Agriculture Reference
In-Depth Information
coincided with a marked shift in the price policy of the State Governments, from the
desire to protect the interests of the urban consumer to promoting the interests of the
agricultural producer. The new policy solves the procurement problem of the State
governments . . . . Such a policy is necessary to provide the much needed incentives to
the farmer to use costly but highly productive inputs, thus increasing food produc-
tion in the country. Behind these economic arguments, however, lie powerful politi-
cal considerations. In most of the states, strong agricultural lobbies have emerged. . . .
In such a situation prices fixed are bound to be what are politically feasible and not
what are economically fair, as determined by an expert body like the Agricultural
Prices Commission. (pp. 125, 127)
However, not all elements of food price suppression were discarded. Anti-hoarding laws
still remain on the topics to restrain competition to government procurement from pri-
vate trade. Further, till India reformed its trade policies to comply with treaty obligations
at World Trade Organization, farmers' access to world markets were tightly regulated by
the government. Indeed, the situation did not materially change even in the 2000s when
the government was supposed to have given up on quantitative restrictions on trade. For
instance, wheat and rice exports were banned in the latter half of the 2000s during the
boom in world commodity prices.
Notwithstanding these qualifiers, the government achieved a greater balance between
producer and consumer interests starting from the 1970s, when the food policy con-
text changed because of the Green Revolution's technological breakthroughs. Earlier
concerns about movements in intersectoral terms of trade adverse to industry faded
away. With the decline of food aid, the growth of domestic food surpluses, declining real
prices of foodgrains, and greater political clout of farmers, the emphasis of food distri-
bution shifted to support of farmgate prices, stabilization, and subsidy for lower income
groups. The policies of procurement and buffer stocks dovetailed neatly into the public
distribution system (Mooij 1998; Varshney 1993).
The public distribution system was converted from a general entitlement to a targeted
scheme in 1997. Subsidies now depend on whether the household is classified as above
poverty line (APL), below poverty line (BPL), or poorest of the poor (POP). APL house-
holds are charged the highest prices, whereas the POP households pay the least. The
administration of targeting has brought into focus India's federal structure. While the
federal government is largely responsible for funding, procurement, and transport of
grain, the implementation and delivery of food subsidies is in the hands of the states.
A similar division of responsibilities underlies the implementation of targeting. On
the basis of household expenditure sample surveys and other means, the federal gov-
ernment determines the aggregate number of BPL and POP households within a state
that are deserving of subsidy. It uses this figure to allocate and distribute the grains
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