Introduction: The Essential Commodities Act 1955 is �An Act to provide, in the

interest of the general public, for the control of the production, supply, and
distribution of, and trade and commerce, in certain commodities�. It gives power to
control production, supply, distribution, etc. of essential commodities for
maintaining or increasing supplies and for securing their equitable distribution
and availability at fair prices. Using the powers under the Act, various
Ministries/Departments of the Central Government have issued Control Orders for
regulating production/distribution/quality aspects/movements etc. pertaining to the
commodities which are essential and administered by them.
Under this Act, essential commodities mean any of the following classes of
commodities
� cattle fodder, including oilcakes and other concentrates
� coal, including coke and other derivatives
� component parts and accessories of automobiles
� cotton and woolen textiles
� drugs (drugs has the meaning assigned to it in clause (b) of Section 3 of
Drugs and Cosmetics Act, 1940
� foodstuffs, including edible oilseeds and oils
� iron and steel, including manufactured products of iron and steel
� paper, including newsprint, paperboard and straw board
� petroleum and petroleum products
� raw cotton, whether ginned or unginned, and cotton seed
� raw jute
� any other class of commodity which the Central Government may, by notified
order, declare to be an essential commodity for the purposes of this Act, being a
commodity with respect to which Parliament has power to make laws by virtue of
entry 33 in List III in the Seventh Schedule to the Constitution
Impact on the Industry: Here how it works. 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 a commodity, be it wholesalers, retailers or even importers are
prevented from stockpiling it beyond a certain quantity.
A State can, however, choose 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 price shops.
Judgements: On 9th March, 2012, the Controller General of Patents Design and
Trademarks of India, Mr. P.H. Kurian, marked his last day in office with a landmark
judgment granting the first ever Compulsory License to an Indian generic
pharmaceutical company Natco Pharma to manufacture and sell a generic version of
Bayer Corporation�s patent protected anti-cancer drug �Sorafenib Tosyalte�
(NEXAVAR). This watershed development is likely to alter the complexion of the
pharmaceutical industry in India. This judgment brings to the fore many contentious
issues such as whether �local manufacturing� of a patented invention is mandatory
in India, what drug price is �reasonable� under the current patent regime
A significant issue to be considered is whether price control of drugs can only be
achieved through CL. Under the Essential Commodities Act, 1955, the government of
India has promulgated The Drug Price Control Order (�DPCO�) which fixes the ceiling
price of certain active pharmaceutical ingredients and formulations. The DPCO
provides the government an effective mechanism to regulate drug prices thereby
increasing access to medicines without interfering with patent rights of
innovators.
Amendments: The Ministry of Consumer Affairs has prepared a set of recommendations
to amend the Essential Commodities Act, 1955. One of the significant
recommendations for such amendment is categorical insertion of a clause on banning
trading of essential commodities including food stuff in the futures market except
for those specifically notified.
The list of the essential commodities will be also enhanced by defining food stuff.
As per the new definition, food stuff will mean any substance, whether perishable
or non-perishable which is used as a final food product by human beings and will
also include raw food articles that may be used as food by human beings.
Flaws: However, invoking the Essential Commodities Act is problematic. Stockholding
limits do not distinguish between food processing industries and food retail
chains, which need to hold large stocks for their operations. Food processing
industries especially need to keep stocks for a few months at a time so that
fluctuating prices don't throw their economics out of gear. But under the Essential
Commodities Act, these can become liable at least for harassment. These are
corporate entities with large, earmarked storage facilities which can be easily
identified. So it is easy for inspectors to go after them
On the other hand, identifying the actual hoarders is not at all easy. These may
not be small traders but their operations are not corporatized and they have many
avenues to spirit away and hoard supplies. The conviction rate under the Act is
also abysmally low. So the hoarders go scot free and genuine players in the food
economy are harassed
The Act is not in tune with present times. It made sense at a time when the
transport infrastructure across the country was poor and markets not integrated. So
a production shock in one part of the country could lead to hoarding and black
marketing. That's not the case anymore. Shortages in one part of the country can be
countered if there is ample supply somewhere else.
The Essential Commodities Act is out of tune with current realities and needs to be
either scrapped or drastically overhauled to deal with crisis situations like
supplies getting disrupted due to war, natural calamities and breakdown of law and
order. But if even an otherwise natural reformist like Modi wants the Act to be
retained and strengthened, looks like the country is going to have to live with an
ineffective, harassment-prone law. And ordinary people will continue to suffer.