(1) Notwithstanding anything in article 302, neither Parliament nor the Legislature of a State shall have power to make any law giving, or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule.
(2) Nothing in clause (1) shall prevent Parliament from making any law giving, or authorising the giving of, any preference or making, or authorising the making of, any discrimination if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India.
Draft Article 274C (Article 303, Constitution of India 1950) was not included in the Draft Constitution, 1948. The Draft Article was discussed on 8 September 1949. It prohibited Parliament and State Legislature from making laws on trade and commerce which discriminate against or give preference to one or more States. However, it empowered Parliament to make laws if necessary to address the issue of scarcity of goods in a territory.
A Member felt the power of Parliament to make laws to address scarcity of goods should be restricted to temporary emergency situations and should apply only during the period of the emergency. He wanted Parliament's power to be limited to prevent abuse of power which would affect the general public.
Another Member proposed to replace the Draft Article to prohibit only the State Legislatures from making laws on trade and commerce which discriminate against or give preference to one or more States without the permission of Parliament. He also proposed to permit State Legislatures, with prior approval from Parliament, to impose reasonable restrictions on trade and commerce with or within that State on grounds of public interest.
After substantial debate, the Draft Article 274C was adopted on 8 September 1949.