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Saturday, February 22, 2014


The Essential Commodities Act-1955 (India) affects production pricing and distribution decisions of a company. Its objective is to control, in the interest of the general public, the production, supply, and distribution of trade and commerce in certain commodities declared essential under the Act. Section 2 of the Act defines essential commodities and lists a large number of products that are included under it. Whenever a company markets these commodities, the provisions of the Act apply to it. The provisions influencing product and distribution decisions in particular have been discussed here while provisions relating to pricing have been elaborated later under impact of government control on pricing decisions.

Section 3 of the Act empowers the Central Government to regulate and or prohibit the production, supply, and distribution of essential commodities and trade and commerce therein if in its opinion it is necessary for maintaining or increasing supplies of any such commodity or for securing their equitable distribution and availability at fair price.

This power of the Central Government may be exercised in the following ways:

1)   regulating by licences, permits or otherwise the production or manufacture of any essential commodity;
2)   controlling the price at which it may be bought or sold;
3)   regulating by licenses, permits or otherwise its storage, transport, distribution, disposal, acquisitions, use or consumption;
4)   prohibiting the withholding from. sale of any essential commodity ordinarily kept for sale;
5)   requiring any person holding its stock to sell the whole or a part of it to the Government.  

The Act imposes both civil and criminal liability on the person for the contravention of the orders made under this Act.


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