Pharma Sector – Drug Pricing, NPPA, FDC, Generics, etc.

What is an ‘Essential Commodity’?


From UPSC perspective, the following things are important :

Prelims level : Essential commodities

Mains level : Regulation of essential commodities

Following reports of shortage and irrational pricing of hand sanitisers and masks, the union government has declared these items “essential commodities” until the end of June. It has notified an Order under the Essential Commodities Act to declare these items as Essential Commodities up to 30th June, 2020 by amending the Schedule of the Essential Commodities Act, 1955.

Why such move?

  • The coronavirus pandemic has triggered panic buying of masks and hand sanitisers at many places around the world, including in India.
  • The government’s order has come in the wake of reports of a shortage of these commodities and a sudden and sharp spike in their prices, and the alleged hoarding of stocks by manufacturers.

What does the government’s declaration mean?

  • The Essential Commodities Act provides, “in the interest of the general public, for the control of the production, supply and distribution of, and trade and commerce, in certain commodities”.
  • The law was passed in 1955 to essentially protect consumers from unreasonable and exploitative increases in prices of commodities in times of shortage.
  • It has been amended several times over the years, and made more stringent.
  • Under the Act, the government can also fix the maximum retail price (MRP) of any packaged product that it declares an “essential commodity”.

What kinds of items or products are generally classified as essential commodities?

  • The government has sweeping powers in this regard. The Act defines an “essential commodity” as simply “a commodity specified in the Schedule”.
  • The Act empowers the central government to add new commodities to the list of Essential Commodities as and when the need arises, and to remove them from the list once the crisis is over or the situation improves.
  • Over the years, a long list of items has been designated as essential commodities, including various drugs, fertilisers, cereals, pulses, sugar, edible oils, petroleum and petroleum products, and certain crops.
  • In the present situation, the government can intervene to regulate the supply and pricing of masks and hand sanitisers, and also notify their stock-holding limits.

How do states and UTs implement these orders?

  • They act on the notification issued by the Centre and implement the regulations.
  • Anybody trading or dealing in the essential commodity, including wholesalers, retailers, manufacturers, and importers, is barred from stocking it beyond the specified quantity.

What if the retailers/traders/manufacturers do not comply?

  • The purpose of designating any commodity as “essential” is to prevent profiteering at a time of extraordinary demand.
  • Violators are, therefore, termed as illegal hoarders or black-marketeers who can be prosecuted.
  • Besides penalties, the violation may lead to imprisonment for a maximum period of seven years.
  • Agencies of state governments and UT administrations are empowered to conduct raids to catch violators.
  • The government can confiscate excess stock hoarded by retailers/traders/manufacturers, and either auction it or sell it through fair-price shops.

Impact on Corona curbing

  • It is important to note that the designation of masks and hand sanitisers as “essential commodities” does not mean that the government considers them to be ‘essential’, in the literal sense, in the fight against COVID-19.
  • Doctors and health experts have underlined that the use of masks is helpful only if you have symptoms yourself, or if you are caring for someone who has symptoms.
  • The infection is spreading mostly through infected surfaces — and masks, especially the cheap surgical ones, can’t actually block the virus out.

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