Essential Commodities Act invoked to rein in tur dal price

Essential Commodities Act invoked to rein in tur dal price

Essential Commodities Act invoked to rein in tur dal price

For Prelims

About Essential Commodities Act (ECA):

  • Essential Commodities Act (ECA) came into force in 1955 and has been used to manage the supply, distribution and production of commodities termed as ‘essentials’ and whose obstruction could affect the lives of the common people to a great extent.

Essential commodities under the act include:

  • Fertilizer, whether inorganic, organic or mixed;
  • Foodstuffs, including edible oilseeds and oils;
  • Hank yarn made wholly from cotton;
  • Petroleum and petroleum products;
  • Raw jute and jute textile;
  • Seeds of food-crops and seeds of fruits and vegetables;
  • Seeds of cattle fodder; and
  • Jute seeds and cotton seeds.

Central Government may, if it is satisfied that it is necessary so to do in the public interest and for reasons to be specified in the notification published in the Official Gazette, amend the Schedule so as to―

(a) add a commodity to the said Schedule;

(b) remove any commodity from the said Schedule.

For Mains

The significance of ECA:

  • The Act is used to curb inflation by allowing the Government to control the stock limit, sold and the price at which it is sold.
  • However, Economic Survey 2019-20 highlighted that government intervention under the ECA 1955 often distorted agricultural trade while its ineffectiveness in curbing inflation is questionable.
  • Since the large stocks held by traders can be outlawed under the ECA 1955 anytime, traders tend to buy far less than their usual capacity and farmers often suffer huge losses during surplus harvests of perishables.

What can be done

  • Allowing people to produce, hold, move, distribute and supply will lead to harnessing economies of scale and attract private sector/foreign direct investment into the agriculture sector.
  • Investment in cold storages and modernization of the food supply chain will reduce wastage due to losses.
  • Create a competitive market environment and also prevent wastage of agri-produce that happens due to lack of storage facilities which will bring about price stability.