Masks and Hand Sanitizers under Essential Commodities Act

I. Background

People all over the world started panicking and stockpiling essential supplies as the virus spread through new regions and countries, The BBC on 4^th of March, 2020² reported the following from Australia:

“At least that appears to be the nightmare prospect scaring many Australians right now, who have become the latest group to respond to coronavirus fears by buying toilet paper en masse. This is despite authorities stressing there is no shortage - given most of the nation's rolls are made locally. However, in Sydney, the nation's largest city, supermarket shelves have been cleared in minutes, forcing one chain to enforce a four-pack buying limit. Police were even called to a dispute on Wednesday, with reports saying a knife was pulled out in an argument over toilet roll between panic buying shoppers.”

Marc Fisher, Senior Editor at Washington Post³ rightfully said in an article

“When the history of the coronavirus pandemic is written, the vanishing of toilet paper might rank as just a footnote in an otherwise dark and frightening account. But it might be a very long, complex and even wise footnote, because toilet paper — or rather, the lack of it — turns out to reveal a great deal about who we are and how we behave in a crisis.”

Directorate General of Health Services,Ministry of Health and Family Welfare, Government of India, issued guidelines on use of masks by public on 11^th of March, 2020⁴. People in India were already hoarding and panic buying masks and sanitizers in India. The New Indian Express reported on this issue on 9^th of March, 2020⁵, the report said:

“The shortage of hand sanitizer, masks and cleaning supplies and disinfectants, such as Dettol, continues in several parts of the country due to panic buying and hoarding for profiteering. In the Northeast, including Assam, pharmaceutical companies reported a whopping 1000% increase in the sale for such items in the last two weeks. Dipesh Kar, zonal head of a company, which supplies sanitizers said, “There are no stocks. The rush was sparked off by government’s advisory on the precautionary measures to be taken.”

The report also talked about the prices of these commodities

“The N95 masks, which costs Rs 45, is unavailable. If available, they sell for Rs 250, while triple-layer masks costing Rs 5 is now Rs 40 per piece,’’ said a leading chemist.

By this time, it was clear that something needs to be done to control the production, supply, distribution and trade of certain essential commodities like Masks and Sanitizers. The outbreak of the Covid-19 increased the demand of masks and sanitizers so much that the prices kept going up, hoarding and black marketing became rampant and the quality of the products started degrading. The only way to solve all these problems in India was to use the Essential Commodities Act, 1955 by the Central Government.

II. Overview of the essential commodities act, 1955

The origins of this act can be traced back to the year of 1939, during the World War II the Government of India made rules regarding control, production, supply, and distribution of certain specific commodities under the Defence of India Act, 1939. This act ceased to exist in the year of 1946, however the need to bring in some law to regulate some essential commodities in the interest of the general public urgently was still there in the minds of the lawmakers.

To fulfill this need, The Essential Supplies (Temporary Powers) Ordinance was passed in 1946, which was subsequently replaced by the Essential Supplies (Temporary Powers) Act, 1946⁶. After our country gained independence, the Essential Commodities Ordinance was passed and it was later replaced by the current Essential Commodities Act, 1955⁷.

(A) Object of the Act

The act was enacted to make sure that essential commodities always remain available to the consumers and to protect them from exploitation by unscrupulous traders. This act has provisions aimed to regulate and control the production, pricing and distribution of essential commodities.

The two main aims of this Act are as follows:

a) To maintain or increase the supply of these essential commodities, and

b) To secure equitable distribution and availability of these essential commodities.

(B) What is an Essential Commodity?

As per Section 2A of the essential commodities act an essential commodity refers to:

“2A. Essential commodities declaration etc.―

1) For the purposes of this Act, “essential commodity” means a commodity specified in the Schedule.

2) Subject to the provisions of sub-section (4), the CentralGovernment may, if it is satisfied thatit is necessary so to do in the public interest and for reasons to be specified in the notification published in the Official Gazette, amend the Schedule so as to―

(a) add a commodity to the said Schedule;

(b) remove any commodity from the said Schedule,in consultation with the State Governments.”

(C) Importance of Essential Commodities Act, 1955

The Essential Commodities Act ensures that the consumers and buyers do not face unnecessary spike in price of essential commodities. The government and the legislature are very serious about hoarders and black marketers and hence throughout history this act has been used multiple times to curb such practices. In a country so vast like India price hikes may occur because of a lot of factors, climate related disturbances or a present-day like pandemic situation, both of these are examples of events which can trigger deficiencies in the market. Harvests in our country are occasional and because of this uncertainty, developing stocks of various crops and essential items is very important, these stocks are different from “hoarding” but rather these are stocks for emergency or seasonal use. To differentiate between such stockings and to keep a check on the prices of various commodities the ECA is plays a vital role.

(D) Powers of the Central Government under the Essential Commodities Act:

The central government under this act has 2 major powers:

1. Powers to control production, supply, distribution, etc., of essential commodities:⁸

a) This act gives the central government powers to issue “control orders”, with the purpose of controlling, prohibiting and regulating essential commodities. These orders are passed when:

• When the government thinks that it is necessary to pass such orders for the benefit of general public of the nation.
• When it is felt that there is a need to secure equal availability and distribution of a commodity in the market.
• When any commodity needs to be secured for the “Defence of India”

b) As per section 3(2) of the Essential Commodities Act, ⁹ these orders may provide for the following:

“(a) for regulating by licences, permits or otherwise the production or manufacture of any essential commodity;

(b) for bringing under cultivation any waste or arable land, whether appurtenant to a building or not, for the growing thereon of food-crops generally or of specified food-crops, and for otherwise maintaining or increasing the cultivation of food-crops generally, or of specified foodcrops.

(c) for controlling the price at which any essential commodity may be bought or sold;

(d) for regulating by licences, permits or otherwise the storage, transport, distribution, disposal, acquisition, use or consumption of, any essential commodity;

(e) for prohibiting the withholding from sale of any essential commodity ordinarily kept for sale;

(f) for requiring any person holding in stock, or engaged in the production, or in the business of buying or selling, of any essential commodity, ―

(a) to sell the whole or a specified part of the quantity held in stock or produced or received by him or,

(b) in the case of any such commodity which is likely to be produced or received by him, to sell the whole or a specified part of such commodity when produced or received by him, to the Central Government or a State Government or to an officer or agent of such Government or to a Corporation owned or controlled by such Government or to such other person or class of persons and in such circumstances as may be specified in the order.”

2. Power to notify “essential commodity”

This power enables the central government to add or remove any commodity from the schedule from time to time in the interest of the general public. However, section 2A (4) of the act says the following:

“(4) The Central Government may exercise its powers under sub-section (2) in respect of the commodity to which Parliament has power to make laws by virtue of Entry 33 List III in the Seventh Schedule to the Constitution.”¹⁰

III. Fixation of prices

Section 3 of the Essential Commodities Act has provisions to empower the Central Government with the power of issuing orders, such orders may have provisions for regulation or prohibition in “the manner of production, supply and distribution of any essential commodity”.

An order which is made under the said section 3 shall have effect notwithstanding anything inconsistent with any other enactment other than the Act, or any instrument having effect by virtue of any enactment other than this Act.

(A) Constitutional Validity of Price Fixation

During the ongoing coronavirus pandemic, the central government used its power under this act to fix prices of various commodities, before having a look on those we should examine the constitutional validity of “price fixation” under this act. In the landmark judgement of Prag Ice & Oil Mills & Anr. Etc vs Union of India¹¹the Supreme Court held the following:

“The dominant purpose of these provisions is to ensure the availability of essential commodities to the consumers at a fair price. And though patent injustice to the producer is not to be encouraged, a reasonable return on investment or a reasonable rate of profit is not the sine qua non of the validity of action taken in furtherance of the powers conferred by s. 3 (1) and s. 3 (2) (c) of the Essential Commodities Act. The interest of the consumer has to be kept at the forefront and the prime consideration that an essential commodity ought to be made available to the common man at a fair price must rank in priority over every other consideration.”

The court further said that:

“the mechanics of price fixation has necessarily to be left to the judgment of the executive and unless it is patent that there is hostile discrimination against a class of operators, the processual basis of price fixation has to be accepted in the generality of cases as valid.”

A five-member bench of Supreme Court, in another landmark case of Shree Meenakshi Mills Ltd v. Union of India¹²,while examining with the validity of Cotton Textiles (Control) Order, 1948 issued under the Act has held the following:

“The question of fair price to the consumer with reference to the dominant object and purpose of the legislation claiming equitable distribution and availability at fair price is completely lost sight of if profit and the producer's return are kept in the forefront. The maintenance or increase of supplies of the commodity or the equitable distribution and availability at fair prices are the fundamental purposes of the Act. If the prices of yarn or cloth are fixed in such a way to enable the manufacturer or producer to recover his cost of production and secure a reasonable margin of profit, no aspect of infringement of fundamental right can be said to arise.

In determining the reasonableness of a restriction imposed by law in the field of industry, trade. for commerce, it has to be remembered that the mere fact that some of those who are engaged in these are alleging loss after the imposition of law will not render the law unreasonable."

The Constitution Bench of the Supreme Court, in the case of Sitaram Sugar Co. Ltd. v. Union of India¹³examined the status of as to who has the power to fix prices of essential commodities. The Supreme Court held that the same question of fixation of a fair and reasonable price for goods placed on the market has come up for consideration of Parliament and Courts in different contexts. It is clear that price fixation is a legislative function but the Parliament generally reacts only at the stage when it is of utmost importance to any social or economic objective or to discharge duties under the Directive Principles of State Policy, regulate or control over the distribution and consumption of the material resources of the community.

The Court concluded that:

“while Parliament has enacted the EC Act, it has left it to the discretion of the Executive to take concrete steps for fixing the prices of essential commodities as and when necessity arises, by promulgating control orders in exercise of the powers vested in the EC Act.”

IV. Essential commodities act and covid-19

The authorities had the job of keeping the supply chains of goods such as masks and sanitizers working and going as the country went into lockdown, the items crucial to the country's battle against the Covid-19 pandemic. In addition, the newly created (due to the pandemic) market for sanitizers and masks has contributed to a rise in their prices initially because of the demand. In the battle against pandemic Covid19, however, the availability of masks and sanitizers of the right quality and the right prices is very important.In order to resolve the situation, the Central Government released a series of orders under the Essential Commodities Act in the month of March onwards, declaring masks and sanitizers as necessary commodities and fixed prices of the same. It should be noted that price fixation orders on food grains, cotton, jute, oils & oil seeds, fertilisers, sugar cane and drugs have also been released since the enactment of the EC Act and the modalities for fixing fair prices thereunder too have come up for the Court's consideration.We may also acknowledge that the legislature has given a special position to the EC Act by putting it under the Ninth Schedule of India's Constitution. Article 31B of the Constitution of India states that “the Acts and Regulations specified in the Ninth Schedule shall not be deemed to be void, or ever to have become void, claiming such Act, Regulation or provision is inconsistent with, or takes away or abridges any of the rights conferred by any provisions of Part-III (Fundamental Rights) of Constitution of India.”

All three well-known brands of hand sanitizers just vanished from the market shortly after the government began publicizing protective measures against the virus, leaving customers with new brands of uncertain consistency. They also became highly skeptical of the absence of third party quality certification on most of these brands, more so considering the fact that many fake goods have also entered the market.Meanwhile, to ensure price control and accessibility of surgical and protective masks, hand sanitizer and gloves, the Centre had also invoked the Disaster Management Act. The Ministry of Health mandated the National Pharmaceutical Pricing Authority (NPPA) to inform these products as drugs in the light of reports of non-availability and black marketing of surgical and protective masks, sanitizers and gloves and as a measure of preparedness to resolve the challenge of the outbreak of COVID-19.

(A) Timeline of orders relating to masks and hand sanitizers under the Essential Commodities Act by the Central Government during the Covid-19 Pandemic

1. 13^thof March, 2020¹⁴ – The Central Government in exercise of its powers under section 2A, sub section (2) of the Essential Commodities Act, 1955 made an order to regulate the production, quality, distribution, logistics of masks and hand sanitizers.

a) The masks were of the following category – 2ply, 3ply, surgical masks and N95 masks

b) The order was called “Essential Commodities Order, 2020”

c) Section 2 of the order published in the Gazette of India read the following:

“2. In the Essential Commodities Act, 1955, in the Schedule, after serial No. (7), the followingitem shall be added, namely: —

“(8) masks (2ply & 3ply surgical masks, N95 masks) & hand sanitizers”.

d) From the date of publication of the said notification, it was supposed to remain in force till 30^th of June, 2020.

2. 19^thof March, 2020¹⁵–The Central Government in exercise of its powers under section 2A, sub section (2) of the Essential Commodities Act, 1955 made an order to regulate the production, quality, distribution, prices and other aspects of alcohols used in manufacturing the Hand Sanitizers for preventing infections due to virus and bacteria.

a) This order was called “the ingredients and prices of the ingredients as raw materials ofEssential Commodities Order, 2020.

b) This order was aimed at securing the raw material required to manufacture hand sanitizer i.e. alcohol, the order also said that in the Essential Commodities Act, 1955, the raw material used in manufacturing asessential commodity shall be treated as essential commodity.

c) The order also fixed the prices of the alcohol used in manufacturing of Hand Sanitizers and said that “the alcohols used in manufacturing the hand sanitizers shall not exceed fromthose prevailing on 05.03.2020 without concurrence of the Central Government.”

e) This order along with the previous order, from the date of publication of the said notification, was supposed to remain in force till 30^th of June, 2020.

3. 21^st of March, 2020¹⁶ - The Central Government in exercise of its powers under section 2A and section 3 of theEssential Commodities Act, 1955 made an order to regulate the prices of masks, the Melt Blown Non-Woven Fabric used as rawmaterial in production of masks, masksand hand sanitizers for preventing infectionsdue to COVID-19 virus.

a) This order was aimed at regulating the prices of 2ply and 3ply masks and the material required to manufacture these 2ply and 3ply masks.

b) This order was called “the fixation of prices of masks (2ply & 3ply), Melt Blown Non-Woven Fabric and hand sanitizers Order, 2020.”

c) The order fixed the prices of Melt Blown Non-Woven Fabric used in making 2ply and 3ply masks, the order also said that the prices of these items “shall not be more than the prices prevailing on the day one month prior to 13.03.2020i.e. the prices prevailing on 12.02.2020.”

d) The order fixed the prices as per the following chart:

e) This order along with the previous orders, from the date of publication of the said notification, was supposed to remain in force till 30^th of June, 2020

4. 24^th of March, 2020¹⁷ – This order was named as “the fixation of prices of masks (2ply & 3ply), Melt Blown Non-Woven Fabric and Hand Sanitizers (Amendment) Order, 2020”the purpose of this order was to add a line in the previous order dated 21^st of March, 2020. It added the following below para 2(2) of the previous order:

‘(A) The retail prices of 3ply surgical mask contain a layer of Melt Blown Non-Woven Fabric shall not be more than Rs.16/- per piece’.

(B) What if the retailers/traders/manufacturers do not comply?

The object of marking any product as "necessary" is to avoid profiteering at a time of exceptional demand. Therefore, violators are referred to as illegal hoarders or black-marketeers who can be tried. In addition to fines, a breach can result in imprisonment for a maximum term of seven years. On 2^nd of April, 2020 two men were arrested in northeast Delhi's Seelampur area for allegedly hoarding masks and sanitizers which were meant for public use to prevent the spread of the Coronavirus.

"The arrest was made after they were found hoarding masks and sanitizers meant for use by public for prevention of the COVID-19 pandemic," said Ved Prakash Surya, Deputy Commissioner of Police (Northeast).¹⁸

On 23^rd of March raids were conducted in Delhi’s Shahdara's Anand Vihar area by the police along with district administration authorities

Six thermometers, 1,09,000 gloves and 64,878 packets of masks were recovered during the raids, said Dinesh Kumar Gupta, Deputy Commissioner of Police (Shahdara).¹⁹

In these cases, FIRs were registered under essential commodities act, as per Section 7 of the Essential Commodities Act, 1955

“Penalties.―1 [(1) If any person contravenes any order made under Section 3,― (a) he shall be punishable,― (i) in the case of an order made with reference to clause (h) or clause (i) of sub-section (2) of that section, with imprisonment for a term which may extend to one year and shall also be liable to fine, and (ii) in the case of any other order, with imprisonment for a term which shall not be less than three months but which may extend to seven years and shall also be liable to fine”²⁰

On 25^th of March, 2020 a racket was busted by the Mumbai Police Crime Branch where over 25 lakh face masks were hoarded to be sold at high prices on the black market, taking advantage of the current crisis and the fear it has created in the minds of people.The accused were charged under the Essential Commodities Act.²¹

(C) What happened after the June 30 deadline?

The Ministry of Consumer Affairs said in an office memorandum released on July 1 to other ministries and government departments that these items are being withdrawn from the list of essential commodities as “there were no adverse reports from the States/UTs with respect to their price and availability”. “Therefore, the Department has decided not to continue these items as essential commodities under the Essential Commodities under the EC Act, 1955, beyond 30.06.2020,”²² it added.Companies engaged in the manufacture of these two items will bring back price variance on the basis of the ingredients and specs offered, with the government discounting the goods from the essential list.With many businesses and community-level societies pitching in to manufacture different types of the two products, the production of both sanitizers and face masks was subsequently ramped up. While the manufacturing of medical grade face masks is regulated by defined quality standards, there were several other categories that were intended to be used by mass-produced individuals who are not in the high-risk category to ensure an adequate supply of masks in the country.

V. Conclusion

Regulation is regarded by psychologists as a basic human need. This outbreak violated the feeling of control in fundamental ways with a disease that is extremely contagious and can turn deadly. The cycle of panic buying, hoarding and shortages only stands to escalate unless policy makers find a way to restore that feeling. In several places around the world, including in India, the coronavirus pandemic caused panic buying of masks and hand sanitizers. Andrew Stephen, a marketing professor at the University of Oxford’s Said Business School says “People are really not equipped psychologically to process this type of thing” “So that just makes it worse for a lot of people in terms of uncertainty, and then they do whatever they need to do to try and get back some control.”²³The pandemic not only triggered panic buying but became a money making opportunity for hoarders and black marketeers.

In the wake of reports of a shortage of these commodities and a sudden and sharp rise in their prices, and the suspected hoarding of stocks by manufacturers, the government declared these items as “essential commodities” The Centre had asked the states to invoke the Essential Commodities Act to ensure smooth supply chains in the midst of disturbances in the supply of essentials and fears of hoarding by traders.By invoking provisions of the Essential Commodities (EC) Act 1955, Home Secretary Ajay Kumar Bhalla wrote to all state chief secretaries to take immediate measures to ensure the availability of essential goods. These steps included the fixing of stock limits, price controls, enhancement of output, inspection of dealer accounts and other such steps.The Act enables the central government, if and when the need arises, to add new goods to the Essential Commodities list and to delete them from the list once the crisis is over or the situation improves. A long list of things, including various medications, fertilizers, cereals, peas, sugar, edible oils, petroleum and petroleum products, and certain crops, have been classified as necessary commodities over the years.

Declaring these products as essential commodities was not only beneficial fort the general public at large but also for front-line warriors like doctors, police officers, municipality workers etc. These front-line warriors were most susceptible to the disease and it was the responsibility of the government to provide them with adequate protection to prevent an infection.The spread of the novel coronavirus worldwide has led to numerous side effects, shop shelves from Singapore to Seattle were being stripped bare. In the U.K., supermarkets began rationing things. Australia saw brawls break out in supermarkets causing police to taser one man and after people started depleting the stock, France effectively nationalised all production of face masks.

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