Essential Commodities Act

The Essential Commodities Act is an important Act that was first drafted in the year 1955 to control the production, supply and distribution of essential products in the country. This act is strongly linked to Indian citizens since it affects the livelihood of the citizens, especially those who are part of the agricultural sector.

The features of the Essential Commodities Act 1955

The Essential Commodities Act, which went into effect in 1955, governs the supply, distribution, and production of ‘essential’ commodities. The government could make these goods available for usage at reasonable prices in this way. The government can also set a minimum support price or MSPs when necessary.

Objectives of Essential Commodities Act

• Put an end to the illegal sale of essential commodities.
• Ensuring the country’s essential commodities are available at all times.
• Reducing the number of essential commodities that are stored unnecessarily
• Ministry of Consumer Affairs, Food & Public Distribution) tries to maintain a stable price for essential commodities. The maximum retail price for such goods is also set by the central government. The maximum retail price of 2 ply masks, like that of masks, has been set at Rs 16.

Agri-food stuff can only be governed under extraordinary circumstances, such as war, famine, extraordinary price rises, or natural calamity, according to the amended EC Act. Any action taken to impose stock limits, on the other hand, will be based on the price trigger. In the case of horticultural produce, a 100% increase 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, will also be the trigger for citing the stock limit.

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

Essential Commodities Act 2020

On June 5, 2020, the Essential Commodities (Amendment) Ordinance, 2020 was signed into law. It modifies the 1955 Essential Commodities Act. The Act gives the government the authority to regulate the yield, supply, allocation, trade, and commerce of certain commodities. The Ordinance aims to boost farmer income by increasing competition in the agricultural sector. Its goal is to deregulate the regulatory structure while safeguarding consumer interests.

Food regulation: The Act allows the central government to appoint certain commodities as essential commodities (such as food, fertilisers, and petroleum products). The production, supply, allocation, trade, and commerce of such basic commodities may be regulated or prohibited by the federal government.

Imposition of a stock limit: The Act gives the federal government the authority to limit how much of a vital commodity a person can own. The Ordinance stipulates that any stock limit imposed on specific items must be based on price increases. Only if there is a 100 percent increase in the price of horticultural goods and a 50 percent increase in the retail value of non-perishable goods can a stock limit be imposed. The increase will be estimated based on the price in effect for the previous twelve months, or the average price for the previous five years, whichever is lower.

Application of Public Distribution System: The provisions of the Ordinance concerning the regulatory oversight of food items and the intrusion of stock limits will not apply to any government mandate relating to the Public Distribution System (PDS) or the Targeted Public Distribution System (TPDS). Crops are divided up by the government at subsidised prices to those who qualify under these systems.

Issues related to the Essential Commodities Act 2020

The Essential Commodities (Amendment) Act 2020 isn’t without its flaws. The following are the details:

Critics believe that the new change to the ECA infringes on state powers because it will make it impossible to regulate stockpiling and black-market practices.

Instead of benefiting producers, the ECA’s stock limit relaxations may result in black marketing and hoarding. This will result in higher inflation and a monopoly of a few people over the prices of certain products.

This is one of three ordinances that have sparked farmer protests across the country. According to the opposition, the amendment will harm farmers and consumers while benefiting hoarders. They argue that the price triggers proposed in the bill are unrealistically high and that they will rarely be used.

Conclusion

The Essential Commodities Act is an important amendment to lift the lives of all the people related to the agricultural sector. While the Act’s original goal was to protect consumers by prohibiting illegal trade practices like hoarding, it has now become a barrier to assets in the agricultural production sector in general and post-harvesting actions in particular.