WHAT IS ECA?

ECA

ECA stands for essential commodities act. The Essential Commodities act 1995 was legislated at a time when the country was facing a  scarcity of foods stuffs due to persistent low levels of food grains production .

• The country was dependent on imports and assistance (such as wheat  imports from US under PL-480) to feed the population .
• To prevent hoarding and black marketing of foodstuffs the ECA enacted in 1955.
• There is no specific definition of essential commodities in the ECA 1955.
• section 2 (A) states that an essential commodity means a commodity specified in the scheduled act.
• Legal jurisdiction; The act gives the power to the central government to add and remove a commodity in the schedule.
• The centre , if it is satisfied that it is necessary to do so public interest ,can notify an item as essential in consultation with state governments.

Objective

The ESA 1955 is used to curb inflation by allowing the centre to enable control by state government of trade in a wide variety of commodities.

Implementing agency 

The ministry of consumer affair , food and public distribution implements the act.

Impact

• By declaring a commodity as essential the government can control the, production ,supply ,and distribution of that commodity and impose a stock limit.

Issues related to ECA

The economic survey of 2019-2020 highlighted that the government intervention under ESA 1955 often distorted agriculture trade while being totally ineffective in curbing the inflation .Such interventions does not enable opportunities for rent-seeking and harassment  .Rent -seeking is a term used by economists to describe un productive income , including from corruption . Traders tend to buy far less than their usual capacity and farmers often suffer huge losses during surplus harvesting of perishables , this leads to farmers being unstable to get better prices due to lack of investment in cold storage , ware houses , processing and export .Owing to these issues , the parliament passed Essential commodities (amendment) bill 2020 , however due to farmers protest the government has to repeal this law.

Way forward

The ECA 1955 was brought when India was not self sufficient in food grains production.

However, now India has become surplus in most agri -commodities and amendments in the ECA 1955 isan important step by government to achieve it's target of doubling farmers income and also ease of doing business.