Effective public procurement of food grains: A case of India under differential charges

Abstract

The procurement of food grains by the government agencies under the Indian food program has been an important policy towards the achievement of self-reliance in food grains production. However, the rising food subsidy, especially in the last decade, including a skewed procurement pattern, raise various concerns before the policymakers. In this paper, an effort is made to provide a policy direction to move towards a balanced procurement plan across the states and to reduce the relevant operational cost. A game-theoretic model is formulated with three players: the central agency, a surplus state, and a deficit state for representation at three different levels. It has been found that a quantity-based incentive to the deficit state would address both the issues. The optimal incentive would depend on the amount of change in procurement in a state. However, beyond a threshold value, it would have no impact on the optimal incentive. Procurement cost parameters of the deficit state are more sensitive not only for the decrease in the relevant operational cost but also for the balanced procurement between the states. Besides, with a rise of the inter-state transportation cost, the scope of relevant operational cost reduction before the central agency increases.