The Essential Commodities (Amendment) Ordinance, 2020

The Essential Commodities (Amendment) Ordinance, 2020, was promulgated by the President of India on 5th June 2020. This significant amendment redefines regulations under the Essential Commodities Act, 1955 to enhance the agricultural economy and protect consumer interests. This article explores the core tenets of the original Essential Commodities Act, 1955, followed by an analysis of the 2020 Amendment's highlights.

Background and Objective of the Essential Commodities Act, 1955

The Essential Commodities Act (referred to as ‘the Act’) was established in 1955 to ensure the availability of essential commodities to consumers and safeguard them from unscrupulous trade practices. The Act empowers the government to control the production, supply, and distribution of essential goods while regulating their prices. This includes fixing the Maximum Retail Price (MRP) of any packaged product declared as essential.

Over the years, the list of essential commodities, which includes fertilizers, drugs, petroleum products, and edible oils, is periodically reviewed to adapt to changing production and supply dynamics. For instance, amidst the COVID-19 pandemic, hand sanitizers and masks were temporarily deemed essential to ensure affordability and accessibility.

Highlights of the Essential Commodities (Amendment) Ordinance, 2020

The Essential Commodities (Amendment) Ordinance, 2020, aims to boost agricultural competitiveness and farmers' income while safeguarding consumer rights. The Ordinance enacts several pivotal changes, including regulated conditions for essential food supplies.

Relaxation on the Regulation of Supply of Food Commodities

According to the Ordinance, Section 3(1A)(a) establishes that the regulation of essential food commodities like cereals, potatoes, pulses, and edible oils will only occur under exceptional circumstances such as war, famine, extraordinary price rises, or severe natural calamities. These revised provisions do not impact the Targeted Public Distribution System (TPDS) or the Public Distribution System (PDS).

Action on the Imposition of Stock Limits

Section 3(1A)(b) of the Ordinance states that any stock limits on specific items should be imposed based on significant price hikes. A stock limit can be enforced if there is a notable price increase—100% for horticultural products and 50% for non-perishable agricultural items. The calculation is based on the lower of the previous 12 months' prices or the average retail price of the last five years.

Moreover, the regulation exempts processors and value chain participants if their stock is below the processing capacity or the export demand. This amendment particularly supports those in the agricultural value chain, which includes traders and exporters, ensuring they are unaffected by abrupt stock limitations under regular market conditions.

By revising these elements, the Amendment strives to balance the scale between farmers’ economic opportunities and consumer protection, fostering a fair and thriving agricultural market. For further reading on agriculture-related ordinances, consider the analysis of the Insolvency and Bankruptcy Amendment Ordinance as it shapes India's financial landscape.

To explore more about amendments during the pandemic, you can read about the Epidemic Diseases Amendment Ordinance, 2020, which also played a critical role in legal adjustments during 2020.

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Frequently Asked Questions

Common questions about Essential Commodities Amendment Ordinance.

The Essential Commodities Act, 1955 is a law enacted by the Indian government to ensure the availability of essential commodities to consumers and protect them from exploitation by dishonest traders. It empowers the government to control and regulate the production, distribution, and pricing of essential commodities like fertilizers, pulses, drugs, petroleum products, edible oils, and more.

The main objective of the Essential Commodities (Amendment) Ordinance, 2020 is to increase competition in the agriculture sector, thereby increasing the income of farmers. It aims to achieve this by liberalizing the regulatory system while also protecting the interests of consumers.

According to the Ordinance, the supply of foodstuffs, including cereals, potatoes, pulses, edible oilseeds, onions, and oils, shall be regulated only under extraordinary circumstances like war, famine, extraordinary price rise, or natural calamities of grave nature.

The Ordinance allows the government to impose stock limits on agricultural produce only if there is a 100% increase in the retail price of horticultural produce or a 50% increase in the retail price of non-perishable agricultural food items, compared to the lower of the price prevailing immediately prior to twelve months or the average retail price of the last five years.

Processors or value chain participants of agricultural produce are exempt from stock limit regulations, provided the stock held by them is less than the overall ceiling of the installed capacity of the processing or the demand of the export in case of an exporter.

A value chain participant is a person engaged in production or value addition at any stage of processing, storage, packaging, transport, and distribution of agricultural produce.

No, the provisions related to the relaxation of supply regulation and stock limit imposition do not apply to any order relating to the Targeted Public Distribution System or the Public Distribution System made by the government.

The Essential Commodities Act was enacted in 1955 with the aim of ensuring the availability of essential commodities to consumers and protecting them from exploitation by dishonest traders.

Yes, the Essential Commodities Act still permits the government to fix the Maximum Retail Price (MRP) of any packaged product that it declares as an essential commodity, even after the implementation of the Essential Commodities (Amendment) Ordinance, 2020.

The "extraordinary circumstances" mentioned in the Ordinance, such as war, famine, extraordinary price rise, and natural calamities of grave nature, are the only situations where the government can regulate the supply of foodstuffs like cereals, potatoes, pulses, edible oilseeds, onions, and oils.