ESEENTIAL COMMODITIES ACT

Subject: Important Legislations

Context: Govt imposes stock limits on onion to check prices under Essential commodities act.

Concept:

Essential Commodities Act

• The ECA is an act which was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or black-marketing would affect the normal life of the people.
• The ECA was enacted in 1955. This includes foodstuff, drugs, fuel (petroleum products) etc.
• It has since been used by the Government to regulate the production, supply and distribution of a whole host of commodities it declares ‘essential’ in order to make them available to consumers at fair prices.
• Additionally, the government can also fix the maximum retail price (MRP) of any packaged product that it declares an “essential commodity”.
• The list of items under the Act includes drugs, fertilizers,Food items, pulses and edible oils, and petroleum and petroleum products.
• The Centre can include new commodities as and when the need arises, and takes them off the list once the situation improves.

How ECA works?

• If the Centre finds that a certain commodity is in short supply and its price is spiking, it can notify stock-holding limits on it for a specified period.
• The States act on this notification to specify limits and take steps to ensure that these are adhered to.
• Anybody trading or dealing in the commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity.
• A State can, however, choose not to impose any restrictions. But once it does, traders have to immediately sell into the market any stocks held beyond the mandated quantity.
• This improves supplies and brings down prices. As not all shopkeepers and traders comply, State agencies conduct raids to get everyone to toe the line and the errant are punished.
• The excess stocks are auctioned or sold through fair price shops.
• Ex: The Union Government has brought masks and hand-sanitisers under the ECA to make sure that these products, key for preventing the spread of Covid-19 infection, are available to people at the right price and in the right quality

For Food Items:

• Based on the deliberations, Government takes various measures from time to time to stabilize prices of essential food items which, inter-alia, include appropriately utilizing trade and fiscal policy instruments like import duty.
• The govt. can impose stock limits and advise State for effective action against hoarders & black marketers etc. to regulate domestic availability and moderate prices.
• The government utilizes the buffer of agri-horticultural commodities like pulses, onion, etc. built under Price Stabilization Fund (PSF) to help moderate the volatility in prices.