engaged in adding value to the agricultural production chain. This participant can be in any stage of the process, which includes storage, production, packaging, transport, and distribution to the agricultural produce.
• The features of this ordinance would not apply to any form of government order for public distribution system or any form of the target public distribution systems. Under these systems, the government would distribute pulses and food grains at subsidised rates to specific individuals.

Is this amendment beneficial?

Many commentators specify that this amendment would be good in the long run.

The following benefits would be achieved through this amendment:

• Farmers would be able to deal directly with companies and other private organisations for the sale of agricultural produce.
• It will increase the livelihood of farmers in the long run.
• Farmers would not have to deal with middlemen by using this system.
• Farmer’s income, on the whole, will be increased as the products dealt by farmers can be sold anywhere. This will not just be applicable in any local mandi or Kirana stores.
• Large organisations would invest in villages by contacting farmers directly, thus increasing their income.

Arguments against the Amendment

While there were many hailing from this amendment, there is also widespread criticism regarding this amendment.

The following criticisms were brought against this amendment:

• As private organisations can deal with produce, there will be more hoarding. Before the amendment, hoarding wasn’t allowed. However, through this amendment, indirect hoarding will occur.
• These amendments go against the rights of states to make their rules on Essential Commodities, as this amendment was brought about throughout the nation.
• Prices of produce under the Essential Commodities act may increase if there are large procurement orders conducted by different organisations. This will directly allow the government to regulate the products under the amendment using the ‘exceptional circumstances’ clause in the bill.
• Hoarding will also increase the price of essential commodities such as onion and potato, which is used extensively in cooking.

Conclusion