The farmers’ protest is as much about their right to produce sustainably as about the food security of 1.2 billion Indian citizens. Amendments to the Essential Commodities Act undercut this life-saving potential and aim. This marks a shift in the standards of governance and demonstrates a change in public policy that is detrimental to consumers across the country, writes AMRITANANDACHAKRAVORTY.
IT is seventy-nine days into the protests led by thousands of farmers at the borders of Delhi, and the Indian State, using all its might, has almost cut them off from the city and the country. It has put up multiple layers of barricades, planted nails into roads, cut off their water and electricity supplies, and has the protest sites from Singhu to Ghazipur heavily patrolled by paramilitary forces. Here is a government at war with its people. First, it went after civil rights activists, then university students, then journalists, and now our farmers.
The third law—the contentious Essential Commodities (Amendment) Act (ECA), 2020—hardly features in the public discourse. From the perspective of consumers, this law has massive implications on food security. To understand why this is so, we must understand the objectives of the original ECA.
ROOTS OF THE ECA
The colonial administration framed the Defence of India Act, 1939, to combat shortages of essential food supplies and other items during the Second World War. After Independence, India struggled with massive food shortages. It was critical to insulate supplies of food grains, edible oil, kerosene, pulses, and other essential commodities from market vagaries and seasonal variations in output. The need for price regulation was keenly felt as well.
The Supreme Court has repeatedly held that maintaining adequate supplies of essential goods and their equitable distribution and availability at fair prices are fundamental purposes of the Essential Commodities Act. Its object is to secure equitable distribution and availability at fair prices in the interest of the consumer and not the producer.
This is evident from the Directive Principles of State Policy enshrined in Part IV of the Constitution. Article 39(b) mandates the State to distribute the ownership and control of material resources of the community to serve the common good. Article 39(c) provides that the State ought to ensure that the economic system does not concentrate wealth and the means of production in a way that is to the common detriment.
Accordingly, Parliament enacted the ECA in 1955 to empower the Centre to control the production, supply, and distribution of certain essential commodities in the public interest. Though the Act did not define an essential commodity, section 2A(1) said that any commodity included in its Schedule was essential. Section 3 empowered the central government to control the production, supply, and distribution of essential commodities to maintain supplies of any essential commodity or secure its equitable distribution or availability at fair prices. It could do so by capping the stocks that a whole-seller or retailer could keep by issuing “control orders”. In effect, the crux of the Act is to maintain adequate supplies of essential goods, available at fair prices.
Initially, the list of essential commodities included coal, automobile parts, cotton and woolen textiles, iron and steel, paper, and sugar, amongst others. Presently, the list includes merely seven items, including drugs, fertilisers, foodstuff (including edible oilseeds 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.
The courts have repeatedly emphasised that the ECA is a welfare-oriented legislation to prevent the hoarding of essential commodities, shortage of supplies, and consequent spikes in the prices. In 1974, a Constitution Bench of five judges of the Supreme Court of India in a landmark decision in Shree Meenakshi Mills v. Union of India 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 returns are kept in the forefront.” It further said, “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.”
Further, the Apex Court held in para 73, “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, laws like the ECA and the Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, 1980, were enacted to address the dangers of profiteering, hoarding, and practices such as creating artificial shortages by penalising the offenders with imprisonment and fines.
THE AMENDMENTS TO ECA IN 2020
In September last year, as part of so-called reforms in the agricultural sector, the ECA 2020, was amended and enacted. This amended law removes certain food items from the framework of price regulation by the government, subject to exceptions by adding a new provision in section 3 of the Act, as follows:
“(1A) Notwithstanding anything contained in sub-section (1)—
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;
any action on imposing stock limit shall be based on price rise and order for regulating stock limit of any agricultural produce may be issued under this Act only if there is—
hundred percent increase in the retail price of horticultural produce; or
(ii) fifty percent 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:
The government will not intervene to regulate the prices of food items such as cereals, pulses, potatoes, onions, and edible oil and oilseeds, except in case of war, famine, extraordinary price rise, or natural calamity of grave nature.
Even in these exceptional cases, the government could impose limits on stocks only if there is a 100% increase in the retail prices of horticultural produce, such as fruits and vegetables, or 50% in the retail prices of non-perishable items such as cereals, pulses or oil. So, if the price of potatoes increases from Rs. 40 to Rs. 80 or of onions from Rs. 50 to Rs. 100, only then the government may issue price control orders, and not in other cases.
Even in cases where the government can impose stock limits, those limits would not apply to agro-food processing companies, or exporters if there is an export order exceeding the government-stipulated stock limit.
The stock limits do not apply to the public distribution system.
It is well-known that the three farm laws were passed in Parliament without any substantive debate, especially on the impact of the ECA, 2020, on 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 this policy change, one has to rely on statements of the government’s ministers or the Economic Survey 2020-21, which was tabled by the Ministry of Finance in Parliament on 31 January 2020, to understand its objectives.
OSTENSIBLE OBJECTS OF THE AMENDMENTS
As per the press release issued by the Press Information Bureau (PIB), “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 the 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 imposing stock limits on dal, sugar, and onions did not affect the volatility of retail and wholesale prices. The Survey, providing clear evidence, suggests that the Act must be jettisoned to grant more economic freedom to the market and facilitate processes of wealth-creation in the economy. The Survey further says that the ECA only seems to enable rent-seeking and harassment.”
The Economic Survey and various government officials have said in recent months that the ECA must be jettisoned in order to free the market and facilitate wealth-creation. Yet the Global Hunger Index, 2020, ranks India at the 94th position among 107 countries. A free reign of markets will not solve this crisis.
Similarly, on 20 March 2020, Rajiv Kumar, Vice-Chairman, Niti Aayog, was quoted in Business Today magazine as saying, “These regulations are like a sword hanging over farm producers. They must be reviewed in the interest of farmers and the economy.” He also reportedly said, “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.”
It can be inferred from the above that the objective of the ECA, 2020, is ostensibly to benefit farmers and increase India’s food export. Importantly, neither the Economic Survey nor the Niti Aayog was quoted saying anything in favour of the consumers or how to ensure that consumers can avail themselves food and other essential commodities at fair prices.
The ECA was enacted to counter shortages during war or famine and ensure that citizens can access quality food at reasonable prices. This object has been reaffirmed by the Supreme Court in several cases, including a seven-judge decision in Prag Ice and Oil Mills v. Union of India (1978). In this case, 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 peacetime problems. “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 GROWING HUNGER AND POVERTY
Considering the economic devastation of India owing to the COVID-19 pandemic and also because of the anti-poor policies of the Prime Minister Narendra Modi-led government, it is completely disingenuous to say that since India is allegedly a food-surplus country now, therefore the ECA has lost its purpose.
No one denies the need to review laws, including the 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 year, even before the onset of the COVID-19 pandemic, India’s unemployment rate rose to the highest in the last 45 years.
As per the data released by the Centre for Monitoring Indian Economy (CMIE), India’s joblessness was at a record high of 10% in December 2020. In the same vein, more than two crore salaried people lost their sources of income or employment in India during the COVID-19 crisis, with virtually no assistance from the government in terms of cash transfers to withstand the loss of livelihood and financial insecurity.
Similarly, as per the Global Hunger Index, 2020, India is ranked at 94th position out of 107 countries. The low ranking means India is classified as having a “serious hunger problem”. It also means India is far behind its neighbours in the region, Bangladesh is ranked 75th, Pakistan 88th, Nepal is at 73rd place, and Sri Lanka at 64th position.
The ECA can be reviewed like any law, but the government cannot give up its constitutional duty to protect citizens from deprivation. The devastation owing to the pandemic, anti-poor policies, rampant unemployment and rising prices is no less grave than war. It is disingenuous to say that India is a food-surplus country and therefore the ECA has lost its purpose.
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 weeks 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, to keep prices under control. Neither the government’s ministers nor any document from the government indicates how it seeks to ensure that food inflation is reduced or that people can 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 for the people’s ability to feed themselves and their families, amidst economic depression.
Several studies have shown that the middle class, too, has been severely affected by food insecurity, wherein people are cutting down on green vegetables or pulses or meat, to feed the family members, and has no social safety net to fall back on. Further, if the ECA, 2020 would benefit the farmers as producers, then millions of farmers would not be opposing these laws for almost the 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 to profit the big agricultural businesses or to help to increase 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 the second-highest population languishing at the bottom of the global hunger ranking, it is a shame that this government is only interested to open the agricultural market to few big businesses, while the majority of the population do not even have three meals a day.
The farmers’ protest is as much about their right to produce sustainably, via minimum support price, as about the food security of 1.2 billion Indians in the 21st century.
(AmritanandaChakravorty is a practicing lawyer based in New Delhi, with a special interest in constitutional and human rights issues. The views expressed are personal.)