ESSENTIAL COMMODITIES ACT, 1955
1. Context
As the blockade of the Strait of Hormuz exposed the vulnerability of India’s supply chain for cooking gas, the majority of which is imported, the Union government invoked the Essential Commodities Act, 1955. While long-term steps are needed to diversify and reduce reliance on global suppliers and expand strategic reserves, the Act is a crucial emergency tool for now. It allows the Centre to direct refiners to boost domestic LPG production, prioritise household consumption, and regulate the allocation of natural gas.
2. What is the Essential Commodities Act, 1955?
- The Act authorizes the Union government to regulate the production, supply, and distribution of key commodities, such as medicines, fertilizers, food items, edible oils, fuels, and seeds.
- According to Section 3 of the Essential Commodities Act, 1955, the government may issue directives to ensure adequate supply, promote increased production of essential goods, and guarantee their fair distribution so that they remain accessible to the public at reasonable prices.
- It also has the authority to fix prices and stock limits, restrict certain sales, regulate storage, transportation, and distribution, and take measures to curb hoarding and black-marketing.
- In recent years, the Act has been used to address shortages of commodities such as wheat, sugar, and pulses. It was also enforced during the COVID-19 lockdown to curb hoarding, profiteering, and black-market activities involving several essential goods
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Essential commodities are goods that are necessary for daily life and whose shortage can affect the public. Under the Act, the Central Government can declare any commodity as essential. Common examples include:
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3. Why is this law invoked now?
- Amid military strikes by the United States and Israel, Iran has responded by launching attacks on oil-producing countries in the Persian Gulf that host U.S. military bases and by targeting vessels passing through the Strait of Hormuz.
- Although nearly one-fifth of the world’s oil trade moves through this strategic maritime route, the immediate concern for Indian consumers has been the potential disruption in the supply of Liquefied Petroleum Gas (LPG), commonly used as cooking fuel.
- Government initiatives such as the Pradhan Mantri Ujjwala Yojana significantly expanded LPG access in India, raising household coverage from around 62% in 2016 to almost universal access today.
- However, domestic production has not grown at the same pace as demand. In 2024–25, Indian refineries produced about 12.8 million metric tonnes of LPG, meeting only around 41% of the country’s annual requirement of 31.3 million tonnes, according to data from the Petroleum Ministry.
- The remaining demand is met through imports, nearly 90% of which pass through the Strait of Hormuz.
- Apart from LPG, Liquefied Natural Gas (LNG) is also used in Indian households through pipeline networks, as well as for transportation and various commercial applications.
- Of India’s daily gas consumption of roughly 189 million metric standard cubic meters, about 52% is produced domestically.
- Meanwhile, approximately one-quarter of the total demand is satisfied through imports from the Persian Gulf
4. How does order affect LPG Production?
- On March 5, the government instructed all oil refineries across India to divert their propane and butane outputs toward LPG production instead of using them for petrochemical manufacturing.
- A follow-up directive issued on March 9 expanded the scope of this order to include oil refineries and petrochemical units located in Special Economic Zones (SEZs).
- It further clarified that propylene, butene, and other components from the C3 and C4 hydrocarbon streams must also be utilised solely for LPG production.
- The directive applies not only to public sector refiners such as Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum, but also to other entities including Chennai Petroleum Corporation, Oil and Natural Gas Corporation, and Numaligarh Refinery Limited.
- In addition, private-sector refiners like Reliance Industries and Nayara Energy have also been brought under this order.
- According to the government, these measures have already boosted domestic LPG production by about 25%. Nevertheless, a significant portion of the country’s demand—roughly half—still needs to be met through imports.
- The directive also mandates that all LPG output be supplied exclusively to Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum, which have been instructed to prioritise distribution of cylinders to household consumers.
- As a result, reduced supply to commercial establishments has led several restaurants, hostels, and hotels to temporarily close or scale down their operations
5. Regulation of Natural Gas Supply
- The directive issued on March 9 regarding natural gas does not alter production levels; instead, it introduces a priority-based system for allocating gas supplies, superseding existing contractual arrangements.
- Under this framework, the highest priority is assigned to piped natural gas supplied to households, compressed natural gas used in transportation, gas required for LPG production, and fuel for pipeline compressors.
- These sectors will receive supplies equivalent to 100% of their average consumption during the previous six months, subject to overall availability.
- Fertilizer producers will be allocated about 70% of their usual requirements, although this proportion may be revised if ongoing conflict continues to disrupt supply chains during the kharif sowing season.
- Meanwhile, sectors such as tea processing, manufacturing, and other industries will receive up to 80% of their typical supply.
- Certain petrochemical units operated by Oil and Natural Gas Corporation, GAIL, and Reliance Industries may experience partial or complete reductions in liquefied natural gas (LNG) supplies. Additionally, natural gas allocations to oil refineries are expected to fall to around 65% of their normal consumption levels
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For Prelims: Essential Commodities, liquefied natural gas (LNG), Special Economic Zones (SEZs)
For Mains: GS II - Policy and Governance
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Previous Year Questions
1.Which of the following statements is/are correct about the Strait of Hormuz?
Select the correct answer using the code below: (a) 1 and 2 only Answer: (a) 2.With reference to Liquefied Natural Gas (LNG), consider the following statements:
Which of the statements given above are correct? (a) 1 only Answer: (b) 3.Consider the following statements:
Which of the statements given above is/are correct? (a) 1 only Answer: (c) |
Source: The Hindu
