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In situations where market conditions are such that purchases fall short of requirements, Government would need to make purchases on the basis of best terms.
The subsidy incurred on supply of food grains through PDS at below at FCI economic cost constitutes the subsidy of consumer, while produce subsidy is the direct outcome of the price support based on procuring operation of thus government.
The producer subsidy along with cost of maintaining the buffer stock accounts for cost buffer stock operation.
‘issue prices’ which are uniform for specified varieties or qualities of grains all over India.
The issue prices are generally lower than the economic costs of the procured grains where economic costs include procurement prices, procurement incidences and distribution incidentals.
Under the present system it is responsibility of the Central and State governments to ensure smooth flow of foodgrains and other commodities to consumers.
The Food Corporation of India (FCI), on behalf of the Central Government procures transports and stocks the grains in the central godowns (owned or hired).The department ensures the adequate availability of foodgrains at reasonable prices in different parts of the country.The public distribution system in India was started in early 1970s with an objective to make foodgrains and other necessary food items available to the economically weaker sections of the society at reasonable rates.The cereals appear to be only way of providing food security to the poor.At present there are 4.74 lakhs fair price shops all over the country.But PDS should be made effective so that BPL families get genuine protection.PDS should be strengthened to safe the poor suffering from food insecurity. The committee recommended that:(i) Quality norms should be strictly adhered to while procuring food grains for PDS distribution.(ii) Payments as statutory levies to state governments by FCI are essentially transfers from the centre to the state governments.There is need for special packages for diversification.(xv) There should be an automatic and transparent policy of variable tariffs both agricultural imports and expect linked to the deviation of spot international prices from their long run trends.This is required for stabilisation of prices in an open economy.(xvi) Barriers to private trade, economic well as legal, should be eased.(xvii) FCI has performed its role in its functions reasonably well and should continue to do so keeping in mind that there has to be a work culture of total quality management.(xviii) It is desirable that the FCI’s role be confined to procurement of the major cereals for the PDS that price support operation coarse cereals are handled by agencies.It is operated under joint responsibility of central and state governments. It was criticised that PDS failed to serve the rural poor. Special cards are issued to BPL families and food grains are sold to them at highly subsidised prices.From April 1, 2002 allocation of foodgrains has increased to 35 kg per family per month. Continued rise in minimum support price and consequent rise in economic cost without commensurate rise in issue price has caused rice of food subsidy.