Agriculture Reference
In-Depth Information
two arguments are essentially governance issues and should not be taken seri-
ously in a country like India. If a country is able to prevent counterfeiting of its
currency, there is no reason why it should not be able to prevent counterfeiting
food coupons. Similarly, stopping misappropriation is no different from fighting
corruption in other sectors of the country. The issue of mistargeting is a problem
for both food- and cash-based programs. However, issuing food coupons can be
a substantial cost cutter, as it does not require the large stock holding and distri-
bution necessary to administer food-based programs, such as PDS.
To summarize, delinking SSN programs from the current policy paradigm
will be an essential part of policy reform. From the efficiency point of view,
it will require a gradual move away from direct food transfer programs. Initial
pilot programs with food coupons have shown signs of success and, given
the level of technology, large-scale replication (scaling up) of such programs is
feasible. However, such scaling up has not happened, which perhaps points to
the challenge of dealing with the political economy. Economic analyses are of-
ten not powerful enough to overcome this problem—it needs strong political
commitments.
Summary and Conclusions
The objectives of this chapter have been to assess the policy justifications for
public intervention, critically review the current policy practices, and infer the
cost implications of the Indian government's grain policy. Our analyses suggest
that rationales for public intervention in grain markets have changed over the
years. None of the commonly accepted rationales for intervention appears per-
suasive in the twenty-first century. Transport and communication infrastruc-
tures have improved, farmers have mastered the new technology from the Green
Revolution, and the international liquidity constraints are practically nonexist-
ent today. The thinness and volatility of world food markets are no longer a sig-
nificant issue, because India is not likely to enter global markets as a large im-
porter of grain in the foreseeable future and the world grain market has matured
in terms of size and stability.
Yet the policy paradigm continues to be more or less the same way as dur-
ing the early years of the Green Revolution. FCI continues to enjoy preferen-
tial treatments under a host of regulations, including cheap and large amounts
of credit, preferential access to transportation, and monopoly control over ex-
port of wheat and import of pretty much all types of grain. By contrast, the pri-
vate sector's operations are constrained by storage restrictions, limited access
to trade credit, and a myriad of state regulations. The consequences of holding
onto the old paradigm have manifested themselves in many ways: programs are
becoming increasingly expensive and inefficient, crowding out resources from
alternative investments, and are increasingly dictated by rent-seeking individ-
uals and special interests.
