Essential Commodities Act, 1955

Essential Commodities Act, 1955

 Essential Commodities Act, 1955 was enacted to ensure easy availability of essential commodities to the consumers and to protect them from exploitation by unscrupulous traders. The Act provides for 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. Most of the power under the Act has been delegated to the State Government.

Using the powers under the Act, various Ministries/Departments of the Central Government have issued Control Order for regulating production/distribution/quality aspects/movement, etc., pertaining to the commodities which are essential and administered by them. The Essential Commodities Act is being implemented by the State Government/UT Administrations have issued various Control Orders to regulate various aspects of trading in Essential Commodities such as foodgrains, edible oils, pulses, kerosene, sugar, etc. The Central Government regularly monitors the action taken by State Government/UT Administration to implement the provisions of the Essential Commodities Act, 1955.

The items declared as essential commodities under the Essential Commodities Act, 1955 are reviewed from time-to-time in the light of liberalized economic policies in consultation with the Ministries/Departments administering the essential commodities declared earlier. In order to accelerate economic growth and to benefit consumers, two more commodities have been deleted from the list from 31st March 2004. At present list of essential commodities contains 15 items.

Essential Commodities

The government has now listed over 60 commodities as essential commodities. For the purpose of this Act, ‘’essential commodity’ means any of the following classes commodities:

  1. Cattle fodder, including oil cakes and other concentrates:
  2. Coal, including coke and other derivatives;
  3. Component parts and accessories of automobiles;
  4. Cotton and woolen textiles;
  5. Drugs;
  6. Foodstuffs, including edible seeds and oils;
  7. Iron and steel, including manufactured products of iron and steel;
  8. Paper, including newsprint, paperboard, and strawboard;
  9. Petroleum and petroleum products;
  10. Raw cotton, whether ginned or unginned, and cottonseed;
  11. Raw jute; and
  12. Any other class of commodity which the Central Government may, by a notified order, declare to be an essential commodity for the purpose of this Act, being a commodity with respect to which Parliament has the power to make laws by virtue of Entry 33 in List 111 in the Seventh Schedule to the Constitution.

Objectives and Scope of Essential Commodities Act

  1. Price and Distribution Control: The objectives of price and distribution controls, in general, are to supplement the efforts of other instruments of planning. The specific objectives of the control over price and distribution may be listed as follows:
  2. Equity or Distributive justice: Growth with social justice has been accepted as a major objective of development. This implies that the fruits of development should be distributed equitably. But it has been generally accepted that inflation distorts income distribution against the poor. Many a time, the scarcity of ‘’wage goods’’- the essential consumer items-leads to black marketing, making the life of the poor more miserable. One of the prime objectives of price and distribution controls, therefore, is to protect the vulnerable sections against inflation and shortages and ensure a reasonable level of consumption for them.
  3. Maintain Quality of Goods and Services: Price and distribution controls, aimed at ensuring the quality of goods and services. For example, the Industries Act, 1951, the Essential Commodities Act, 1955,etc., empower the Government of India to control the quality of various goods and services.
  4. Prevention of Monopolistic, Restrictive and Unfair Trade Practices: Prevention of certain trade practices that are detrimental to the common interest is another major objective of price and distribution controls. In India, the MRTP Act, 1969, seeks to prevent the monopolistic, restrictive and unfair trade practices that are prejudicial to the public interest. This Act, apart from trying to remove certain imperfections in supply, also aims to ensure that capital investment and technical development are not hampered by such trade practices.
  5. Augment Supply: Increasing the supply of goods and services is of paramount importance to reduce the hardships of the people by making goods available at reasonable prices. And this is one of the objectives of the price and distribution controls. The Industries Act, the Essential Commodities  Act, and the MRTP Act contain provisions to prevent an unjustifiable reduction in production by the industrial undertaking. The public distribution systems of the Government of India envisages a comprehensive production-cum-distribution scheme.
  6. Supply of Inputs to Priority Sectors: Ensuring a supply of essential inputs to the priority sectors at reasonable prices is an important objective of the price and distribution controls. For example, in India, certain industries are accorded priority in the allocation of certain raw materials and intermediate goods which are in short supply. Small-scale industries, export industries, agriculture and other priority sectors are given credit at concessional terms.
  7. Allocation of Resources: Control over prices and distribution enable s the planning authorities to achieve the desired pattern of resource allocation more easily to encourage investment in a particular field, it is essential to ensure a remunerative price for the output. For this purpose sometimes price support schemes will have to be adopted. Considerable supply response to prices is noticed in case of certain agricultural commodities. In such cases, deliberate variations in relative prices may be effected to re-distribute the area under different crops to obtain the desired output mix.
  8. Prevention of Hoarding Black Marketing: Hoarding and black marketing have almost become by-products of shortage economy. An effective system of control should prevent the creation of artificial scarcity by the unscrupulous businessmen for profiteering. Laws like the prevention of black marketing and Maintenance of supplies of Essential Commodities Act, 1980, are designed to serve this purpose.
  9. Control of Inflation and Deflation: As it is abundantly clear from the objectives mentioned above, control of inflation is a principal objective of prices and distribution controls. In certain cases, however, prevention of fall in the prices is also the task of these controls. As there is close inter-relationship between supply and prices, price and distribution policies should mutually support each other to achieve the desired objectives.