Essential Commodities Act, (ECA) 1955
Indian agriculture is confronted with high price volatility, climate risks and indebtedness. Since majority of farmers are small and marginal with declining and fragmenting landholdings, these uncertainties make them even more vulnerable and risk-prone.
Until recently the fragmented voices of farmers went unheard but this has changed considerably in recent times, people have begun to see problems from the agriculturist perspective, acknowledging their hardships.
However government tends to see farmers from a very narrow perspective and are driven from urban consumers’ motive and often brings law that are at times detrimental to farmers. One such law is Essential Commodities Act, (ECA) 1955.
Knowing the ECA
The ECA was enacted in 1955. The act provides for the control of production, supply, distribution, trade and commerce in any farm good deemed “essential” and “in the interest of the general public”.
The list of items under the Act includes drugs, fertilisers, pulses and edible oils, and petroleum and petroleum products.
The Centre under the Act has the power to include new commodities as and when the need arises, and can take them off the list once the situation improves (in view of public interest).
Once a notification is issued, anybody trading or dealing in a commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity.
It protects consumers against irrational spikes in prices of essential commodities. The Government has invoked the Act numerous times to ensure adequate supplies. It cracks down on hoarders and black-marketers of such commodities.
Governments often confuse interests of “general public” with urban consumers’ and have a huge tendency of putting their interest above everybody else which often stands in conflict with the interests of farmers.
Governments by bringing any commodity in ECA or banning export through fixing a minimum price below which shipments couldn’t take place infringes upon the commercial freedom of farmers and agri-businesses.
Indian agriculture today suffers from domestic investment in processing as well as backend procurement, grading, warehousing, cold storage and transport infrastructure. These problems can only be solved by increasing farmers’ household income.
Government’s constant manoeuvring with supply side management creates an unstable environment for foreign investors.
Export ban measures makes India an unreliable and unpopular partner amongst its global peers, as policies here are governed more on public sentiment then on real economic grounds. Foreign markets are important as they serve as an alternative source of buyers for Indian farmers by providing better and competitive prices in case of an unfavourable domestic demand.