Essential Commodities Act

In News: With tur dal prices surging since mid-July and reports coming in of some traders creating artificial supply squeeze by restricting sales, the Centre has invoked the Essential Commodities Act of 1955 to ask States to monitor and verify the stocks available with such traders.

• Tur prices have risen since mid-July amid slow progress in kharif sowing as compared to last year due to excess rainfalls and water logging conditions in parts of major Tur growing states of Karnataka, Maharashtra and Madhya Pradesh, the Department of Consumer Affairs has noted in its rationale for the directive.

Essential Commodities Act 1955:

Background

• The ECA Act 1955, was legislated at a time when the country was facing a scarcity of foodstuffs due to persistent low levels of foodgrains production.
• The country was dependent on imports and assistance (such as wheat import form the US under PL-480) to feed the population.
• To prevent hoarding and black marketing of foodstuffs, the Essential Commodities Act was enacted in 1955.

Features

• Objective: The ECA 1955 is used to curb inflation by allowing the Centre to enable control by state governments of trade in a wide variety of commodities.
• There is no specific definition of essential commodities in the Essential Commodities Act, 1955.
• Section 2(A) states that an “essential commodity” means a commodity specified in the Schedule of the Act.
• The Centre, if it is satisfied that it is necessary to do so in public interest, can notify an item as essential, in consultation with state governments.
• Legal Jurisdiction: The Act gives powers to the central government to add or remove a commodity in the Schedule.
• Implementing Agency: The Ministry of Consumer Affairs, Food and Public Distribution, implements the Act.
• Impact: By declaring a commodity as essential, the government can control the production, supply, and distribution of that commodity, and impose a stock limit.

Issues Related to Essential Commodities Act 1955:

• The Economic Survey 2019-20 highlighted that government intervention under the ECA 1955 often distorted agricultural trade while being totally ineffective in curbing inflation.
• Such intervention does enable opportunities for rent-seeking and harassment. Rent-seeking is a term used by economists to describe unproductive income, including from corruption.
• Traders tend to buy far less than their usual capacity and farmers often suffer huge losses during surplus harvests of perishables.
• This led to farmers being unable to get better prices due to lack of investment in cold storage, warehouses, processing and export.
• Owing to these issues, the Parliament passed the Essential Commodities (Amendment) Bill, 2020. However, due to farmers’ protest the Government had to repeal this law.

Source: The Hindu

Previous Year Question

Q.1) With reference to the ‘Prohibition of Benami Property Transactions Act, 1988 (PBPT Act), consider the following statements: (2017)

1. A property transaction is not treated as a benami transaction if the owner of the property is not aware of the transaction.
2. Properties held benami are liable for confiscation by the Government.
3. The Act provides for three authorities for investigations but does not provide for any appellate mechanism.

Which of the statements .given above is/are correct?

1. 1 only
2. 2 only
3. 1 and 3 only
4. 2 and 3 only