The Essential Commodities (Amendment) Act, 2020

What is the purpose of the Essential Commodities Act, 1955?

The 1955 Act aims to regulate the production, supply and distribution of, and trade and commerce in, certain commodities, in the interest of the general public.

Essential commodities refers to fertilisers – inorganic, organic or mixed; foodstuffs including edible oilseeds and oils; hank yarn made wholly from cotton; petroleum and petroleum products; raw jute and jute textiles; seeds of food crops, cattle fodder, fruits and vegetables; cotton and jute seeds; drugs, surgical and N95 masks, and hand sanitisers.

How does the Amendment alter the 1955 Act?

The Amendment adds sub-section (1A) to section (3) of the 1955 Act. The original section (3)  said that the central government may regulate or prohibit the production, supply and distribution of, or trade and commerce in, essential commodities. The government may do so if it is of opinion that it is ‘necessary or expedient’ for maintaining or increasing supplies of any essential commodity, ensuring its ‘equitable distribution’ and ‘availability at fair prices’, or securing such commodities for the defence of India.

The Amendment states that the supply of ‘foodstuffs’ – including cereals, pulses, potato, onions, edible oilseeds and oils – may only be regulated under ‘extraordinary circumstances’ such as war, famine, ‘extraordinary’ price rise and ‘natural calamity of grave nature’. The central government may do this through a notification in The Gazette of India.

What does the Amendment mandate about stock limits on essential commodities?

Any action on imposing stock limits on agricultural produce shall be based on price rise. An order for regulating the stock limit of such produce may be issued under this Act only if there is a 100 per cent increase in the retail price of horticultural produce, or a 50 per cent rise in the retail price of ‘non-perishable agricultural foodstuffs’. The increase should be over the price prevailing in the preceding 12 months, or the average retail price of the last five years – whichever is lower.

Such orders for regulating stock limit shall not apply to a ‘processor’ or ‘value chain participant’ of any agricultural 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.” A ‘value chain participant’ for agricultural products, includes those involved in production, processing, packaging, storage, transport and distribution – each stage where ‘value is added’ to the product.

Nothing in sub-section (1A) – which the Amendment inserted in the 1955 Act – shall apply to any order relating to the Public Distribution System made by the government under any law in force.

Focus and Factoids by Oorna Raut.