The Essential Commodities (Amendment) Ordinance, 2020

The Essential Commodities (Amendment) Ordinance, 2020

The Essential Commodities (Amendment) Ordinance, 2020, is promulgated by the President of India on 5th June 2020. The Ordinance amended the Essential Commodities Act, 1955. Under the present article, we will first look into the basis of the Essential Commodities Act, 1955 and then analyze the highlights of the Essential Commodities (Amendment) Ordinance, 2020.

Background and objective of the Essential Commodities Act, 1955

The Essential Commodities Act (from now on referred to as ‘the Act’) was enacted way back in 1955 with an aim to ensure the availability of essential commodities to consumers. The Act protects the consumer from exploitation by dishonest traders.

The Act provides for the control and regulation of the production, distribution, and pricing of the essential commodities. Further, the Act empowers the Government to control/ regulate the production, supply, trade, distribution, and commerce in certain commodities. The Act also permits the Government to fix the Maximum Retail Price (i.e., MRP) of any packaged product that it declares as an essential commodity.

It is pertinent to note here that the list of essential commodities/ items includes fertilizers, pulses, drugs, petroleum and petroleum products, edible oils, etc. However, such a list is reviewed and revised from time to time based on the production, supply, and economic liberalization. For example, recently, due to COVID-19 pandemic, the Government on 14th March 2020 brought the hand sanitizers and masks within the Act’s ambit, to make the same available to the public at the right price and in right quality.

Highlights of the Essential Commodities (Amendment) Ordinance, 2020

The Essential Commodities (Amendment) Ordinance, 2020 (from now referred to as an Ordinance), basically tries to increase competition in the agriculture sector, resultantly increasing the farmers income. The Ordinance targets both liberalizations of the regulatory system vis-à-vis, protecting the interest of the consumers. The highlights of the Ordinance are summarized hereunder-

Relaxation on the regulation of supply of the food commodities

Vide the Ordinance, Section 3(1A)(a) has been inserted, which states that the supply of foodstuffs (including cereals, potato, pulses, edible oilseeds, onion, and oils) shall be regulated only under extraordinary circumstances. Such extraordinary circumstances may include the following-

  • War,
  • Famine,
  • Extraordinary price rise, and
  • Natural calamity of grave nature.

The above provisions do not apply to any order relating to the Targeted Public Distribution System or the Public Distribution System made by the Government.

Action on the imposition of stock limit

Vide the Ordinance, Section 3(1A)(b) has been inserted, which requires that any action on imposing any stock limit on some specified items shall be based on the price rise. The stock limit of any agricultural produce may be imposed only if the following conditions are satisfied-

  1. There is a 100% increase in the retail price of the horticultural produce; and
  2. There is a 50% increase in the retail price of the non-perishable agricultural food items.

It should be noted that the percentage increase will be calculated lower of the following-

  • Price prevailing immediately prior twelve months; or
  • The average retail price of the last five years.

The above regulation of the stock limit shall not apply to the processor or the value chain participant of the agricultural produce. However, such exemption is available only if the stock held by the processor/ value chain participant is less than the overall ceiling of the installed capacity of the processing or the demand of the export in case of an exporter.

The value chain participant here means the person engaged in production, or in value addition at any stage of processing, storage, packaging, transport, and distribution of agricultural produce.

The above provisions do not apply to any order relating to the Targeted Public Distribution System or the Public Distribution System made by the Government.

Post by poonamgandhi

CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.