Model Answer
0 min readIntroduction
Price and distribution controls of essential commodities in India have been a cornerstone of public policy aimed at ensuring food security and affordability, particularly for vulnerable sections of society. Rooted in the post-independence era of planned development, these controls initially sought to address widespread poverty and prevent hoarding. The Public Distribution System (PDS), established in 1965, is the primary instrument for implementing these controls. However, over time, these interventions have faced criticism for creating distortions in the market and inefficiencies in the supply chain. Recent reforms, like the National Food Security Act (NFSA) 2013 and digitalization efforts, aim to address these challenges and enhance the effectiveness of the PDS.
Main Objectives of Price and Distribution Controls
The primary objectives of price and distribution controls on essential commodities in India are:
- Food Security: Ensuring availability of essential commodities like food grains, sugar, edible oils, and kerosene at affordable prices to all sections of the population, especially the poor.
- Price Stability: Controlling inflation and preventing excessive price fluctuations, particularly during times of scarcity or natural disasters.
- Poverty Alleviation: Providing subsidized food grains to Below Poverty Line (BPL) families, thereby reducing their expenditure on essential commodities and improving their living standards.
- Equitable Distribution: Ensuring that essential commodities reach all parts of the country, including remote and underserved areas.
- Buffer Stock Management: Maintaining buffer stocks of essential commodities to meet emergency situations and stabilize prices. The Food Corporation of India (FCI) plays a crucial role in this.
Problems Caused by “Controls”
While intended to benefit the public, price and distribution controls often lead to several problems:
- Distortion of Market Signals: Artificial price controls disrupt the natural forces of supply and demand, leading to misallocation of resources.
- Black Marketing and Hoarding: Subsidized prices create incentives for black marketing and hoarding, as individuals attempt to profit from the price difference between controlled and open market prices.
- Leakage and Diversion: A significant portion of subsidized commodities is diverted to the open market, benefiting non-eligible individuals and reducing the availability for intended beneficiaries.
- Administrative Costs: Maintaining a vast network of fair price shops (FPS) and managing the procurement, storage, and distribution of commodities involves substantial administrative costs.
- Reduced Investment in Agriculture: Guaranteed prices for farmers, while providing some security, can discourage investment in improving agricultural productivity and efficiency.
- Fiscal Burden: Subsidizing essential commodities places a significant burden on the government's budget.
Example: The sugar industry has often been affected by price controls, leading to accumulation of unsold sugar and financial distress for sugar mills. This has necessitated government intervention in the form of subsidies and export incentives.
Steps Taken to Strengthen and Revamp the Public Distribution System
Recognizing the shortcomings of the traditional PDS, the government has undertaken several steps to strengthen and revamp the system:
- National Food Security Act (NFSA) 2013: This Act legally entitles 75% of the rural population and 50% of the urban population to subsidized food grains.
- Direct Benefit Transfer (DBT): DBT schemes have been implemented in several states to transfer cash subsidies directly to beneficiaries' bank accounts, reducing leakage and improving transparency.
- Digitization of PDS: End-to-end computerization of PDS operations, including online allocation of food grains, tracking of supplies, and biometric authentication of beneficiaries, has been undertaken to improve efficiency and accountability. The use of Point of Sale (POS) devices at FPS is a key component.
- Decentralized Procurement: Encouraging state governments to undertake decentralized procurement of food grains, allowing them to tailor procurement policies to local conditions.
- Diversification of Commodities: Expanding the range of commodities offered through the PDS to include pulses, edible oils, and other essential items.
- Fair Price Shop Automation: Automating FPS operations through the installation of electronic weighing machines and POS devices.
- Integration of Ration Cards with Aadhaar: Linking ration cards with Aadhaar numbers to ensure accurate identification of beneficiaries and prevent duplication.
Recent Developments: The ‘One Nation One Ration Card’ (ONORC) scheme, implemented nationwide, allows beneficiaries to access their entitled food grains from any FPS across the country, enhancing portability and convenience. As of December 2023, 36 states and UTs have been integrated with ONORC.
| Reform | Impact |
|---|---|
| NFSA 2013 | Legal entitlement to subsidized food grains, improved targeting. |
| DBT | Reduced leakage, increased transparency, empowerment of beneficiaries. |
| Digitization | Improved efficiency, accountability, and tracking of supplies. |
| ONORC | Enhanced portability, convenience for migrant beneficiaries. |
Conclusion
Price and distribution controls, while initially intended to address food security and poverty, have presented significant challenges in terms of market distortions and administrative inefficiencies. The ongoing efforts to revamp the PDS through digitization, DBT, and legal frameworks like the NFSA are crucial steps towards creating a more efficient, transparent, and targeted system. However, sustained political will, effective implementation, and continuous monitoring are essential to ensure that the benefits of these reforms reach the intended beneficiaries and contribute to a more equitable and food-secure India.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.