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Understanding Hoarding and Essential Commodity Act

hoarding essential commodity act

With the announcement of Essential Commodity Act in yesterday’s cabinet meet, an expectation has surfaced that it will help to eliminate the practice of hoarding prevalent in the society. Here is a brief account which answers the queries regarding hoarding and essential commodities act.

Q: What is hoarding?
A: Hoarding is storing huge quantities of a product to generate artificial scarcity, so that you can sell that product at a higher price. A recent example of hoarding would be N95 masks.

Q: What is the Essential Commodities Act?
A: The Essential Commodities Act is an act of Parliament of India which was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or blackmarketing would affect the normal life of the people. This includes foodstuff, drugs, fuel etc. It was enacted in 1955 amidst massive food scarcity. (If you haven’t heard of it, please Google search “Khadya Andolon”, 1959.)

A recent example of the ECA in action would be placing hand sanitizers under the same.

Q: Why would anyone oppose this act?
A: The Government of India has argued, long before the Covid-19 pandemic, that the ECA stops traders from buying surplus items from farmers and therefore leads to losses for farmers. It is supposed to help “ease of doing business.”

Q: What do the new amendments do?
A: The new amendments have taken rice, pulses, edible oils, grains, etc out of the ECA purview. They are no longer “deemed necessary”, and can be procured at will. Recent moves to create a central agricultural market also means that corporate players (such as Gautam Adani’s Fortune, which also owns major godowns and cold storages now, and was responsible for toor daal price inflation in 2015, and Reliance Fresh) stand at a particular advantage. Contract farming too might now become a reality.

Q: Who stands to benefit from this?
A: Big players, certainly.

Q: Will this lead to hoarding and inflation?
A: Time will tell. But we have every right to be very very sceptical of the sudden need to remove major food items from the ECA. As recently as early April, the cheaper daal varieties disappeared from the retail market, leaving us with no option but to buy daal at 120 rupees here (unless you went to a wholeseller) in West Bengal. Anyone who has done rations or community kitchen work has experienced this. What could this mean down the line, with an aggressive Fortune and Reliance? I cannot say, but would ask you nonetheless to Google the toor daal price rise in 2015.

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