The Essential Commodities Act (ECA) 1955 is a significant instrument in India’s food security framework. It was introduced when the nation experienced severe food scarcity due to consistently low foodgrain production levels and dependency on imports, such as wheat from the United States under PL-480. The Act serves to prevent hoarding and black marketing of food items, which are critical to ensuring food security.
The Need for Imposing Stock Limits
In recent times, unseasonal rains, hailstorms and intense heat in February 2023 have detrimentally impacted wheat production. This has led to inflated prices that can exceed government purchasing rates and destabilise supplies. An estimated 20% reduction in wheat procurement comparative to initial calculations further exacerbates the issue. Damages amounting to around 5.23 lakh hectares of wheat crops in MP, Rajasthan and UP have been reported due to these weather conditions. The India Meteorological Department (IMD) also cautions against potential crop damage due to high temperatures during their reproductive growth stage.
Regulating Wheat and Pulse Stocks
To address the challenges surrounding food security, the Ministry of Consumer Affairs, Food & Public Distribution introduced restrictions on how much wheat could be stored by various entities. These include traders, wholesalers, retailers, large retail chains and processors. Furthermore, limits were placed on the stock of Tur and Urad pulses, leveraging the powers vested through the ECA 1955.
Diverting Surplus Wheat through Open Market Sale Scheme (OMSS)
To stabilise prices, the government strategised an open market sale of approximately 15 lakh tonnes of wheat from the central pool through the Open Market Sale Scheme (OMSS). This facilitates the allocation of wheat to flour mills, private traders, bulk purchasers, and manufacturers of wheat-based products. The wheat is sold in lots ranging from 10 to 100 metric tonnes according to market demand and pricing trends.
Government Aims in Setting Stock Limits
The primary goal of setting these stock limits is to control the prices of wheat and ensure stability in the market. By monitoring these limits, the government aims to prevent hoarding and speculation, thus ensuring a steady supply of wheat and avoiding price volatility. In addition, by controlling retail prices through the OMSS, the government ensures that wheat remains accessible to the public at reasonable rates.
Preventing Supply Shortages and Maintaining Food Security
Monitoring and managing these limits is key to maintaining an adequate supply of wheat to meet demand, avoid scarcity, and ensure access to the vulnerable via the Public Distribution System. It also helps ensure food security, where the government can track production, supply, and distribution of essential commodities, further enforcing stock limits as necessary.
About the Essential Commodities Act 1955
The ECA 1955, although introduced in a time of food shortages, continues to be a useful tool to keep inflation in check. It empowers the Centre to control trade in a comprehensive list of commodities. There is no fixed definition of ‘essential commodities’ within the ECA 1955, the central government has the power to add or remove a commodity from the Schedule of the Act as they deem fit, in consultation with state governments.
Given the challenges posed by climate change and external factors affecting food production, commodities like wheat and pulses remain critical to India’s food security plan. Therefore, judicious use of laws such as the ECA 1955 will continue to be crucial for managing food supplies and ensuring food security.