DR Ambedkar IAS Academy

What is the Essential Commodities Act, and how will amending it help?

By declaring a commodity as essential, the government can control the production, supply, and distribution of that commodity, and impose a stock limit.

The Union Cabinet has approved an ordinance to amend The Essential Commodities Act, 1955, to deregulate commodities such as cereals, pulses, oilseeds, edible oils, onion and potatoes.

The ordinance, once assented by the President of India and notified in the gazette, will become law. The text of the ordinance has not been made public so far. Here is what we know.

Essential Commodities Act: What is the amendment?

Sources at the Ministry of Consumer Affairs, Food and Public Distribution said that the ordinance has introduced a new subsection (1A) in Section 3 of The Essential Commodities Act, 1955.The amended law provides a mechanism for the “regulation” of agricultural foodstuffs, namely cereals, pulses, oilseeds, edible oils, potato, and supplies under extraordinary circumstances, which include extraordinary price rise, war, famine, and natural calamity of a severe nature.

What is the definition of an ‘essential commodity’?

There is no specific definition of essential commodities in The EC Act. Section 2(A) of the act states that an “essential commodity” means a commodity specified in the “Schedule” of this Act.

The Act gives powers to the central government to add or remove a commodity in the “Schedule.” The Centre, if it is satisfied that it is necessary to do so in public interest, can notify an item as essential, in consultation with state governments.

At present, the “Schedule” contains 9 commodities — drugs; fertilisers, whether inorganic, organic or mixed; foodstuffs, including edible oils; hank yarn made wholly from cotton; petroleum and petroleum products; raw jute and jute textiles; seeds of food-crops and seeds of fruits and vegetables, seeds of cattle fodder, jute seed, cotton seed; face masks; and hand sanitisers.

The latest items added to this schedule are face masks and hand sanitisers, which were declared essential commodities with effect from March 13, 2020 in the wake of Covid-19 outbreak.

By declaring a commodity as essential, the government can control the production, supply, and distribution of that commodity, and impose a stock limit.

How and under what circumstances can the government impose stock limits?

Under the amended EC Act, agri-food stuffs can only be regulated under extraordinary circumstances such as war, famine, extraordinary price rise, and natural calamity.

However, any action on imposing stock limits will be based on the price trigger.

Thus, in case of horticultural produce, a 100 per cent increase in the retail price of the commodity over the immediately preceding 12 months or the average retail price of the last five years, whichever is lower, will be the trigger for invoking the stock limit for such commodities.

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