From UPSC perspective, the following things are important :
Prelims level : Essential Commodities Act
Mains level : Not Much
The Centre has invoked the Essential Commodities Act of 1955 to ask States to monitor and verify the stocks of Arhar/Tur Dal available with traders.
Essential Commodities Act
- The ECA, 1955 was established to ensure the delivery of certain commodities or products, the supply of which, if obstructed due to hoarding or black marketing, would affect the normal life of the people.
- The list of items under the Act includes drugs, fertilizers, pulses, and edible oils, as well as 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.
- Additionally, the government can also fix the maximum retail price (MRP) of any packaged product that it declares an “essential commodity”.
How ECA works?
(1) Centre notifying stock limit holding
- 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.
(2) States can opt-out
- 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.
What happens for non-compliance?
- 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.
- This improves supplies and brings down prices.
Ex: The Union Government has brought masks and hand-sanitizers 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. Later this move was reverted.
What about Food Items?
(1) Items covered:
Rice, wheat, atta, gram dal, arhar dal, moong dal, urad dal, masoor, dal, tea, sugar, salt, Vanaspati, groundnut oil, mustard oil, milk, soya oil, palm oil, sunflower oil, gur, potato, onion and tomato.
(2) Price Stabilization Fund (PSF):
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.
Recent amendments to the ECA
In 2020, the EC Act was amended for the stock limit to be imposed only under exceptional circumstances such as famine or other calamities.
- Exceptional circumstances: It allowed the centre to delist certain commodities as essential, allowing the government to regulate their supply and prices only in cases of war, famine, extraordinary price rises, or natural calamities.
- Commodities de-regulated: The commodities that have been deregulated are food items, including cereals, pulses, potatoes, onion, edible oilseeds, and oils.
- The government regulation of stocks will be based on rising prices, and can only be imposed if there is
- A 100% increase in retail price in the case of horticultural produce and
- A 50% increase in retail price in the case of non-perishable agricultural food items
- These restrictions will not apply to stocks of food held for public distribution in India.