Essential Commodities Act: Provision for essential items

The Indian Parliament enacted the Essential Commodities Act to assure the delivery of specific commodities or items whose supply, if disrupted by hoarding or black marketing, would hurt people’s daily lives. It covers food, medications, and gasoline, among other things.

The ECA got adopted in 1955. The government has since used it to control the production, supply, and distribution of a wide range of goods that it deems “important” to make them available to consumers at reasonable costs.

Furthermore, the government has the authority to set the Minimum Support Price (MSP) of any packaged product that it deems to be an essential commodity. Let’s get into deep to understand what is essential commodities act and what’s included in the same.

Historical background of Essential commodities Act

The origins of this Act may be traced back to 1939, when the Government of India passed the Defence of India Act, 1939, which established laws for the control, production, supply, and distribution of certain particular commodities during World War 2.

The Act got repealed in 1946. However, it got recognised that specific laws were required immediately to preserve critical goods in the public interest. As a result, in 1946, the Essential Supplies (Temporary Powers) Ordinance was created, which was later superseded by the Essential Supplies (Temporary Powers) Act, 1946.

Two General Assembly resolutions expanded the terms of this Act in 1948 and 1949. The first Essential Commodities Ordinance was enacted after independence by the 3rd Constitutional Amendment, superseded by the current Act, The Essential Commodities Act, 1955.

Scope of the Essential commodities Act

The scope of this Act is India as a whole. The Essential commodities act got passed to assure the supply of necessary commodities to consumers and protect them from exploiting unscrupulous dealers. As a result, the Act establishes regulations for regulating and controlling essential commodity production, price, and distribution.

This Act has two primary objectives:

1. Maintaining or increasing the supply of these vital goods, and
2. To ensure that these necessary items get distributed and available equally.

Definition of an essential commodity

The Essential commodity Act does not provide a detailed definition of essential commodities. As per section 2(A) of the act, an “essential commodity” gets defined as a commodity included in the “Schedule” of the act.

The Essential commodities act grants the federal government the authority to add or remove commodities from the “Schedule.” In conjunction with state governments, the Centre can declare an item essential if it believes it is vital in the public interest.

Currently, the “Schedule” incorporates nine commodities: drugs; fertilisers, whether organic, inorganic, or mixed; foodstuffs, including edible oils; petroleum and petroleum products; hank yarn made entirely of cotton; raw jute and jute textiles; food-crops seeds and fruits and vegetable seeds, jute seed, cattle fodder seeds, cottonseed; and face masks.

Face masks and hand sanitisers, which were deemed essential commodities with effect from March 13, 2020, in the aftermath of the Covid-19 epidemic, are the most recent additions to this timetable.

The government can restrict the production, supply, and distribution of a commodity by designating it necessary and setting a stock limit by declaring it essential.

Need for the Essential commodities Act

The Essential Commodities Act, 1955 empowers the government to regulate these commodities’ production, supply, and distribution to maintain or increase supplies and ensure equitable distribution.

Fundamentally, the act’s goal is to ensure that essential commodities are easily accessible to consumers while also preventing traders from taking advantage of them.

What gets included in Essential commodities

The Act covers seven broad categories of essential commodities.

• Drugs;
• inorganic,
• organic, or mixed fertiliser;
• foodstuffs, incorporating edible oilseeds and oils; hank yarn made entirely of cotton; petroleum and petroleum products;
• raw jute and jute textile;
• seeds of food crops and seeds of fruits and vegetables;
• seeds of cattle fodder; and jute seeds.
• The cottonseed recently got added to the list.

Implementation of the Essential commodities Act

Under the Essential Commodities Act of 1955, the government can issue orders controlling the production, distribution, trade, and commerce of essential commodities. With an order dated February 12, 2007, the Central Government amended the list of necessary items under this Act, as stated below.

• Drugs
• Fertilisers (organic, inorganic or mixed)
• Edible oilseeds and oil are examples of foods.
• Petroleum and Petroleum Products are hank yarns composed entirely of cotton.
• Jute Textiles and Raw Jute
• Food crop seeds, as well as fruit and vegetable seeds
• Cattle Fodder Seeds
• Seeds of jute
• Cotton seeds are a kind of seed that gets used

Impact of the amendment of the Essential commodities Act

The main modifications aim to liberate agricultural markets from the constraints imposed by licenses and mandis, intended for a time when there was a paucity of resources. Cereals, oilseeds, edible oils, pulses, onions, and potatoes are among the items removed from the list of necessities. The change gets anticipated to promote private investment in the value chain.

While the Act’s initial goal was to protect consumers by prohibiting unlawful trade practices like hoarding, it has become a barrier to investment in the agriculture industry in general and post-harvesting operations in particular.

The private sector has been hesitant to engage in perishable cold chains and storage facilities since most commodities are under the EC Act and may be subject to abrupt stock limitations. The amendment aims to resolve these issues.

Laws relating to maintenance of essential supplies

In 1980, the government enacted the Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act to combat illicit activities and violations under the Essential Commodities Act of 1955.

Essential commodities Act gives officials of the Central and State governments the authority to issue detention orders against those trying to regulate the production, distribution, supply, trade, and commerce of vital commodities as specified in Section 2 of the Essential Commodities Act 1955.

The Act also defines the procedure for passing or enforcing these detention orders.

Powers of central government under the essential commodities

The Central Government under the Essential commodities Act have two essential powers:

Power to Notify the essential commodity

The Central Government can utilise this power to add or remove any product from the schedule at any moment to benefit the general public. The commodities concerning which such rights are exercised, on the other hand, must be provided under entry 33, list 111 of the constitution’s 7th schedule.

Power to issue a control order (Section 3)

The Central Government has the authority to issue control orders under this Act. In one of the following instances, such directives provide for the restriction and ban of critical commodities:

• When the government determines that it is essential and expedient to act in the public interest
• When they need to ensure that these goods are distributed fairly and are readily available in the market
• When they need to secure a certain commodity for India’s defence

Stock limitation under the Essential commodities Act

The essential commodities Act gives the federal government the authority to restrict a person’s stock of a critical item. The Ordinance stipulates that any stock limit imposed on specific commodities must get based on price increases.

A stock restriction may get imposed only if there is a 100 per cent increase in the retail price of horticulture produce and a 50 per cent increase in the retail price of non-perishable agricultural food products. The increase will get computed based on the price in effect for the previous twelve months, or the average retail price for the previous five years, whichever is lower.

Any stock restriction imposed on a processor or value chain participant of agricultural output will not apply if the stock held by such person is smaller than the following:

The overall ceiling of installed processing capacity,

or

Demand for export in the exporter case.

A value chain participant is involved in the production or value addition of agricultural products at any level of processing, packaging, storage, transportation, and distribution.

Under what circumstances can the government impose stock limits

According to the modified EC Act, Agri-food stuff can only get regulated under extreme conditions, such as war, hunger, extraordinary price rises, or natural tragedy.

Any action taken to impose stock limitations, on the other hand, will be based on the price trigger.

In the case of horticultural products, a 100% rise in the retail price of the commodity in the previous 12 months or the average retail price in the last five years, whichever is smaller, shall be the trigger for imposing the stock restriction.

The price trigger for non-perishable agricultural products will be a 50% rise in the retail price of the commodity in the previous 12 months or the average retail price in the previous five years, whichever is lower.

Officials noted that processors and value chain participants of any agricultural goods and orders linked to the Public Distribution System would be free from stock-holding limitations.

How does the act help check price?

The Essential commodities act is implemented by state governments and union territories, with the federal government’s role limited to monitoring state actions in carrying out the Act’s requirements.

State and local governments use the Act’s powers to set stock or turnover limits for specific commodities and penalise people who hold them over the limit. Stock limitations for pulses, edible oil, edible oilseeds, rice, paddy, and sugar got enforced in numerous states.

What was the amendment in the Essential commodities Act

As per the Ministry of Consumer Affairs, Food and Public Distribution sources, the ordinance has added a new provision (1A) to Section 3 of the Essential Commodities Act, 1955.

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The modified legislation creates a system for the “control” of agricultural goods, such as grains, pulses, oilseeds, edible oils, potato, and supply, in the event of unusual price increases, war, famine, or a terrible natural catastrophe.

Need of amendment in the EC Act

The EC Act got enacted when the country was experiencing a food crisis due to persistently low food grain output. The government relied on imports and aid (such as wheat imports from the United States under PL-480) to feed the people.

In this circumstance, the Essential Commodities Act was created in 1955 to prevent food stockpiling and black marketing.

However, things have changed lately.

According to a note prepared by the Ministry of Consumer Affairs, Food and Public Distribution, wheat production has increased by tenfold (from less than 10 million tonnes in 1955-56 to more than 100 million tonnes in 2018-19); rice production has increased by more than fourfold (from around 25 million tonnes to 110 million tonnes) during the same period.

Pulses have grown 2.5 times in output, from 10 million to 25 million tonnes.

India is presently a significant exporter of a variety of agricultural products. The EC Act has become obsolete as a result of these changes.

How effective is the act?

During the years 2006-2008, state and union territory administrations prosecuted 14,541 people under the EC Act, 1955, resulting in 2,310 convictions. As of August 31, 2009, 2533 people had been charged, and 37 had been convicted. However, questions concerning the Act’s efficacy got raised several times.

The government was recently requested by Parliament’s estimates committee to develop new laws as soon as possible to restrict the retail prices of essential commodities like rice, wheat, legumes, edible oils, sugar, milk, and vegetables.

Conclusion

The Essential Commodities Act of 1955 is one of the country’s most significant legislation pertaining to protecting the general public’s interests. The Central Government has broad authorities under this Act to control the production and supply of critical goods. The Central Government regulates the pricing of vital goods that have been confiscated or seized under the essential commodities Act. All of these powers are required to keep the market afloat.