Cabinet has approved historic amendment to the Essential Commodities Act. Under the proposed amendments, essentials like cereals, pulses, oilseeds, edible oils, onion and potatoes have been excluded from the Essential Commodities Act.
Essential Commodities Act (ECA)
- It was enacted in 1955.
- 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.
- The Act gives powers to the central government to add or remove a commodity in the “Schedule.” The Centre, if it is satisfied that it is necessary to do so in public interest, can notify an item as essential, in consultation with state governments.
- There is no specific definition of essential commodities in The EC Act. Section 2(A) of the act states that an “essential commodity” means a commodity specified in the “Schedule” of this Act.
- At present, the “Schedule” contains 9 commodities — drugs; fertilisers, whether inorganic, organic or mixed; foodstuffs, including edible oils; hank yarn made wholly from cotton; petroleum and petroleum products; raw jute and jute textiles; seeds of food-crops and seeds of fruits and vegetables, seeds of cattle fodder, jute seed, cotton seed; face masks; and hand sanitisers.
- The latest items added to this schedule are face masks and hand sanitisers, which were declared essential commodities with effect from March 13, 2020 in the wake of Covid-19 outbreak. The Centre can include new commodities as and when the need arises, and take them off the list once the situation improves.
- Under the Act, the government can also fix the maximum retail price (MRP) of any packaged product that it declares an “essential commodity”.
How the Essential Commodities Act is used by Government
- 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 States act on this notification to specify limits and take steps to ensure that these are adhered to.
- Anybody trading or dealing in a 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.
Importance of Essential Commodities Act
- The ECA gives consumers protection against irrational spikes in prices of essential commodities.
- The Government has invoked the Act umpteen times to ensure adequate supplies.
- It cracks down on hoarders and black-marketeers of such commodities.
- State agencies conduct raids to get everyone to toe the line and the errant are punished.
Recent Changes in the Act
The Union Cabinet has approved an ordinance to amend The Essential Commodities Act, 1955, to deregulate commodities such as cereals, pulses, oilseeds, edible oils, onion and potatoes.
- The ordinance has introduced a new subsection (1A) in Section 3 of The Essential Commodities Act, 1955.
- The amended law provides a mechanism for the “regulation” of agricultural foodstuffs, namely cereals, pulses, oilseeds, edible oils, potato, and supplies under extraordinary circumstances, which include extraordinary price rise, war, famine, and natural calamity of a severe nature.
- Under the amended EC Act, agri-food stuffs can only be regulated under extraordinary circumstances such as war, famine, extraordinary price rise, and natural calamity.
- Any action on imposing stock limits will be based on the price trigger. Thus, in case of horticultural produce, a 100 per cent increase in the retail price of the commodity over the immediately preceding 12 months or the average retail price of the last five years, whichever is lower, will be the trigger for invoking the stock limit for such commodities.
- For non-perishable agricultural foodstuffs, the price trigger will be a 50 per cent increase in the retail price of the commodity over the immediately preceding 12 months or the average retail price of the last five years, whichever is lower.
- Exemptions from stock-holding limits will be provided to processors and value chain participants of any agricultural produce, and orders relating to the Public Distribution System