Context: Masks and hand sanitisers have been declared as essential commodities due to shortage in the wake of the COVID-19 outbreak.
More about the news:
- The Centre has notified an order under the Essential Commodities Act, 1955 to declare 2 ply and 3 ply surgical masks, N95 masks and hand sanitisers as essential commodities till June 30, 2020.
- It has also issued an advisory under the Legal Metrology Act, so that States can ensure these items are not sold for more than the Maximum Retail Price (MRP).
Why this move?
- It has been noted that these products are either not available with most of the vendors in the market or are available with great difficulty at exorbitant prices.
- Thus, the Centre takes decision following their shortage.
- States can now notify the Central order in their own official gazettes, and ask manufacturers to enhance production capacity of these products.
- The decision would also empower the State and Central governments to regulate production, quality, distribution and sales of these items and carry out operations against those involved in speculation, overpricing and black marketing.
- Consumers can register complaints in this regard with the National Consumer Helpline 1800-11-4000 or at consumerhelpline.gov.in.
- An offender under the Essential Commodities Act can be punished with imprisonment up to seven years, or a fine, or both.
About Essential Commodities Act
While India is a market economy where prices are ostensibly decided by demand and supply, certain laws empower the Centre to intervene in the market to protect consumer interests. The Essential Commodities Act (ECA) is one such key law.
What is it?
- Enacted way back in 1955, the law has since been used by the Government to regulate the production, supply and distribution of a whole host of commodities it declares ‘essential’ in order to make them available to consumers at fair prices.
- The list of items under the Act include drugs, fertilisers, pulses and edible oils, and petroleum and petroleum products. The Centre can include new commodities as and when the need arises, and take them off the list once the situation improves.
- 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.
Why is it important?
- Gives consumers protection against irrational spikes in prices of essential commodities as it improves supplies.
- Cracks down on hoarders and black-marketeers of such commodities.
Another side to the story:
- Difficult to differentiate between genuine stock and speculative hoardings: Given that almost all crops are seasonal, ensuring round-the-clock supply requires adequate build-up of stocks during the season. So, it may not always be possible to differentiate between genuine stock build-up and speculative hoarding.
- Disincentivizes farmers: Also, there can be genuine shortages triggered by weather-related disruptions in which case prices will move up. So, if prices are always monitored, farmers may have no incentive to farm.
- Disincentivizes traders: With too-frequent stock limits, traders also may have no reason to invest in better storage infrastructure.
- Curtail operations of food processing industries: Also, food processing industries need to maintain large stocks to run their operations smoothly. Stock limits curtail their operations. In such a situation, large scale private investments are unlikely to flow into food processing and cold storage facilities.
According to the Economic Survey 2019-20, Essential Commodities Act is out-dated and must go.
- Without the ECA the common man would be at the mercy of opportunistic traders and shopkeepers.
- It empowers the government to control prices directly too.
- The amendment to the Legal Metrology (Packaged Commodities) Rules 2011 is linked to the ECA. The Government can fix the retail price of any packaged commodity that falls under the ECA.
About Legal Metrology Act,2009
Objective: To establish and enforce standards of weights and measures, regulate trade and commerce in weights, measures and other goods which are sold or distributed by weight, measure or number.
Legal Metrology (Packaged Commodities) Rules, 2011
Ministry of Consumer Affairs, Food & Public Distribution
- The Legal Metrology (packaged Commodities) Rules, 2011 are framed to regulate the pre-packaged commodities in order to provide protection to consumers from malpractices of under-weight or under-measurement.
- Under these rules, the pre-packaged commodities have to comply with certain mandatory labelling requirements.
Some of the salient features of the amendments:
- Declaration about the manufacturer: Goods displayed by the seller on e-commerce platform shall contain declarations required under the Rules like name & Address of the manufacturer, packer and importer, name of the commodity, net content, retail sale price, consumer care complaint, dimension etc.
- Specific mention is made in the rules that no person shall declare different MRPs (dual MRP) on an identical pre-packaged commodity, unless allowed under any law.
- This will benefit consumers at large as they are having complaints regarding dual MRP for item depending upon different types of public places like Cinema Hall, Airport, Malls etc.