Without getting into the merits of the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, and the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 — the two of the three Farm Laws which form the heart of the ongoing farmers’ protests, this article focuses on the third contentious law, the Essential Commodities (Amendment) Act (‘ECA’), 2020, and its implications on food security in India. Not much analysis of the amendment in the ECA from the perspective of consumers exists yet in the public domain. However, before we get into the details of the amendment in ECA, it is critical to understand the aims and objectives of the ECA.

Roots of the Act

The history of the ECA can be traced back to the pre-independence times of the Defence of India Act, 1939, wherein the Government of India under the British rule framed regulations to combat the shortages of essential supplies of food and other items during the Second World War. After gaining independence in 1947, India was a nascent country struggling with massive food shortages, and it was considered critical that the supply of essential items like food grains, edible oil, kerosene, pulses and other important commodities be not left to the vagaries of the market or seasonal output. The need for price regulation was keenly felt as well. This is also evident from the Directive Principles of State Policy enshrined in Part IV of the Constitution, wherein Article 39(b) mandates the State to distribute the ownership and control of the material resources of the community in a way as best to subserve the common good; and Article 39(c) provides that the State ought to ensure that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.

Accordingly, in 1955, the ECA was enacted by the Parliament to empower the Central Government to control production, supply and distribution of certain essential commodities in the interest of the general public. Though the Act did not define the term ‘essential commodity’, Section 2A(1) of the Act stated that any commodity included in the Schedule would be termed as an essential commodity. Section 3 further empowers the Central Government to control the production, supply and distribution of essential commodities in the interest of maintaining increasing supplies of any essential commodity, or for securing equitable distribution or availability of fair prices by capping the stocks that a whole-seller or a retailer could keep, through the issuance of ‘control orders’. In effect, maintaining adequate supply of essential goods at a fair price is the crux of the Act.

Initially, the list of essential commodities included coal, parts of automobile, cotton and woolen textiles, iron and steel, paper, and sugar, amongst others. Presently, the list merely includes 7 items, including drugs, fertilizer, foodstuff (inclusive of edible oil seeds and edible oil), petroleum and petro products, raw jute and jute textiles, seeds of food crops and seeds of fruits and vegetables, seeds of cattle fodder and jute seeds.

Welfare Legislation

The Courts have time and again emphasised that the ECA is a welfare legislation meant to prevent hoarding of essential commodities, shortage of supplies and the consequent spike in the prices. The Constitution Bench of Five Judges of the Supreme Court of India in a landmark decision in Shree Meenakshi Mills v. Union of India (1974) 1 SCC 468 had elaborated on the object behind the ECA, and how it ought to be implemented by noting in para 65 that “the question of fair price to the consumer with reference to the dominant object and purpose of the legislation claiming equitable distribution and availability at fair price is completely lost sight of if profit and the producer's return are kept in the forefront.

The maintenance or increase of supplies of the commodity or the equitable distribution and availability at fair prices are the fundamental purposes of the Act.”

The Apex Court further held in para 73 that “in fixing the prices, a price line has to be held, in order to give preference or predominant consideration to the interest of the consumer or the general public over that of the producers in respect of essential commodities. The aspect of ensuring availability of the essential commodities to the consumer equitably and at fair price is the most important consideration.” Thus, through laws like ECA and the Prevention of Blackmarketing and Maintenance of Supplies of Essential Commodities Act, 1980, the dangers of profiteering, hoarding and creating artificial shortages were sought to be addressed by penalizing the offenders to imprisonment and fine.

The Amendments in 2020

Now let us examine the amendments in the ECA made in September, 2020 as part of the so-called reforms in the agricultural sector. The ECA, 2020 basically removes certain food items from the framework of price regulation by the Government, subject to certain exceptions by adding a new provision in Section 3 of the Act, as follows:

“(1A) Notwithstanding anything contained in sub-section (1),—

(a) the supply of such foodstuffs, including cereals, pulses, potato, onions, edible oilseeds and oils, as the Central Government may, by notification in the Official Gazette, specify, may be regulated only under extraordinary circumstances which may include war, famine, extraordinary price rise and natural calamity of grave nature;

(b) any action on imposing stock limit shall be based on price rise and an order for regulating stock limit of any agricultural produce may be issued under this Act only if there is—
(i) hundred per cent increase in the retail price of horticultural produce; or
(ii) fifty per cent increase in the retail price of non-perishable agricultural foodstuffs, over the price prevailing immediately preceding twelve months, or average retail price of last five years, whichever is lower:
…….”

In effect, the ECA, 2020 implies that:

i. The Government will not intervene in regulating the prices of food items like cereals, pulses, potato, onions and edible oil and oil seeds, except in cases of war, famine, extraordinary price rise, or natural calamity of grave nature.

ii. Even in those exceptional cases, as stated above, the Government could impose limits on the stocks, only if there is a 100% increase in the retail prices of horticultural produce like fruits and vegetables or 50% in the retail prices of non-perishable items like cereals, pulses or oil. For example, if the prices of potato increase from INR 40 to INR 80 or onions rise from INR 50 to INR 100, then only the Government may issue price control orders, and not in other cases.

iii. Even in cases where the Government can impose stock limits, those limits would not be applicable to agro-food processing companies, or to exporters if there is an export order exceeding the government stipulated stock limit.

iv. The stock limits are not applicable to the public distribution systems.

It is well-known that the three farm laws were passed in the Parliament without any substantive debate, especially on the impact of the ECA, 2020 on the consumers, including the poor and vulnerable communities who are excluded from the PDS, owing to Aadhaar mismatch or other exclusion issues. Since the Amendment Act itself does not state the rationale for such policy change, one has to rely on the statements made by the Ministers or the Economic Survey, 2020-2021 tabled by the Ministry of Finance in the Parliament on 31 January, 2020 to understand its object.

Ostensible Objects of the Amendments

As per the press release issued by the Press Information Bureau (‘PIB’), it was stated that “the Survey describes inter alia, the Essential Commodities Act (ECA) as anachronistic and irrelevant in today’s India as the Act was passed in 1955 in an India worried about famines and shortages. The Survey observes the frequent and unpredictable imposition of blanket stock limits on commodities under the ECA distorts the incentives for creation of storage infrastructure by the private sector, movement up the agricultural value chain and development of a national market for agricultural commodities. The Survey further notes that imposition of stock limits on Dal, Sugar and Onions had no effect on the volatility of retail and wholesale prices The Survey, providing clear evidence, suggests that the Act must be jettisoned in order to grant more economic freedom to the market and to facilitate the process of wealth creation in the economy. The Survey further says that the ECA only seems to enable rent seeking and harassment.”

Similarly, Mr. Rajiv Kumar, Vice Chairman, NITI Aayog, was quoted in Business Today on 20 March, 2020 as saying that “these regulations are like a sword hanging over farm producers. They must be reviewed in the interest of farmers and the economy.” He further reportedly said that “today, India is foodgrain surplus. If we improve our post-production value chain, our foodgrain surplus shall be efficiently utilised. We have to improve our labour productivity and yield in all crops and focus on capacity building of farmers. Our costs must be globally competitive. We need a second green revolution to increase farmer income and double exports.”

From the above, it can be said that the object of ECA, 2020 was to ostensibly benefit the farmers, and to increase India’s food export. Importantly, neither the Economic Survey nor the NITI Aayog was quoted as saying anything in favour of the consumers and how to ensure that consumers avail fair prices in food and other essential commodities. It is important to note that ECA was enacted in 1955 not just to counter shortages during war or famine but also to ensure that citizens have access to quality food commodities at reasonable prices. This object has been repeatedly reaffirmed by the Supreme Court in several cases, including in a seven judge decision in Prag Ice and Oil Mills v. Union of India(1978) 3 SCC 459, wherein the Apex Court stated that “the object is to secure equitable distribution and availability at fair prices so that it is the interest of the consumer and not of the producer, which is the determining factor in applying any objective tests at any particular time.” The Court further noted that price control is required not just for wartime exigencies, but also to deal with peace time problems by stating that “price control and planning may have been forced upon all nations of the world due to the needs and exigencies of modern "total" warfare. But, as has been observed, the problems of the aftermath or of the peace and reconstruction, which follow (according to some they "break out") are no less demanding. In addition, it is common knowledge that the population explosion, unemployment, and rising prices in our country, due to the inflationary spiral pose problems with no less grave implications for the whole country than a war. It would be no exaggeration to say that the fate of every government depends ultimately upon a satisfactory solution of these problems, and, particularly, on its capacity to check rise in prices of essential commodities.”

Ignoring the growing hunger and poverty

It is completely disingenuous to say that ECA has lost its purpose in the current times, since India has allegedly become a food surplus country, considering the economic devastation that has happened in India, owing to Covid-19 pandemic and also because of the anti-poor policies of the Modi Government. No one is denying the need to review laws, including ECA, keeping in mind the changing times and context, but that does not mean that the Government gives up on its constitutional duty to protect the socio-economic rights of the people. In the last one year, even prior to the onset of Covid-19 pandemic, India’s unemployment rate rose to highest in the last 45 years, and as per the data released by Centre for Monitoring Indian Economy (‘CMIE’), India’s joblessness was a record high of 10% in December, 2020. In the same vein, more than 2 crore salaried people lost their employment in India during the Covid crisis, with no assistance from the Government in terms of cash transfer to withstand loss of livelihood and financial insecurity.

Similarly, as per the Global Hunger Index, 2020, India is ranked 94th out of 107, which is classified as having ’serious hunger problem,’ much behind our neighbours in the region, Bangladesh (75th), Pakistan (88th), Nepal (73rd) and Sri Lanka. According to the Livelihood Survey conducted by Azim Premji University in July, 2020, “almost 8 in 10 are eating less food than before. More than 6 in 10 respondents in urban areas did not have enough money for week’s worth of essentials. More than a third of all respondents had taken a loan to cover expenses during the lockdown. More than 8 in 10 respondents did not have money to pay next month's rent. The impact of job losses and food insecurity has been higher for certain groups of people: Muslims, Dalits, women, and those with lower levels of education. Urban residents and migrants have been impacted more.” In October-November, 2020, India’s food inflation had touched a record high of 11%, while as per IMF estimates, 40 million Indians are said to have slipped into extreme poverty during the pandemic.

It in this context of widespread economic devastation, loss of livelihoods, rising hunger and extreme poverty that one has to consider the aims and objects of the ECA, 2020 which the Government claims is no longer required to regulate the supply of food items, in order to keep prices under control. As stated above, neither the Government Ministers nor any document from the Government indicates how it seeks to ensure that food inflation is reduced or that people are able to buy food at cheaper prices. Only having PDS is not the answer, and that too when the PDS is under attack from many quarters of the Government itself. The ECA is an integral part of the food security framework in India, and to have diluted the same in the name of food surplus is highly arbitrary and ill-thought out, resulting in severe consequences of the people’s ability to feed themselves and their families, amidst larger economic depression. Several studies have shown that middle class too has been severely affected by food insecurity, wherein people are cutting down on green vegetable or pulses or meat, in order to feed the family members, and has no social safety net to fall back on. Further, if the ECA, 2020 would actually benefit the farmers as producers, then millions of farmers would not be opposing these laws for almost last three months.

In conclusion, one can say that ECA, 2020 has been enacted, contrary to the objects of the main ECA, i.e., to maintain the regular supply of essential commodities at a fair price for the benefit of the consumers. The ECA is not meant profit the big agricultural businesses or to help increasing India’s agricultural exports. The farmers know it well that all these three laws, including the ECA, 2020, have been enacted for the benefit of large agri-food businesses or exporters, and neither for the regular farmers nor for the common consumers. With the world’s largest democracy with second highest population languishing at the bottom of global hunger ranking, it is a shame that this government is only interested to open the agricultural market to few big businesses, while majority of the population do not even have three meals a day. The farmers’ protest is as much about farmers’ right to produce in a sustainable way, via minimum support price, as about the food security of 1.3 billion Indians in the 21st century. (IPA Service)