The Essential Commodities Act is an act of Parliament of India which was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or black marketing would affect the normal life of the people. This includes foodstuff, drug, fuel (petroleum products) etc.
The ECA was enacted in 1955 and ever since been used by the government to regulate the production, supply and distribution of a whole host of commodities it declares ‘essential’ in order to make them available to consumers at a fair prices. The government can also fix the maximum retail price (MRP) of any packaged product that it declares as “essential commodity”.
The list of items under the Act includes drugs, fertilizers, pulses and edible oils, and petroleum products. The Centre can include new commodities as and when the needs arises, and take them off the list once the situation improves.
If the Centre finds that a certain commodity is in short supply and its price is spiking, it can notify stock holding limits on it for a specified period. The States act on this notification to specify limits and take steps to ensure that these are adhered to. Anybody trading or dealing in the commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity.
A State can however, chose not to impose any restrictions. But once it does, traders have to immediately sell into the market any stocks held beyond the mandated quantity. This improves supplies and brings down prices. As not all shopkeepers and traders comply, State agencies conduct raids to get everyone to toe the line and the errant are punished. The excess stocks are auctioned or sold through fair prices shops.
For instance, the Union Government on 14 March 2010 brought masks and hand-sanitizers under the Essential Commodities Act. 1955 to make sure that these products, key for prevention the spread of Covid-19 infection, are available to people at the right price and in the right quality.