The government’s move to extend by six months its controls on the stocking and movement of wheat and pulses defies logic. These checks were imposed under the Essential Commodities Act a year ago, when the prices of these food items were high. Also, state government officials were empowered at the time to ‘raid’ the premises of traders and commodity businesses to unearth hoarded stocks. Though such retrograde steps were uncalled for even then, their perpetuation makes absolutely no sense now, when foodgrain prices happen to be well within acceptable limits. Even when the controls were first imposed early this year, there was little evidence to suggest that the prices of wheat and pulses had risen due to hoarding or any other trade malpractice that could be controlled be executive fiat; nor could it be claimed with any degree of conviction that the controls subsequently softened prices. Even the government knows now that supply-side constraints were the cause of high inflation, and imports resulted in toning down prices. The continuation of these superfluous controls and curbs, despite the changed scenario, can only prove counter-productive.
At the root of these regressive measures is the outmoded Essential Commodities Act, which was legislated in 1955 in circumstances that were totally alien to those obtaining today. As such, the law has outlived its utility and has become by and large irrelevant. Even a high-level committee comprising Union ministers and state chief ministers, which reviewed the Act in 2002 in the context of the emergence of the World Trade Organisation (WTO), had recommended that the restrictions on farm commodities’ trade and movement should be removed and that a law should be retained only as an enabling provision for need-based occasional enforcement. This led to the abolition of several unwanted constraints on free trade. But where the list of essential items is concerned, despite its pruning down in phases from the original 70 items in 1989 to just seven by 2006, it still has several goods and categories that cannot, by any stretch of imagination, be deemed essential. These include items like hank yarn made wholly from cotton; raw jute and jute textiles; and seeds of vegetables, fruits, food crops, cattle fodders and jute. What also needs to be noted is that by amending the Act last year, the Centre has bestowed on itself the powers to declare any item as essential through a mere notification, bypassing Parliament.
Another equally draconian measure that still forms part of the statute book, and needs to be scrapped, is the Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, 1980. This law, among other trade-unfriendly clauses, provides for the detention of traders by state officials, the appeal against which can be made only to the Central authorities, thus, needlessly delaying grievance redress. Such laws, obviously, flout the spirit of free and competitive trade and marketing that the country is seeking to create in the post-reforms period. It is, therefore, time the government shed its old-fashioned licence-raj mentality and did away with obsolete and even regressive statutory measures.
Illogical controls
Business Standard / New Delhi Sep 04, 2007, 22:35 IST
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