About ECA

• The Essential Commodities Act (ECA) was enacted by the Central Government in 1955 to control and regulate trade and prices of commodities declared essential under the Act.
• The Act empowers the Central and state governments concurrently to control production, supply and distribution of certain commodities in view of rising prices and to prevent Black marketing.
• The measures that can be taken under the provisions of the Act include licensing, distribution and imposing stock limits. The governments also have the power to fix price limits, and selling the particular commodities above the limit will attract penalties.
• Some of the major commodities that are covered under the act:
  • Petroleum and its products
  • Food stuff, including edible oil and seeds, vanaspati, pulses, sugarcane
  • Drugs- prices of essential drugs
  • Fertilisers

Why in News?

• The Union Cabinet recently approved an amendment to the Essential Commodities Act of 1955 to “deregulate” agricultural commodities like cereals, pulses, oilseeds, onions and potatoes.
• Stock limits on these commodities will not be imposed except in times of a national calamity or a famine, and will not be imposed at all on food processors or value chain participants, which/who will be allowed to store as much as allowed by their installed capacity. Exporters will also be exempted.

Rationale for the move

• Traders have long complained of harassment under the Act on the suspicion of hoarding, black marketing and speculation, while food processors and exporters have also pointed out that they may need to stock commodities for longer periods of time. The Act has disincentive construction of storage capacity and hindered farm exports.
• It is hoped that the amendment will bring more private investment into warehouses and post-harvest agricultural infrastructure, including processors, mills and cold chain storage.
• It could help farmers sell their produce at more competitive rates if there is no fear of government intervention to artificially suppress market prices, and is likely to give a boost to farm exports.