Essential Commodities Act 1955

16 Aug 2022 Essential Commodities Act 1955

Posted at 10:21h in Daily current-affairs by khyati khare 0 Comments

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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.

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.

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.