Agriculture Reference
In-Depth Information
markets, not the availability of food in India as a whole in that particular year.
1
Because of inadequate infrastructure, limited information flow across regions,
and a weak marketing network, foods from surplus areas did not move to Ben-
gal to prevent the famine. Thus, the central justification for heavy public in-
volvement in foodgrain marketing was to address the inability of private traders
to ensure efficient allocation of essential commodities across space and time.
As a first step, the Department of Food was made responsible for managing the
Indian food economy and performing the following functions: (1) maintaining
central reserves of foodgrains, (2) importing and procuring foodgrains, (3) reg-
ulating prices and controlling interstate movement of foodgrains, and (4) con-
structing and leasing storage facilities.
The scope, coverage, and administrative structure of public intervention
grew quickly during the remainder of the colonial era. At independence in 1947,
about 54 million people were under statutory rationing and another 90 million
under other forms of public distribution (Chopra 1981). Because of increased
commitment to public distribution, foodgrain imports rose from about 1.6 mil-
lion tons in 1944 to 2.37 million tons in 1947. To reduce mounting costs of pub-
lic distribution, the newly formed government decided to deregulate prices in
December 1947, but prices soon started rising and the policy had to be reversed
in less than a year. In 1952, because of adequate food supply, the government
announced a gradual relaxation of controls, including a drastic reduction in
rationing and abolition of public procurement programs. However, increased
production, combined with lower rationing commitments, led to sizable stock
build-ups in the subsequent years, which had to be released to the market to
avoid spoilage. At the same time, strict monetary controls and enhanced crop
prospects caused the prices of rice and wheat to start declining sharply during
1953/54, leading to complete abolition of rationing and hence withdrawal of the
government from grain marketing. The foodgrain trade in India was free again.
But the free trade of foodgrain in India was short lived. By the middle of
1955, prices started rising again, and government controls on grain trade had
re-emerged. In 1957, the government set up a Foodgrains Enquiry Committee
(FEC) to analyze the food situation and suggest new food policies. The com-
mittee's recommendation to the government was to establish a food price sta-
bilization organization, which would not only take over some of the tasks of the
Department of Food but would also operate as a trader in the market. The gov-
ernment intervention in grain markets as a trader was deemed necessary on two
grounds: (1) to improve the efficiency of foodgrain markets by ensuring the
availability and stability of foodgrain price across space and over time and
(2) to counterbalance the speculative activities of private traders.
1. We view this phenomenon differently from Sen's (1981) interpretation of famine as enti-
tlement failure. Although Sen's work has been influential in the literature, many have criticized his
approach in recent years. See Devereux (2001) for a recent critique.
