Essential Commodities Act of 1955

The Essential Commodities Act of 1955 has recently been used by the Ministry of Consumer Affairs, Food, and Public Distribution to stop the rise in tur dal prices.

States and Union Territories are required to give weekly instructions to "stockholder entities to submit the data of the stocks held by them" to a Department of Consumer Affairs online monitoring portal.

Why Invoking the Act?

• Due to excessive rainfall and water logging conditions in some areas of the key Tur-growing states of Karnataka, Maharashtra, and Madhya Pradesh, Tur prices have increased since mid-July 2022, but Kharif planting has advanced more slowly this year than it did the last year 2021.
• The government is taking proactive measures to ensure widespread availability and controlled prices of pulses in both the local and international markets in order to prevent any unnecessary price increases in the next high-demand festival months.
• Limiting attempts by certain sellers and stockists to artificially inflate scarcity and use "limited sales" to drive up the price of tur dal.
• Artificial scarcity refers to the deliberate restriction of production of specific goods (or services) in order to increase costs and/or demand.

What is the Essential Commodities Act 1955?

Background:

• Due to persistently low levels of foodgrain production, the country was experiencing a food shortage when the ECA Act 1955 was passed into law.
• The nation was reliant on aid and imports (such as the import of wheat from the US under PL-480) to feed its people.
• The Essential Commodities Act was passed in 1955 to discourage food stockpiling and black marketing.

Essential good or service:

• The Necessary Items Act of 1955 omits a detailed definition of essential commodities.
• According to Section 2(A) of the Act, an item listed in the Act's Schedule qualifies as an "essential commodity."

Legal Jurisdiction:

• The Act gives the federal government the authority to include or exclude a good from the Schedule.
• The Center may notify a product as essential after consulting with state governments if it determines that doing so is required in the public interest.
• By permitting the Center to permit state governments to control commerce in a wide range of commodities, the ECA 1955 is utilized to manage inflation.
• The government can impose a stock limit and regulate the production, supply, and distribution of a commodity by designating it as vital.

Issues Related to Essential Commodities Act 1955

• The Economic Survey 2019–20 emphasized that while government involvement under the ECA 1955 was completely useless at reducing inflation, it frequently impacted agricultural commerce.
• This type of action does create opportunities for harassment and rent-seeking.
• Economists refer to unproductive revenue, especially that derived by corruption, as "rent-seeking."
• During excess perishable harvests, traders frequently purchase much less than they normally would, and farmers frequently incur significant losses.
• Due to the lack of investment in cold storage, warehouses, processing, and export, farmers were unable to obtain higher prices.
• Due to these problems, the Essential Commodities (Amendment) Bill, 2020, was approved by Parliament.
• However, the government was forced to revoke this statute as a result of farmer opposition.

Way ahead

When India's production of food grains was insufficient, the ECA 1955 was introduced. However, given that India already has a surplus of the majority of agricultural goods, the government's decision to revise the ECA 1955 is crucial for both achieving its goal of doubling farmers' income and for improving the ease of doing business.

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