Agriculture Reference
In-Depth Information
(and subsidy) to the state governments. It is the job of the state government to identify
deserving households and to distribute grain accordingly.
Identification is supposed to be done on the basis of some observable correlates of
households (e.g., type of housing, type of employment, land holdings, caste characteris-
tics). Even if done honestly, it cannot be expected that such a process would yield totals
that match the figures determined by the federal government. When identified house-
holds exceed the estimate of the federal government, the state government either has to
trim its list or must dig into its own resources to bridge the gap.
This has led to some discord between the federal and state governments. The federal
government is accused of using targeting to limit its subsidy bill while burdening the
state government with the unwelcome task of implementation. On the other hand, if the
federal government were to offer subsidies to all households identified as deserving by
state governments, the latter would have no incentive to observe discipline in the iden-
tification process.
One response of state governments has been to depart from the targeting parameters
that govern federal policy. The federal government allocates subsidies to states on the
basis of an entitlement of 35 kg of grain to BPL and POP households. By offering only
20 kg of grain, the southern state of Tamil Nadu has stretched the federal subsidy to
operate a near-universal subsidy scheme (with some resources from its coffers as well).
The willingness of some of the state governments to use the central subsidy together
with its own resources has been increasingly seen in the 2000s.
The Shadow of Procurement
Grain procurement has had several impacts on the wider agricultural economy of India
(Landes and Gulati 2004; Saxena 2004). Land and other resources have shifted to the
state-supported crops of rice and wheat. While this was understandably the original
intent of state policies formulated in the period of acute food shortage of the 1960s, it is
not clear this is appropriate today when the demand for nonstaple foods such as dairy,
fats, fruits, and vegetables are growing faster than the demand for grains. Second, the
cost-effective strategy for procurement is for the buying agencies to focus attention on
the “surplus” regions of North India, namely, Punjab, Haryana, and Uttar Pradesh. This
has led to complaints of lack of price support operations in other parts of India, notably
the eastern region. These are regions with conditions favorable to agricultural growth,
yet it is claimed that they have not emerged as effective food exporters because of the
concentration of resources in North India. More generally, because of the availability
of subsidized grain, the “deficit” states have neglected price support to their own farm-
ers and continue to have a food shortage. Third, procurement may be adverse to the
long-term interests of even the favored regions. The summer rice-winter wheat rota-
tion has environmentally degraded the lands in these regions. Fourth, procurement
has nothing to offer to the farmers growing the so-called coarse cereals (principally
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