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 Regulatory Affairs
 
Another anti-reform thrust
The Indian Express, India Tuesday, January 04, 2011

Bibek Debroy
The Essential Commodities Act (ECA) will presumably be tightened up. ECA may seem to date from 1955, but its origins go back to Defence of India Rules, 1939, and war-time shortages. It imposes controls on production, supply and distribution of essential commodities and the act itself defines some items as “essential”.ECA and its orders didn’t reduce shortages. Non-reform of agriculture has led to shortages (and inflation) now. Land has been diverted to other uses, writes Bibek Debroy in The Indian Express.

Given the price increase, something seems to be brewing in the Essential Commodities Act (ECA). It will presumably be tightened up. In any event, an amendment bill was pending, primarily because of sugar. ECA will now be tightened to handle black-marketeers and hoarders and a working group of CMs (Gujarat, AP, Maharashtra, Tamil Nadu) has been formed, to reflect on recommendations made by an earlier conference of CMs (in February 2010).

ECA may seem to date from 1955, but its origins go back to Defence of India Rules, 1939, and war-time shortages. It imposes controls on production, supply and distribution of essential commodities and the act itself defines some items as “essential” in Section 2.

There were relaxations in 2005 and Section 2 now only includes drugs, fertilizers, food-stuffs (edible oils), hank yarn, petroleum products, jute products, seeds of food products, cattle fodder and cotton. However, other sections of the statute allow Central and State governments to decree that other items are “essential”.

...

Let’s also not forget that there is a parallel Prevention of Black-marketing and Maintenance of Supplies of Essential Commodities Act of 1980. It is a separate matter that given the state of our criminal justice system, there have been few convictions under this.

ECA and its orders didn’t reduce shortages. Non-reform of agriculture has led to shortages (and inflation) now. Land has been diverted to other uses. Commercialization (such as through production of sugar-cane) has led to land being diverted away from onions.

...

The central government is consistently following the policy of removing all unnecessary restrictions on movement of goods across the State boundaries as part of the process of globalization simultaneously with the pruning of the list of essential commodities under the said Act to promote consumer interest and free trade.

...

Precisely, but we now want to roll back, decide that more commodities are “essential” and re-introduce the Special Provisions Act of 1981. This is in consonance with the anti-reform thrust of the present government.

This article was published in the The Indian Express on Tuesday, January 04, 2011. Please read the original article here.
Author : Mr Debroy is a noted economist, based in New Delhi.
Tags- Find more articles on - ECA | price control | shortages

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