The Essential Commodities Act is an act of Parliament of India which was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or blackmarketing would affect the normal life of the people. This includes foodstuff, drugs, fuel etc. The ECA was enacted in 1955. It has since been used by the Government to regulate the production, supply and distribution of a whole host of commodities it declares ‘essential’ in order to make them available to consumers at fair prices. Additionally, the government can also fix the maximum retail price of any packaged product that it declares an “essential commodity”. The list of items under the Act include drugs, fertilisers, pulses and edible oils, and petroleum and petroleum products. The Centre can include new commodities as and when the need arises, and take them off the list once the situation improves.
Usage
If the Centre finds that a certain commodity is in short supply and its price is spiking, it can notify stock-holding limits on it for a specified period. The Statesact on this notification to specify limits and take steps to ensure that these are adhered to. Anybody trading or dealing in the commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity. A State can, however, choose not to impose any restrictions. But once it does, traders have to immediately sell into the market any stocks held beyond the mandated quantity. This improves supplies and brings down prices. As not all shopkeepers and traders comply, State agencies conduct raids to get everyone to toe the line and the errant are punished. The excess stocks are auctioned or sold through fair price shops.
Instances
For instance, the Union Government on 14 March 2020 brought masks and hand-sanitisers under the act to make sure that these products, key for preventing the spread of COVID-19 infection, are available to people at the right price and in the right quality during the COVID-19 pandemic in India. Govt has removed Masks & Hand-Sanitisers from Essential Commodity List from 1st of July.
Proposed amendment
In May 2020, the Finance Minister of India suggested that the act will be amended and stock limit will be imposed only under exceptional circumstances such as famine or other calamities. There will no stock limit for processors and supply chain owners based on their capacity and for exporters based on the export demand. It will also end some punitive measures. It will also deregulate agriculture produce such as pulses, onion, potato and cereals, edible oils and oilseeds, with aim of better price realisation for farmers.
Amendment by Ordinance
The Essential Commodities Ordinance 2020 was promulgated on 5 June 2020. The ordinance amends the Essential Commodities Act to allow the Government of India to delist certain commodities as essential, allowing the government to regulate their supply and prices only in cases of war, famine, extraordinary price rises, or natural calamities. The commodities that have been de-regulated are food items, inc including cereals, pulses, potato, onion, edible oilseeds, and oils. These can only be regulated in the extraordinary circumstances previously mentioned, by imposing limits on the amount of stocks of such items that can be held by persons. The Ordinance states that government regulation of stocks will be based on rising prices, and can only be imposed if there is a 100% increase in retail price and 50% increase in retail price. These restrictions will not apply to stocks of food held for public distribution in India.
