Essential commodities act is an act which is aimed at securing the interest of both manufacturer customer and trader.
The Essential Commodities Act 1955 provides for the 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 availability at fair prices.
By this act the government ensures that the farmer get fair prices for his product and also the availability of product in the market.
Exercising powers under the Act, various Ministries/Departments of the Central Govt. and under the delegated powers, the State Governments/UT Administrations can issue orders for regulating production, distribution, pricing and other aspects of trading in respect of the commodities declared as essential.
It means in some of the cases Central Government have more power but in some specific cases even the state government or union territories can issue guidelines for the the enforcement of essential commodities act.
Important Amendments done in 2020: Supply of food stuffs including cereals, pulses, potato, onions, edible oilseeds and oils can be regulated only under extraordinary circumstances which may include war, famine, extraordinary price rise & natural calamity of grave nature, as notified by the Central Govt. This is an important deviation from the earlier act as the government had full powers onb regulating food stuffsb supply which was essential for the times when the original act was made.
There is an important amendment in the stocking limit of food stuffs. The situations also mentioned clearly so that there is no place for disputes.
Stocking limit restrictions can be imposed only in case of extraordinary price rise (100% increase in case of perishables and 50% increase in case of non-perishable food stuffs over the price prevailing immediately preceding 12 months, or average retail price of last five years, whichever is lower).
But attraction here is , the regulation regarding stocking limit shall not apply to a processor or “value chain participant” of any agriculture produce, if the stock limit of such person does not exceed the overall ceiling of installed capacity of processing, or the demand for export in case of an exporter.
“Value chain participant”, in relation to any agricultural product, means and includes a set of participants, from production of any agricultural produce in the field to final consumption, involving processing, packaging, storage, transport and distribution, where at each stage value is added to the product.
What it mean?
The original act was enacted at a time when India was facing severe food scarcity and the intention was to prevent hoarding and black marketing. But the situation has changed like anything as of now India is having sufficient foodstuffs and VR mode from scarcity to a situation where are the major exporter of food commodities.
The Act has hurt private investments in agri-infrastructure because of which there is huge wastage of food items every year. The amendments will remove unnecessary regulation and will help attract private and foreign investments in the supply chain infrastructure like warehouse/cold storage/packaging of agri-commodities.
Exporters & food processors are exempt from stocking limit which will help in development of modern food processing infrastructure and smooth supply chain for exporters The freedom to produce, hold, move, distribute and supply will lead to vertical integration in the agriculture supply chain and achieve economies of scale resulting in lower prices of agri-products for the consumers
It will transform the farm sector and increase the farmers’ income
While liberalizing the regulatory environment, the govt. has insured that interest of consumers is safeguarded. During war, famine, any natural calamity or extra ordinary price rise, the supply of agricultural food stuffs can be regulated and Govt. can impose stocking limit also in case of excessive price rise.