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Blog / 19 Jun 2020

(Daily News Scan - DNS English) What is Essential Commodities Act

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(Daily News Scan - DNS English) What is Essential Commodities Act


Recently, The Union Cabinet has approved an order to amend The Essential Commodities Act, 1955. This step is taken to deregulate commodities such as cereals, pulses, oilseeds, edible oils, onion and potatoes. This move is expected to transform the farm sector and help raise the farmer’s income. The order, once if approved by the President of India and notified in the gazette, will become law. Not only this the, cabinet has also approved ‘The farming produce trade and commerce (promotion and facilitation) ordinance 2020. This will help in ensuring barrier free trade in agriculture produce, creating an ecosystem for framers and traders to purchase and sale agri produce with full freedom.

In this DNS we will talk about Essential commodities and the amendments made in it.

Let us first know what is 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 is eligible to 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 sanitizers.

The latest items added to this schedule are face masks and hand sanitizers, 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.

As per the sources at the Ministry of Consumer Affairs, Food and Public Distribution, 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.

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.

As per the officials, an exemption from stock-holding limits will be provided to processors and value chain participants of any agricultural produce, and orders relating to the Public Distribution System.

Talking about the history of this ACT, The EC Act was legislated at a time when the country was facing scarcity of foodstuffs due to persistent abysmal levels of food grain production. The country was dependent on imports and assistance (such as wheat import form US under PL-480) to feed the population.

In this scenario, to stop the hoarding and black marketing of foodstuffs, The Essential Commodities Act was enacted in 1955.

But the current situation is very different.

In a note prepared by the Ministry of Consumer Affairs, Food and Public Distribution shows that production of wheat has increased by 10 times (from less than 10 million tonnes in 1955-56 to more than 100 million tonnes in 2018-19); during the same period, the production of rice has increased more than four times from around 25 million tonnes to 110 million tonnes.

The production of pulses has increased by 2.5 times, from 10 million tonnes to 25 million tonnes.

In fact, India has now become an exporter of several agricultural products. With these developments, the EC Act has become outdated. For the present times and to tackle the problems of the present days food issues amendments are required in this Act.