Essential Commodities Act (EC Act) and its impacts

Essential Commodities Act (EC Act) is an act enacted in 1955 by the Parliament of India with a view to ensuring availability of commodities declared as ‘essential’ at fair price. The EC act aims to avoid hoarding and black marketing which lead to artificially created scarcity and inflated prices. The ultimate aim of the Essential Commodities Act is alleviating the sufferings of public emanating from price rise by regulating the supply of essential commodities.

Powers conferred on the central government by the Essential Commodities Act

The EC act empowers the central government to take appropriate measures for regulating or prohibiting the production, storage, acquisition, consumption, trade, supply and distribution of a commodity for securing equitable distribution of the item at reasonable price. To ensure the same, following powers are granted to central government under the Essential Commodities Act:

1. Right to declare a commodity as essential commodity and remove any item from the list.
2. Power to regulate the production, supply and distribution of the commodities declared as essential commodity.
3. Power to fix the maximum retail price (MRP) of any packaged product declared as an “essential commodity”. For perishable commodities, state/UT governments must regulate prices by ensuring minimum gap between selling price of producer/manufacturer and retail price.
4. Power to direct state governments to fix maximum stock holding limits for essential commodities in discussion with the central government.

When does a commodity become ‘essential’? What are the items covered under EC Act?

The central government has the freedom to declare any item as essential under the act depending on the prevailing market condition and necessity. Any commodity included in the schedule of the act through such declaration becomes an essential commodity. Foodstuffs including edible oils and oil seeds, drugs, fertilisers, pulses, hank yarn, raw jute petroleum and petroleum products are the major items covered under the EC Act.

How are the compliance of the provisions of Essential Commodities Act (EC Act) ensured?

When the central government observes that the price of certain commodity is rising due to scarcity, it notifies the item as essential commodity for a specific period. State governments are required to specify the stock holding limit, wherever warranted.  The state governments take steps to ensure that the stipulations are adhered to by conducting raids. Anybody trading or dealing in the commodity in any capacity, wholesalers, retailers or importers/ exporters are banned from stockpiling the commodity beyond the specified holding limit. Those who are holding stock beyond the ceiling are compelled to sell the surplus quantity in the market thereby improving the supply and reducing the price. However, it may be noted that the question of hoarding does not arise, if no stock holding limit is specified.

An offender under Essential Commodities Act may be punished with an imprisonment of up to seven years and/or fine. Offenders can be detained for maximum of six months under the PBMMSEC Act.

Views for and against the Essential Commodities Act (EC Act)

The opposers of the Essential Commodities Act (EC Act)  describe the act draconian and not suited for the times as the present day farmers face issues emanating from plenty rather than shortage. They argue that all unnecessary restrictions shall be removed to enable free movement of goods across the state boundaries as part of globalization and to promote consumer interest and free trade.  The Economic Survey 2019-20 also observed that EC Act hampers remunerative prices for farmers and discourage investment in storage infrastructure.

However, the supporters of the Essential Commodities Act (EC Act)point out that the act is handy during the period crisis. For example, in the wake of Covid 19, there has been sudden spurt in the cost of face masks and sanitisers. The Union Government on 14^th March, 2020 brought these items under the Essential Commodities Act, 1955. This was done to ensure that the key products to control the spread of Covid-19 infection are available to people at the right price and in the right quality. The central government also asked the state governments to issue licences and permit hand-sanitiser makers to store ethanol and extra neutral alcohol (ENA) without any quota restrictions. The Indian Sugar Mills Association and All India Distilleries Association were directed to ensure easy availability of ethanol and ENA by maintaining the prices at the levels as on March 5 this year, till June 30,2020. The government also capped the price of a 2-ply mask at Rs. 8 and that of 3-ply surgical mask at Rs. 10. Price of hand sanitisers were sealed at Rs. 100 for a 200-ml pack.

(All kinds of inter-state restriction on the movement, distribution and trade of essential commodities have been removed under the powers provided in the EC Act.  Further, while revealing details of the third tranche of the Rs. 20 lakh crore economic package announced by Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman on 15^th  May, 2020, announced that government will amend Essential Commodities Act (ECA) to deregulate cereals, edible oil, oilseeds, pulses, onions and potato to enable better price realisation for farmers.)