Essential Commodities Act

By : Neha Dhyani

Updated : Mar 1, 2022, 13:33

The Essential Commodities Act (ECA) first came into existence in 1955. The act governs India's production, supply, and distribution of essential commodities. Through the provisions of this act, the government intends to control the price rise of essential commodities like fertilisers, pulses, edible oil, cereals, oilseeds, petroleum and allied products, and fruit and vegetable seeds. After the COVID-19 pandemic grew beyond control, the incumbent government included masks and sanitisers under the ECA.

This act empowers the government against hoarders and black marketers willing to control the prices artificially. Since all commodities included in the essential list are consumed by common citizens of the country, it is imperative to control their prices to let the people of India lead a healthy life. The act also enables the government to set a minimum support price to fairly compensate the farmers producing the essentials. The Government of India monitors the commodities they consider essential for the masses. If the prices go beyond a certain limit, they can invoke this act to set a stockholding limit for a short while.

Once the limit is decided and published, the States get into action to ensure that no wholesaler, retailer, importer, or exporter accumulates the commodities beyond the specified limit. If a state decides to add prohibitions, they can take action by punishing wholesalers, retailers, shopkeepers, and the like, who do not obey the limit and hoard commodities. The state government can take the help of the police to conduct raids and auction the surplus goods.

In May 2020, the current Finance Minister of India, Smt. Nirmala Sitharaman announced that the government would amend the Essential Commodities Act of 1955 to be implemented only during extraordinary circumstances like a famine or war. The Finance Minister proposed to remove the stock limit for supply chain owners, processors, and exporters, besides stopping the punitive measures. Moreover, the action plans to deregulate commodities like pulses, potatoes, cereals, onion, oilseeds, and edible oils to allow farmers to seek better prices.

The government initially promulgated Essential Commodities (Amendment) as an Ordinance on 5th June 2020. The Lok Sabha finally cleared the Essential Commodities (Amendment) Act on 15th September and Rajya Sabha on 22nd September 2020 as part of the Indian Agricultural Acts (Farm Bills) 2020. President Ram Nath Kovind approved the act on 27th September 2020.

Essential Commodities Amendment Act - Overview

Through the Essential Commodities Amendment Act 2020, the government introduced the following changes:

  • Remove commodities like onion, potato, cereals, edible oil, oilseeds, etc., from the Essential list except in extraordinary circumstances like famine, war, natural calamities, etc.
  • The regulations will depend on the market conditions and spurt in prices. For example, if the prices of horticulture produce increase by 100% or non-perishable agricultural food items increase by 50%, the government may invoke the act's provisions to regulate the prices.
  • Food stocks for common distribution will be devoid of any restrictions.
  • Create a competitive agricultural market.
  • Reduce agri-waste by investing in cold storage facilities.
  • Offer stable prices to farmers.
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FAQ on Essential Commodities Act

Q.1) What is the Essential Commodities Act?

The Essential Commodities Act (ECA) first came into existence in 1955. The act governs India's production, supply, and distribution of essential commodities.

Q.2) What are the Essential Commodities Amendment Act 2020?

In May 2020, the current Finance Minister of India, Smt. Nirmala Sitharaman announced that the government would bring forward the Essential Commodities (Amendment) Act 2020 to amend the Essential Commodities Act of 1955 by allowing it to be implemented only during extraordinary circumstances like a famine or war.

Q.3) When did the Essential Commodities (Amendment) Act come into effect?

The Lok Sabha cleared the Essential Commodities (Amendment) Act on 15th September and Rajya Sabha on 22nd September 2020 as part of the Indian Agricultural Acts (Farm Bills) 2020. President Ram Nath Kovind approved the act on 27th September 2020.