The burden of food subsidy and mounting stocks of food grains in India: Empirical analysis

Abstract

The distribution of food grains through Public Distribution System (PDS) to the consumers to the targeted sections, at affordable prices has been an important objective of food management policy in India. The current food stocks in the country are far more than the needs. The problem of plenty is not going vanish away soon and it is a main concern of the policy makers. Along with this, the quantum of food subsidy has been increasing in India and has increased more rapidly during the recent years. This is basically because of the hike in Minimum Support Prices (MSPs), increase in procurement incidentals and distribution costs and expansion in the scale of PDS. The study intends to compute the rising trend in food subsidy and its determinants. It also intends to analyze the impact of rising MSPs on procurement and off take of food grains and finally to compare the role of MSP on rising food subsidies and rise in food grain stock. The study is based on the time series data on PDS off take, MSPs, PDS stocks, Central Issue Prices of food grains, food subsidy and production of food grains compiled from RBI hand book of statistics on Indian Economy economic survey, FCI reports and from ministry of food and public distribution. As the study finds that a two way relation between MSP and food subsidy and MSP and increasing stocks of food grains the role of MSP in the procurement operations of the government have to be taken into the account. Further, the study suggests that the food subsidy reforms have to be initiated to rationalize the burden of exchequer. The plan to computerize the TPDS databases along with the introduction of the Aadhaar/UID and NPR systems is the important stride to move forward.