- Recently, the Ministry of Consumer Affairs, Food and Public Distribution has implemented the Essential Commodities Act 1955 to check the increase in the prices of tur dal.
- States and UTs have been directed to ‘upload the stockholder entities’ data on the stock held by them on the online monitoring portal of the Department of Consumer Affairs on a weekly basis.
- Toor prices have increased from mid-July 2022 amid slow progress in Kharif sowing as compared to 2021 last year due to excess rainfall and water-logging conditions in parts of major tur producing states of Karnataka, Maharashtra and Madhya Pradesh.
- In order to check undue price rise due to high demand in the upcoming festive months, the government is taking pre-emptive steps to ensure overall availability and controlled prices of pulses in domestic and foreign markets.
- To limit efforts by certain sections of traders and hoarders to increase the prices of tur dal, by resorting to ‘restricted sale’ to create an artificial shortage.
- Artificial scarcity is the purposeful limit of producing particular products (or services) in order to increase prices and/or demand.
Essential Commodities Act 1955:
- The ECA Act, 1955 was enacted at a time when the country was facing food shortage due to persistently low levels of food grains production.
- The then India was dependent on imports and aid (such as import of wheat from America under PL-480) to meet its food needs.
- The Essential Commodities Act was brought in the year 1955 to prevent hoarding and black marketing of food items.
- There is no specific definition of essential commodities in the Essential Commodities Act, 1955.
- Section 2(a) states that “essential commodity” means a commodity specified in the Schedule to the Act.
- The Act empowers the Central Government to add or remove any article in the Schedule.
- The Centre, if it is satisfied that it is necessary so to do in the public interest, may, in consultation with the State Governments, notify any article as necessary.
- ECA 1955 is used to curb inflation by allowing the center to enable control by state governments of trade in a variety of commodities.
- By declaring a commodity as essential, the government can control the production, supply and distribution of that commodity and impose stock limits.
Essential Commodities Act 1955
- The Economic Survey 2019-20 highlights that government intervention under the ECA 1955 has often distorted agricultural trade, while being completely ineffective in containing inflation.
- Such interventions create opportunities for rent-seeking and mismanagement.
- Rent Seeking is a term used by economists to describe unproductive income including corruption.
- Traders buy less than their normal capacity and farmers often incur huge losses during excess production of perishable crops.
- Due to this, farmers were not getting better prices due to lack of investment in cold storage, warehousing, processing and exports.
- Due to these issues, Parliament passed the Essential Commodities (Amendment) Bill, 2020.
- However, due to the protest of the farmers, the government had to repeal this law.
- ECA 1955 was introduced when India was not self-sufficient in food grains production. However, now most of the agricultural commodities in India are in a surplus situation and the amendment in ECA 1955 is an important step by the government to achieve its goal of doubling farmers’ income and ease of doing business.