Follow the onion

The deletion of onions from the purview of the Essential Commodities Act, 1955, is a welcome step. The case of onions revealed how curbs on movement and export of a commodity are detrimental to both consumers and farmers. The draconian act is an obstruction to free trade of goods in the country. It is one of the many obstacles to India becoming a single national market. An important instrument of the Licence Raj, it authorises the government to regulate the production, storage, transport and distribution of items in the list of essential commodities. These are items of mass consumption such as foodstuffs including edible oilseeds and oil, tea, onion, drugs and textiles; agricultural products such as cattle fodder, seed of food crops, fruits and vegetables; intermediate products like insecticides, fungicides and medicines; and industrial products like coal, iron and steel, paper, petroleum, cement, textile machinery and electric cables. Until 2002 silk and synthetic textiles, lighting lamps, two-pin plugs, electric irons and heaters were on the list of 8220;essential commodities8221;.

These controls have been traditionally justified on the grounds that they are necessary to control hoarding and other types of speculative activity by 8220;unscrupulous traders8221;. Even the Planning Commission has observed that 8220;the fact is that they do not work in times of genuine scarcity and they are not needed in normal times. Besides, they are typically misused by the lower levels of the administration and become an instrument for harassment and corruption.8221; They, along with taxes like octroi and sales taxes, serve to reduce domestic trade. Even a cursory look at the list shows that the government should delete all items from this list. Issues of food security and price stability can be handled through the development of the commodity futures markets rather than government control of trade.

In addition to the ECA are various State Levy Control Orders such as those relating to rice and sugar. Mills are required to deliver a proportion of their output to the government at a prescribed price. Millers can sell their output in the market only after making these deliveries. Another related law, the Agricultural Produce Marketing Act, prevents farmers from selling their produce directly to retailers. They have to go through regulated mandis and bear high mandi charges. It is high time the government woke up to the damage being done by outdated legislations like the ECA to the development of the market and growth of trade in India, and abolished the act.