The Essential Commodity Act, 1955

India, being a developing country with large population and uncertain

monsoon affecting both its agricultural and industrial production, has often
faced the problem of imbalance in the demand and supply of certain essential
items. In the year of shortage, India has to spend its precious foreign exchange
on import of these items. The problem was worsened due to the hoarding and
black marketing of the goods i.e. man-made shortage.

Governing act

With a view to regulate the production, distribution, storage, pricing of certain

items of mass consumption, the essential commodities act, 1955 was enacted.
The act ensures easy availability of essential commodities to consumers and
protection from exploitation by traders. The act was amended from time to
time to make its provision more effective. The essential commodities act
through various control orders regulates the production, pricing, quality,
movement, distribution etc. Of certain items declared as essential
commodities under the act.

The essential commodities act 1995 was enacted to ensure the delivery of
certain commodities or product the supply of which is obstructed owing to
hoarding, black marketing would affect the normal life of the people. This
includes foodstuff, drugs, petroleum product etc. The act provides for
Regulation and control of production, distribution and pricing of commodities
which are declared as essential for maintaining or increasing supplies or for
securing their equitable distribution and their availability at fair price.

Essential Commodity Section 2(a)

Essential commodity means any of the following classes of 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;

The Essential Commodities (Amendment) Ordinance, 2020

The bill was introduced by the Minister of State for Consumer Affairs, Food &
Public Distribution, Shri Danve Raosaheb Dadarao in the Lok Sabha on
14th September, 2020 to replace ordinances promulgated on 5th June 2020.
The bill was passed by Lok Sabha on 15th September, 2020.

Amendment

 Regulation of food items: The Essential Commodities Act, 1955

empowers the central government to designate certain commodities
(such as food items, fertilizers, and petroleum products) as essential
commodities. The central government may regulate or prohibit the
production, supply, distribution, trade, and commerce of such essential
commodities. The Ordinance provides that the central government may
regulate the supply of certain food items including cereals, pulses,
potatoes, onions, edible oilseeds, and oils, only under extraordinary
circumstances. These include:
 (i) war,
 (ii) famine,
 (iii) extraordinary price rise and
 (iv) Natural calamity of grave nature.

 Stock limit: The Ordinance requires that imposition of any stock limit on
agricultural produce must be based on price rise. A stock limit may be
imposed only if there is: (i) a 100% increase in retail price of horticultural
produce; and (ii) a 50% increase in the retail price of non-perishable
agricultural food items. The increase will be calculated over the price
prevailing immediately preceding twelve months, or the average retail
price of the last five years, whichever is lower.

How and under what circumstances can the government impose stock limits?
 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.
 Thus, in case of horticultural produce, a 100 per cent increase in the
retail price of the commodity over the immediately preceding 12 months
or the average retail price of the last five years, whichever is lower, will
be the trigger for invoking the stock limit for such commodities.
 For non-perishable agricultural foodstuffs, the price trigger will be a 50
per cent increase in the retail price of the commodity over the
immediately preceding 12 months or the average retail price of the last
five years, whichever is lower.
 However, exemptions from stock-holding limits will be provided to
processors and value chain participants of any agricultural produce.

Need for Amendment

 The EC Act was legislated at a time when the country was facing scarcity

of foodstuffs .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 now the situation has changed.

 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

anachronistic.

Control orders
The central and state government have issued a number of control Orders in
respect of the various essential commodities named above, for regulating their
production, pricing, quality, movement, distribution, etc. These control orders
are issued with the following objectives-

 Maintaining or increasing supplies of any essential commodity; or

 Securing their equitable distribution and availability at fair prices; or

Content of order Section 3(2): Such order may provide-

(a) issuing licence or permit for production or manufacture of essential

commodities
(b) bringing under cultivation any land for maintaining or increasing the
cultivation of food crops
(c) controlling price of essential commodities
(d) regulating the storage, transport, distribution, disposal, acquisition use
or consumption of any essential commodity by licence or permit
(e) Prohibiting the withholding of sale of any essential commodity
(f) requiring any person holding stock any essential commodity to sell it to
public or to the central or state government or to a corporation owned
or controlled by government
(g) Collecting information for statistics to regulating or prohibiting any of
the aforesaid matters
(h) Requiring persons engaged in production, supply or distribution of any
essential commodity to maintain and produce for inspection books,
accounts and records

Nature of restrictions

The control order ordinary provide for licensing of production, storage,

transport, distribution, use of consumption of any essential commodity, price
control, prohibition on hoarding of any essential commodity kept for sale,
compulsory sale of a part of production to the government, etc.

On the basis of the restriction provided in the control orders, the orders may
be classified under the following heads:
  Price control order: These aims to ensure fair distribution of certain
commodities to consumers at a reasonable price to save them from the
exploitative tendency on part of the traders.
 Quality control orders: These are issued in respect of items considered
vital for consumers; commodities where lack of standards may lead to
loss of life and health hazards.
 Movement control order: These orders aim at restricting the movement
of an item from a given place in the state in which it is produced to any
state outside the restrictions. These are based on the production and
supply conditions of the specified item.
 Packing control order: These orders require a reasonable degree of care
and packaging products with a view to ensuring the safety and
preventing the deterioration.
 Licensing control order: These orders lay down the licensing and
registration procedure and require of a trader in specified commodities
to obtain a licence under the respective control order.
 Stock and storage control order: These orders have been issued for
preventing hoarding by placing restriction on stock Holdings of a number
of commodities.
 Usage control order: These control orders place restriction on use of
control item for purposes other than those specified in the order. These
orders are issued with a view to ensuring that Items covered reached the
target consumers.
 Distribution control orders: The basic objective of these orders is
regulating the supply of specified products and distributing it with the
specific terms and conditions imposed under the order to ensure fair
and equitable distribution to all sections of the consumers.

Section 3(4)
If the Central Government is of opinion that it is necessary so to do for
maintaining or increasing the production and supply of an essential
commodity, it may, by order, authorize any person (hereinafter referred to as
an authorized controller) to exercise, with respect to the whole or any part of
any such undertaking engaged in the production and supply of the commodity
as may be specified in the order such functions of control as may be provided
therein and so long as such order is in force with respect to any undertaking or
part thereof,--

(a) the authorized controller shall exercise his functions in accordance

with any instructions given to him by the Central Government, so,
however, that he shall not have any power to give any direction
inconsistent with the provisions of any enactment or any instrument
determining the functions of the persons in-charge of the management
of the undertaking, except in so far as may be specifically provided by
the order; and

(b) The undertaking or part shall be carried on in accordance with any

directions given by the authorised controller under the provisions of the
order, and any person having any functions of management in relation
to the undertaking or part shall comply with any such direction

Offence and Penalties

Offence Punishment
Contravention of an order passed by Imprisonment for a term which may
the central government under Section extend to one year and with fine
3(2) with reference to clause (g) or (h)

For the contravention of an order with Imprisonment for a term ranging

reference to other clause of section from 3 months to 7 years and fine
3(2)

If any person to whom a direction is Imprisonment not less than 3 months

given under section 3(4) (b) fails to but which may extend to seven years
comply with it. and fine