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India’s Burgeoning Food Subsidies: How Much can we Blame the Food Corporation of India?

Author

Listed:
  • Shome, Swaha

    (Adjunct Faculty – ICFAI Business School Mumbai, India)

  • Lalvani, Mala

    (Department of Economics, University of Mumbai, India)

Abstract

The Food Subsidy Bill of the Government of India has increased manifold in the past decades. The Food Corporation of India (FCI) is responsible for ensuring that the subsidy reaches both the producers through the support prices and to the consumers through the Public Distribution System (PDS). The high economic costs of the Food Corporation, along with low PDS prices contributes to the rising food subsidy bill. Some parts of this economic costs are within the purview of the FCI while others are completely outside its domain. Hence this paper attempts to ascertain the factors leading to the increasing food subsidy and the extent to which these are attributable to the FCI. We find that, in fact, some of the major components of the economic costs, which are leading to rising food subsidy, are not within the control of the FCI and to that extent, the parastatal can be absolved of the blame. The villain of the piece appears to be the support price policy of the government and some components of the economic cost of FCI, which are outside the purview of the FCI. The paper also delves into analysing the cost components of FCI in an attempt to assess the performance of the parastatal itself. Sussidi alimentari crescenti in India: quanto possiamo ritenere responsabile la Food Corporation of India? Il Food Subsidy Bill del governo indiano è cresciuto secondo molte modalità negli ultimi decenni. La Food Corporation of India (FCI) è responsabile della destinazione dei sussidi affinché siano assegnati ai produttori attraverso il sostegno ai prezzi ed ai consumatori tramite il Public Distribution System (PDS). Gli elevati costi della Food Corporation, insieme ai bassi prezzi del PDS, contribuiscono al sorgere del conto sussidi agli alimentari. Parte di questi costi rientrano nelle competenze della Food Corporation, mentre altri sono completamente al di là del suo ambito di attività. A questo proposito questo lavoro cerca di individuare i fattori che portano ad un incremento dei sussidi alimentari e in che misura questi fattori siano attribuibili alla Food Corporation. Sono state riscontrate evidenze che alcune componenti dei costi che causano gli elevati sussidi non rientrano tra le competenze della Food Corporation e di conseguenza l’ente statale non ne può essere ritenuto responsabile. I responsabili sembrerebbero essere la politica di sostegno ai prezzi condotta dal governo e alcune componenti di costo che sono al di fuori delle competenze della Corporation stessa. Questo studio approfondisce anche l’analisi delle componenti di costo della Food Corporation nel tentativo di valutare l’efficienza dell’ente stesso.

Suggested Citation

  • Shome, Swaha & Lalvani, Mala, 2017. "India’s Burgeoning Food Subsidies: How Much can we Blame the Food Corporation of India?," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 70(3), pages 353-390.
    • Handle: RePEc:ris:ecoint:0808
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    References listed on IDEAS

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    1. Jha, Shikha & Srinivasan, P. V., 1999. "Grain price stabilization in India: Evaluation of policy alternatives," Agricultural Economics, Blackwell, vol. 21(1), pages 93-108, August.
    2. Alagh, Munish, 2013. "Positive and Normative Aspects of Food Policy and the Market in Indian Agriculture-An Empirical Analysis of Government Policy Interventions in Food Management," IIMA Working Papers WP2013-01-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    3. Sharma, Vijay Paul, 2012. "Food Subsidy in India: Trends, Causes and Policy Reform Options," IIMA Working Papers WP2012-08-02, Indian Institute of Management Ahmedabad, Research and Publication Department.
    4. Sharma, Vijay Paul & Alagh, Munish, 2013. "Food Subsidy in India: Its Components, Trends, Causes and Reforms for Public Policy," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 68(2), pages 1-27.
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    2. Ana Miranda, 2018. "Public food procurement from smallholder farmers: literature review and best practices," Working Papers 176, International Policy Centre for Inclusive Growth.

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    More about this item

    Keywords

    Food Subsidy; Economic Costs; Sales Realisation;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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