Essential commodities act, 1955

Essential Commodities Act, 1955
By
AmitKumar (PGDMA 1001)
Anjali Sati (PGDMA 1002)

Genesis
Passed by the parliament of India on April 1, 1955.
Objective
Ensure the easy availability of essential commodities to consumers and to protect them from exploitation by unscrupulous traders.
This Act empowers the Central Government to:
i) regulate production, supply, distribution, storage, transport, etc.; and
ii) control price of commodities which have been declared under the Act, as essential are provided for those who commit offences under the Act.
The Act was amended in 1986, empowering recognised Consumer Associations to make a report in writing of any facts constituting an offence under the Act.

Contd..
The enforcement/ implementation lies with the State Governments and UT Administrations.
State government issue various control orders w.r.t. trading of some essential commodities such as food grains, edible oils, pulses, kerosene and sugar etc.
Items listed under the act are reviewed from time to time as per the economic policies, production, demand and supply.
The number of essential commodities which stood at 70 in the year 1989 has been brought down to 7 at present through such periodic reviews.
From February 2002, 11 commodities were removed.
On 31 March 2004, two more commodities were deleted.
At present, only 16 commodities are in the list.

Different Sections under the Act
1. Short title and extent :
(1) This Act may be called the Essential Commodities Act, 1955.
2. Definitions:
(ia) "Code" means the code of Criminal Procedure;
(iia) "Collector" includes an Additional Collector and such other
Officer, not below the rank of Sub-Divisional Officer
(a) "essential commodity“ means any of the following classes of
commodities
(i) Cattle fodder, including oilcakes and other concentrates;
(ii)coal, including coke and other derivatives;
(iii) component parts and accessories of automobiles;
(iv) cotton and woollen textiles;
(iv) drugs.

Contd..
(v) Foodstuffs including edible oil-seeds and oils;
(vi) Iron and steel, including manufactured products of iron and steel;
(vii) Paper including newsprint, paper board and straw board;
(viii) Petroleum and petroleum products,
(ix) Raw cotton, and whether ginned or and cotton seed;
(x) Raw jute;
(b) "food-crops" include crops of sugarcane;
(c) "notified order" means and order notified in the Official Gazette;
(d) "State Government", in relation to a Union Territory, means the administrator thereof;

Sections contd..
3. Powers to control production, supply, distribution, etc., of essential commodities.
4. Imposition of duties on State Government, etc.
5. Delegation of powers
6. Effect of orders inconsistent with other enactments
6A Confiscation of essential commodity
6B. Issue of show-cause notice before confiscation of essential commodity.
6C. Appeal.
6D. Award of confiscation not to interfere with other punishment
6E. Bar of jurisdiction in certain cases :-

7. Penalties
7A. Power of Central Government to recover certain amounts as arrears of land revenue.
8. Attempts and abetment
9. False statement
10. Offences by Companies
11. Cognizance of offences
12. Constitution of special courts.
13. Presumption as to orders
14. Burden of proof in certain cases
15. Protection of action taken under Act;
15A. Prosecution of public servants
16. Repeals and savings

The Act/Orders/Rules of Essential Commodities:
The following orders are at present in effect under the provisions of Section-3 of the said Act :
(A) Bihar Trade Articles (Licences Unification) Order, 1984.
(B) Bihar Essential Articles (Display of Prices and Stocks) Order, 1977 (Re-published in 1986).
(C) Bihar Motor Spirit and High Speed Diesel Oil Dealer's Licensing Order, 1966.
(D) Motor Spirit and High Speed Diesel (Regulation of Supply and Distribution and Prevention of Malpractices) Order, 1998.

(E)The Liquefied Petroleum Gas (Regulation of Supply and Distribution) Order, 2000.
(F) Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993.
(G) Naptha (Acquisition, Sale, Storage and Prevention of Use in Automobile) Order, 2000.
(H) Solvent, Raffinate and Slop (Acquisition, Sale, Storage and Prevention of Use in Automobiles) Order, 2000.
(I) Bihar Rice and Paddy Procurement (Levy) Order, 2005.2.In addition to Essential Commodities Act, 1955,

Major Amendments
Pulses, Edible Oilseeds and Edible Oils (Storage Control) Order, 1977
for securing equitable distribution and availability at fair price of these items to the consumers. The orders to exempt the imported edible oils (excluding coconut oil, palm kernel oil, RBD Palm Oil and RBD palm stearin) from the stock limit as prescribed under the Control Order, 1977 has been made in orders to make easy availability of these commodities at fair price.
Essential Commodities Act, 1980
The Prevention of Black-marketing and Maintenance of Supplies of Essential Commodities.
The Act empowers the Central and State Governments to detain persons whose activities are found to be prejudicial to the maintenance of supplies of commodities essential to the community

Essential Commodities (Special, Provisions) Act, 1981
Drugs Price Control Order (DPCO) 1995
order issued by the Government of India under Section 3 of the Essential Commodities Act, 1955 to regulate the prices of drugs.

As per the decisions of the Conference of Chief Ministers held on 21 May 2001, the restrictions like licensing requirement, stock limits and movement restrictions have been removed from almost all agricultural commodities.
Wheat, pulses and edible oils, edible oilseeds and rice being exceptions, where States have been permitted to impose some temporary restrictions in order to contain price increase of these commodities.
Department of Consumer Affairs introduced the Essential Commodities (Amendment) Bill, 2005
prune the list of essential commodities to the minimum by deleting all such commodities which have no relevance in the context of present improved demand and supply position and to facilitate free trade and commerce.
Only those commodities considered essential to protect the interest of the farmers and the large section of the people "below the poverty line" are proposed to be retained under the Essential Commodities Act, 1955.

THE ESSENTIAL COMMODITIES (AMENDMENT) ACT, 2006
(1) Drugs
Explanation.-For the purposes of this Schedule, "drugs" has the meaning assigned to it in clause (b) of section 3 of the Drugs and Cosmetics Act, 1940;
(2) fertilizer, whether inorganic, organic or mixed;
(3) foodstuffs, including edible oilseeds and oils;
(4) hank yarn made wholly from cotton;
(5) petroleum and petroleum products;
(6) raw jute and jute textiles;
(7) (i) seeds of food-crops and seeds of fruits and vegetables;
(ii) seeds of cattle fodder; and
(iii) jute seeds.

The Essential Commodities (Amendment) Bill, 2010
introduced on August 9, 2010
seeks to amend the Essential Commodities Act, 1955 to clarify the price payable for levy sugar (procured for public distribution system).
The Principal Act was amended last in December 2009. That amendment had two main provisions.
It added an Explanation to Section 3 of the Principal Act, stating that the central government, while procuring levy sugar, would not pay any price in excess of that calculated on the basis of the Minimum Price (SMP) for sugarcane set by the central government.
It also amended the price to be paid to sugar producers by the central government for procuring levy sugar.
It specified that the price of sugar will be based on the “Fair and Remunerative Price” (FRP) fixed for sugarcane, and will include the manufacturing cost, duties, taxes and reasonable rate of return.

Impact of the Act
The Central Government regularly monitors the action taken by State Governments/`UT Administrations to implement the provisions of the Essential Commodities Act, 1955. The action taken by States/UTs under the Act during the year 1995 (as reported upto 31.12.1995) is an indicated below:-
(i) No. of raids made -- 80927
(ii) No-. of persons arrested -- 9528
(iii) No. of persons prosecuted -- 3387
(iv) No. of persons convicted -- 2714
(v) Value of goods confiscated -- 1472.65 (Rs. in Lakhs)

Implications of Essential commodity act in current business scenario
It is a sort of restrictions on trade
The Essential Commodities Act mandates that commodities that have been identified as being “essential commodities” can only be traded and stored by licensed holders. However, legally, Negotiable warehouse receipt (NWR) is a negotiable instrument. It is in the nature of an actionable claim representing a right to a commodity. Trading in NWR will not be covered by ECA, until physical possession is sought. Only the last transaction would have to comply with the provisions of the ECA.
Contd…

Regulations under the Essential Commodities Act, 1955:
Problems due to restrictions:
Most of the provisions in this Act have become irrelevant in the context of having achieved self-sufficiency in production.
They hamper the market from performing its productive and commercial role.
A large number of permits and licences are required to be obtained from the authorities under the Essential Commodities Act and periodically returns have to be submitted and inspections carried out, which add to transaction costs.
Some notifications under the same Act restrict movement of goods from the surplus states to deficit states.
These controls and restrictions, which include the ever present threat of arrest, act as disincentives to production and distribution of essential commodities by organised companies that can exploit economies of scale.
(i) Regulating by licenses, permits, etc. the production, storage, transport, distribution, disposal acquisition, use or consumption of an essential commodity;
(ii) Increasing cultivation of food grains;
(iii) Controlling prices;
(iv) Prohibiting the withholding from sale of any essential commodity;
(v) Requiring a stockholder to sell any essential commodity to the Government;
(vi) Regulating or prohibiting any commercial or financial transactions in food
items or cotton textiles which may be detrimental to the public interest;
(vii) Collecting any information;
(viii) Requiring production of books of accounts etc; and
(ix) Any incidental matters
Justification for Regulations:
These controls have been traditionally justified on the grounds that they are
necessary to control hoarding and other types of speculative activity.

Essential commodities act, 1955

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