Government plans to create unified national market

NEW DELHI: The Narendra Modi government is preparing a plan to create a unified market in India by setting up a permanent authority that will take the concept through to implementation, in tandem with the long-awaited goods and services tax (GST), which is a top priority for the administration.

A Cabinet note on the creation of a national common market commission under Article 307 of the constitution is expected to be drafted soon, a senior government official aware of deliberations told ET.

This body will deal with intra- and inter-state issues related to freedom of trade and commerce, the person said. Along with GST, the authority will help break down state and district boundaries for the seamless delivery of goods and services across the country, though the primary focus is on movement of food and vegetables.
The government is keen to spell out a timetable for GST implementation soon with the budget giving concrete signals such as the elimination of central sales tax levied on inter-state sales. Efforts are on to persuade states to agree to the earliest possible implementation date for GST, apart from readying legislation that’s needed as part of this initiative.“Free movement of goods and services within the country is important,” said the official cited above.

“Discussions have begun and a cabinet note would be floated once the contours are frozen.” The department of consumer affairs had pitched for the creation of a common market commission at a meeting of the inter-ministerial group on consumer advocacy.Industry said the move would amount to a significant reform.

"The creation of a unified market, which would facilitate seamless movement of goods across states by removing inter se trade barriers between them, would go a long way to reduce the transaction cost of business and help India to compete in overseas markets on equal terms," said Chandrajit Banerjee, director general of the Confederation of Indian Industry. “So far, Indian industry has had to deal with the disability of a fragmented market and high transaction costs.”

Article 307 allows Parliament to appoint an authority for carrying out the purposes of Articles 301, 302, 303 and 304, related to trade, and confer on this powers and duties as deemed fit.Various panels on inter-state relations including the Sarkaria and Punchi commissions suggested an inter-state trade and commerce commission.

The government is keen on the creation of an integrated food market as sharp seasonal fluctuations in the prices of fruits, vegetables and pulses are a concern for policy makers. The Centre has already asked the states to revamp wholesale marketing systems under the Agriculture Produce Marketing Committee Act as these are seen to be hindering the free movement of goods within the country.“There is a need to establish an institutional mechanism for coordinated policy making for development of a single agriculture market that covers internal trade and facilitates harmonization of food and agri marketing policies across states,” said the official cited above.

An integrated food market will be a necessary condition to increasing the efficiency of distribution from the farm to the consumer and reducing intermediation costs.

The official said this will require the repeal of some obsolete legislation and redesigning policy interventions to address “market failures”.

A 2011 report by the working group on consumer affairs set up by the department pointed to significant inter-state barriers to trade. Such tax-related and physical barriers should be reduced or eliminated, it had said.

Under the constitution, Article 301 mandates that trade and commerce throughout the territory of India shall be free. Article 302 mandates that Parliament can impose restrictions on this in the public interest. Article 304 allows state legislatures to impose taxes on goods from other states provided those locally sourced face the same levies. This article also empowers state legislatures to impose curbs on the freedom of trade as needed in the public interest.

The government is relying on Supreme Court judgements such as the one in Atiabari Tea Co. Ltd versus the state of Assam and others to bolster its bid to free up interstate trade. “Free movement and exchange of goods throughout the territory of India is essential for the economy of the nation and for sustaining and improving living standards of the country,” the top court has said.