Published on: August 15, 2022

Essential Commodities Act

Essential Commodities Act

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Razumnoye With tur dal prices surging since mid-July and reports coming in of some traders creating artificial supply squeeze by restricting sales, the Centre has invoked the Essential Commodities Act of 1955 to ask States to monitor and verify the stocks available with such traders.

Essential Commodities Act

  • The Essential Commodities Act (ECA) was a Parliamentary act which governed the delivery and supply of commodities or products, whose obstruction could affect the lives of the common people to a great extent.
  • The act was modified through the Essential Commodities (Amendment) Act, 2020 as part of the 2020 Indian Agricultural Acts (Also known as Farm Bills)
  • The Essential Commodities Act came into force in 1955 and has been used to manage the supply, distribution and production of commodities termed as ‘essentials’. In this way the government makes these commodities available for consumption at acceptable prices. A minimum support price can also be fixed by the government should it deem it necessary
  • The list of commodities included under the ECA are as follows:
    • Fertilizers
    • Pulses
    • Edible Oil
    • Cereals
    • Oilseeds
    • Petroleum and allied products
    • Seeds of fruits and vegetables
  • In the event of a commodity’s supply becoming short and its price increasing as a result, then the Centre can set stock holding limits for a specific period. Once the limit is set, the States will ensure that adequate steps are taken to ensure the guidelines are followed by preventing wholesalers, retailers, importers etc from accumulating a commodity beyond the specified quantity.

Changes under the Essential Commodities (Amendment) Act 2020

  • It was announced in May 2020 by Finance Minister Nirmala Sitharaman that the ECA would be further amended to be only be implemented under extraordinary circumstances like war or famine.
  • This was taken in light of strides in agricultural productivity made in the ensuing decades.
  • The Essential Commodities (Amendment) was passed in the Lok Sabha on 15 September 2020, while it was passed by the Rajya Sabha on 22 September 2020. It received approval from the President Ram Nath Kovind on 27 September 2020.

The amendment has brought about the following changes:

  • It allows the government to remove few commodities termed as ‘essential’, provided there was no special circumstance at play (war, famine, natural calamities etc)
  • Future regulations would be based on the trajectory of rising prices. They would come into effect should there be a 100% rise in price for horticulture produce. While for non-perishable agricultural food items, the limit is set to 50% increase
  • Food stocks meant for common distribution will not be subjected to any form of restriction.
  • In addition to these changes the following benefits would also be brought about by the ECA Amendment:
  • Creation of a competitive agricultural market and prevention of agri-waste due to increased investment in cold-storage facilities
  • Bringing price stability for farmers.