Retailers Association of India
Representation
on
Essential commodities Act
To
Government of Maharashtra
26 February 2014
Mumbai
In this section, we have set out a brief outline of the key issues faced by the retailers in
Maharashtra relating to Essential Commodities Act, 1955. For convenience we have
divided the section in the following parts:
PART A:
Background of Essential Commodities Act, 1955
PART B:
Issues and Suggestions
1.
2.
3.
4.
PART C:
Stock Limits
Disclosure of Price List
Maintenance of Registers
Specific Requirement for Invoice
Key Highlights of the Recommendations
PART A: BACKGROUND OF ESSENTIAL COMMODITIES ACT, 1955
1.
The main purpose of the Essential Commodities Act, 1955 and the rules,
regulations and orders framed thereunder by the Central and State Governments
(collectively, “ECA”) is to ensure availability of essential commodities such
as sugar, edible oil, wheat, pulses, etc. to consumers and to protect them
from exploitation by unscrupulous traders. The ECA provides for the
regulation and control of production, supply and distribution of, and trade
and commerce in certain commodities in order to secure their equitable
distribution and availability at fair prices.
2.
The Essential Commodities Act (EC Act), relevant 30 years back, had been
enacted at a time when the country was faced with severe food shortages
and scarcity when there was a need to curb hoarding of any essential item
which then would create artificial price rise.
3.
However, many of the ECA’s old provisions continue to be a thorn for
retailers as much of the provisions that were cast in a different era to address
problems of fair price and distribution have outlived their time. The provisions
designed to tackle problems faced in the past are hampering the growth of the
retail industry today, such as ceilings on stock limits, maintenance of various
physical registers, display of price lists, etc.
4.
The relevant civic bodies in each state notify the stock holding ceilings under
the ECA. Based on discussions with the retailers, we have focused on the
issues currently faced by them in Maharashtra below.
PART A: ISSUES AND SUGGESTIONS
1. Stock Limits
The state governments are empowered to issue orders under the ECA stipulating the
ceilings up to which various essential commodities may be stocked by wholesalers
and retailers. By way of an illustration, in Maharashtra, as notified by the
Department of Food, Civil Supplies and Consumer Protection, a wholesaler may
stock not more than three hundred and fifty (350) tons of rice, while retailers may
stock not more than twenty (20) tons of rice. Such stock-holding ceilings have been
notified in respect of sugar and edible oil, oil seeds, and pulses also. Moreover, the
ceilings tend to be lower in areas that are outside the limits of a municipal
corporation area.
Issue
(i)
The stocking limits, when applied in the context of a retail
supermarket/hypermarket, are grossly inadequate and act as an impediment
to the conduct of business. Retailers are forced to operate multiple
warehouses and have frequent replenishments to meet growing customer
demands which drive up operational and supply chain costs.
(ii)
The modern supermarket/hypermarket model of business has a heavy
footfall of customers and therefore, large sales also. Sales are also
particularly high on weekends when, often, retailers cross the thresholds
specified for various commodities under the ECA within a few hours of
business.
(iii)
Due to higher stocking limits applicable within municipal corporation areas,
retailers are forced to open godowns/storages in such municipal areas, which
tend to drive up operational costs due to higher real estate rates.
(iv)
The stocking limits of various commodities differ on the location of the
Distribution Center (DC). If the DC is located within the Municipal
Corporation Area, then the stock limit is higher as compared to if it is located
in other areas of the State. Space in the city is costly and scarce. By keeping a
low stock limit outside the Municipal Corporate Area, in order to meet their
requirement of higher stocking limits, big retailers are forced to push their
DC’s further into the city. This is not beneficial for the infrastructure of the
city.
Recommendation
(i)
Supermarkets/hypermarkets are actually improving the distribution and
supply of essential commodities by serving a large number of customers,
as opposed to stifling supply or hoarding of such commodities.
(ii)
The stipulated ceilings must necessarily be linked to a figure that reflects
the quantum of business generated by such retail store .This would also
reflect changing patterns of consumption and reduce the need for
frequent replenishments.
We propose that:
(i)
Each retail location will be allowed to hold stock equivalent to thirty days
of sale at a category level for the categories specified as essential
commodities under ECA i.e. Sugar, edible oil, rice, pulses etc.
(ii)
Each Depot location will be allowed to hold stock equivalent to twenty
days of sale at a category level for the categories specified as essential
commodities under ECA i.e. Sugar, edible oil, rice, pulses etc.
(iii)
The value corresponding to the number of days sale will be calculated
based on the sales of the last three months. The value will be declared by
the 5th of every month and shall be available at the establishment for
scrutiny.
2. Disclosure of Price List
The terms of the license issued under the provisions of the ECA require that the
licensee exhibits the price list of the commodities held and offered by him for sale at
the business premises. It requires that such price list be legibly written in Marathi/or
in the principal language of the locality concerned. Further, the price list must
separately indicate, the selling prices of different varieties of commodities.
Issue
This is a difficult provision to follow, as it demands for the price list to show every
commodity available at the store. In the case of large retail hypermarkets, it is all the
more difficult as there are a large number of various commodities available along
with different varieties of each such commodity.
Recommendation
We propose that retail stores should not be required to keep a board showing the
price list of every commodity, but the retailer should only be required to display the
sale price of each commodity by placing a sticker on such commodity or next to it on
the shelf upon which they are placed.
3. Maintenance of Registers
(i)
Clause 12 of the Maharashtra Retail Dealers’ Licensing Order (“RDL
Order”) and Clause 13 of the Maharashtra Wholesale Dealers’ Licensing
Order (“WDL Order”) read with the conditions of a typical license issued
to a retailer under the ECA provide for maintaining a register to show
separately opening stock of each day, quantities received on each day,
the quantities delivered or otherwise removed on each day and the
closing stock on each day. These accounts must be updated and kept
tallied on a day-to-day basis.
(ii)
The ongoing reporting requirements are particularly onerous. A licensed
retailer is required to file in Form C, a true record of inward, outward and
stockpile of the scheduled items every fortnight, along the purchase
price, sale of each scheduled item and stockpile limit of each scheduled
item.
(iii)
The inspectors and the Department of Food, Civil Supplies and Consumer
Protection insist that the foregoing stock registers are maintained in
physical form.
Issue
The requirement to maintain the registers in physical form is difficult owing to
different units of measurements used in respect of each commodity offered for sale
and also due to large volume of transactions in the various varieties of essential
commodities. Moreover, maintenance of physical registers has become all the more
difficult and challenging owing to the fact that nearly all of these activities
associated with compliance and inventory management are being performed
electronically by way of various enterprise resource planning software (“ERP”).
Recommendation
The government ought to recognize this shift toward electronic maintenance of
records and the inspectors should not insist on production of physical registers and
extracts. In line with the amendments in the Information Technology Act, 2000
which legitimizes electronic maintenance of records, the governmental authorities
should permit maintenance of stock registers through computer systems which
should be an acceptable compliance where the various details can be made available
through the ERPs such as SAP.
4. Specific Requirement for Invoice
As per Clause 8 of Form B of the RDL Order, unless a retailer is specifically
exempted, such retailer must issue to every customer, a correct receipt, invoice
or cash memo for any sale that exceeds Rs. 25 (Rupees twenty five). Further,
such invoice must contain the name of the retailer, his address, his license
number, the date of the transaction, the quantity sold, the price per kilogram/
liter/ quintal/ package/ tin, and the total amount charged. Furthermore, the
retailer is required to maintain a duplicate copy of each such invoice issued for
his record. The retailer is also required to record the name and address of the
buyer with him as well.
Issue
In a typical large retail store/hypermarket, customer footfall is huge. Consequently,
it is neither practicable nor possible to collect and record the name and addresses of
the customers. This is a particularly onerous requirement that has outlived its
purpose in the scheme of things.
Recommendation
We propose a relaxation in as much as the details of the customers are required to
be recorded as well as recognize the legitimacy of maintenance of keeping a record
of the invoices issued in electronic form as opposed to physical copies.
PART A: KEY HIGHLIGHTS OF THE RECOMMENDATIONS
1)
2)
3)
4)
5)
6)
Each retail location will be allowed to hold stock equivalent to thirty days
of sale at a category level for the categories specified under essential
commodities Act
Each Depot location will be allowed to hold stock equivalent to twenty
days of sale at a category level for the categories specified under
essential commodities Act.
The value corresponding to the number of days sale will be calculated
based on the sales of the last three months. The value will be declared by
the 5th of every month and shall be available at the establishment for
scrutiny.
The sale price of each commodity will be displayed on the commodity or
next to it on the shelf or location on which the commodity is placed.
Electronic maintenance of stock and sales registers will be permissible
and shall substitute the current requirements for manual records.
The record of all invoices can be kept in electronic form and details of
customers purchasing these commodities would not be required to be
captured.