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Essential Commodities Act

Context:

The Centre has invoked the Essential Commodities Act of 1955 to ask States to monitor and verify the stocks of Arhar/Tur Dal available with traders.

Relevance:

GS-II Social Justice

Dimensions of the Article:

  1. Essential Commodities Act
  2. How it works?
  3. What are Food Items covered under it?
  4. Recent amendments to the ECA

Essential Commodities Act

  • The ECA is an act which was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or black-marketing would affect the normal life of the people.
  • The ECA was enacted in 1955.
    • This includes foodstuff, drugs, fuel (petroleum products) etc.
  • 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 (MRP) of any packaged product that it declares an “essential commodity”.
  • The list of items under the Act includes drugs, fertilizers, pulses and edible oils, and petroleum and petroleum products.

How it works?

  • 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.

What are Food Items covered under it?

  • The items covered include rice, wheat, atta, gram dal, arhar dal, moong dal, urad dal, masoor, dal, tea, sugar, salt, Vanaspati, groundnut oil, mustard oil, milk, soya oil, palm oil, sunflower oil, gur, potato, onion and tomato.
  • Based on the deliberations, Government takes various measures from time to time to stabilize prices of essential food items which, inter-alia, include appropriately utilizing trade and fiscal policy instruments like import duty.
  • The govt. can impose stock limits and advise State for effective action against hoarders & black marketers etc. to regulate domestic availability and moderate prices.

Recent amendments to the ECA

  • In 2020, the EC Act was amended for the stock limit to be imposed only under exceptional circumstances such as famine or other calamities.
    • Exceptional circumstances: It allowed the centre 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.
    • Commodities de-regulated: The commodities that have been deregulated are food items, including cereals, pulses, potatoes, onion, edible oilseeds, and oils.

Exceptions provided

  • The government regulation of stocks will be based on rising prices, and can only be imposed if there is
    • A 100% increase in retail price in the case of horticultural produce and
    • A 50% increase in retail price in the case of non-perishable agricultural food items
  • These restrictions will not apply to stocks of food held for public distribution in India.

-Source: The Hindu


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