Delivering Food Subsidy - The Oxford Topic of Food, Politics, and Society - page 302

there was still room for debate on the best means by which government should pro-
cure foodgrains.1 Should the government purchase grain at market prices, or should
it enforce a monopoly of grain trade and obtain supplies at a low cost? After debat-
ing these alternatives, the government opted for a “compromise” middle path. There
would be no monopoly, and a private trading structure would be allowed to function.
However, the government would operate a parallel marketing chain from procurement
to distribution. Thus, private markets would be excluded from the marketed surplus
procured and distributed by the government. In addition, there would be curbs on
market activity so that the government could obtain its supplies relatively cheaply. In
effect, through market suppression farmers would be taxed to part finance the subsidy
to urban consumers.
These policies continued even after the end of the colonial government in 1947.
Ironically, though, till the mid-1960s, domestic procurement (compared with commer-
cial imports and food aid) was neither an important nor reliable source of supply to the
PDS. The lack of success of the procurement machinery is repeatedly acknowledged in
government reports of the time and is ascribed to the existence of a free market where
traders compete away supplies. The Foodgrains Policy Committee of 1966 stated the
desired policy direction as follows:
In order to achieve the basic objectives of food policy, it is necessary for Government
to acquire a large share of the foodgrains produced in the country. It is in the light
of this requirement that systems of procurement and regulations affecting private
trade have to be formulated and appraised. Government has to strengthen its own
machinery for the procurement, transport and distribution for foodgrains for the
surplus as well as deficit areas.
(quoted in Chopra 1981)
These views reached their logical end with the state takeover of wholesale wheat trade in
1974. However, the move was unsuccessful and the policy had to be rescinded.
The reshaping of food price policies began in 1965 when the government formed the
Food Corporation of India, which became the principal central agency responsible for
purchase and storage of foodgrains. The other important event in the same year was the
formation of the Agricultural Prices Commission to advise on price policies for wheat,
rice, sorghum, millet, and other field crops. The state would offer a support price to miti-
gate the uncertainties of the market. The intent was to provide incentives to produc-
ers to adopt the new high-yielding varieties of wheat and rice that reached India in the
mid-1960s.
The success of the Green Revolution meant that the harsher aspects of the earlier food
policy directed at maximizing procurement could be moderated. At the same time, the
food surplus states now had clout in national politics that could be used to lobby for
prices favorable to farmers. Even by 1970, B. M. Bhatia (p 125,127) noted:
The concern of the Government in the matter of agricultural prices for the first
twenty years of independence was to keep down the prices of foodgrains through
controls, imports and rationing. The beginning of the Green Revolution has