top of page
  • Writer's pictureLAWGIC STRATUM

ESSENTIAL COMMODITIES ACT (Effect of its amendment, 2020)

Updated: Jan 6, 2021

Author: Janaki Nair


The original Essential Commodities Act was instituted in the year 1955 by the Central Government of India. The Act was initially brought to the public in order to regulate, supervise and control the distribution, production, and supply (and thereby commerce and trade-related activities) of ‘certain commodities’. [1] Though literally prescribed in the name of the Act, there is no explicit definition of what exactly constitutes the ‘essential commodities’, other than the fact that it is a commodity that is specified in the Schedule[2] of the Essential Commodities Act. Till the amendment came to place, the essential commodities were drugs, food including edible oil, fruits, vegetables, face masks, and sanitizers (the last two were added due to the outbreak of the pandemic).

The 1955 Act was established at a time when India faced an astounding shortage and scarcity of basic food as a result of extremely low levels of production technology that existed in India around that period of time. As a result, the country had to depend on foreign countries for imports and assistance with regards to food in order to keep the population fed. However, the Government at that time saw that the scarce food grains were being misused by many known and unknown agencies, and therefore established the current Act in order to stop black marketing and hoarding of these precious food grains.

India has come a long way from that dreaded few years in its history. According to a report submitted by the Ministry of Consumer Affairs, Food and Public Distribution, the rise in the production levels of wheat, rice, etc. has doubled and tripled in the current economy when compared to the economy that existed during the initialization of the Act.[3]In fact, India has turned a complete 180 degree in its dependencies and has now established itself as one of the biggest exports of many agricultural products all over the world.


The Government of India passed the Essential Commodities Amendment Bill was passed by the Parliament in September 2020 with an idealistic view to boosting the incomes of the ever-struggling farmers of India. The author Zia Haq[4] has explained the rationale given by the Indian Government is that India has come a long way since the 1960s and 1970s, and the continuing control of the Government on small and poverty-ridden farmers by way of the 1955 Act had discouraged huge corporations to even think of doing business with these farmers, which may have helped in the development of the latter.

Following are the amendments and their effects:


Before, the so-called essential commodities that were listed in the Schedule of the Act were under the direct supervision of the State and Central Governments of India. Earlier, the products of these farmers were regulated in terms of their supply and price limits by way of the Government. The respective State Governments could control the quantities that traders could store, by way of ‘stock holding limits’.

Now, the products do not enjoy any sort of such safety mechanisms by the Government. The Government has stated in the amended Act that it will impose the abovementioned ‘stock holding limits’ to traders (corporates, private players, etc.) only in exceptional circumstances such as natural calamities, war, famine, etc. Moreover, this newly formed imposition of stock holding limits is again controlled by two price - triggers that need to be proved –

(i) there should be a 100% increase in the retail price of the perishable agricultural produce, (ii) there should be a 50% increase in the retail price of the non-perishable agricultural food-related items.


This point can be thought of as an ancillary to the above. In addition to deregulation, the amended Act has scrapped certain commodities as ‘essential’, such as onions, potatoes, edible oil, etc. Now, they can only be added back into the Schedule if a resolution to that effect is passed in the Parliament.

In fact, this amendment constitutes only one-third of what are three agricultural-based bills supposed to improve the functioning and living situation of the farmers.


The target – group of this amendment was basically the farmers and large corporates and/or private players of the industry. From the get-go, it proved to be an amazing opportunity for these big corporates, as the essential middlemen were removed from the trade business as a part of one of the agricultural reforms bill. Just like how it was imagined, the corporates now do have an abundance of farmer resources to go to for their needs.

However, even though the bill said it would be beneficial to the farmers, the farmers themselves are in vehement protest to such a statement. Instead of increasing control over their products, the farmers are getting robbed off by the corporates. They are at the mercy as due to the lifted restrictions in government regulation, the corporates trick the farmers into selling it for a much lower price than desired by pretending that their stocks are full.

The wide range of the price – trigger to invoke the Act will also result in inflation across the country, thereby making the poor poorer once again in terms of food resources and the rich richer. Price triggers should at least be in reference to localities who would be able to afford such high costs of basic foodstuff.


The Indian Government still has a long way to with regards to its imposition and implementation of public-beneficial laws and acts.


[1] S.3, The Essential Commodities Act (1955). [2]S.2(A), The Essential Commodities Act (1955). [3]Harikrishnan Sharma, Explained: What is the Essential Commodities Act, and how will amending it help?, THE INDIAN EXPRESS, (Accessed on 11th December, 2020, 07:32 PM). [4] Zia Haq, Decoding the impact of ECA Amendments, HINDUSTAN TIMES, ( Accessed on 11th December, 2020, 07:32 PM)

44 views0 comments
bottom of page