[Answered] Critically examine the measures taken by the Indian government to stabilize rice prices. How effective are these measures in addressing the underlying causes of price inflation?

Introduction: Give a brief context to the question

Body: Highlight measures taken to stabilize rice prices and the effectiveness of these measures

Conclusion: Way forward

The retail price of rice has increased by 14.51% in the last year &  rice inflation is high in the varieties that are largely preferred by consumers.

Measures taken to stabilise prices

  • Reporting of stocks: The government has asked traders, wholesalers, retailers, chain retailers, and millers to report the stocks online in the categories of broken rice, non-basmati white rice, par-boiled rice, basmati rice, and paddy.
  • Affordable rice: The government has also launched the retail sale of ‘Bharat Rice’ to general consumers at ₹29 per kg to counter price inflation.
  • Regulation export: in September 2022, the export of broken rice was banned, and a 20% duty was imposed on parboiled rice. Non-basmati white rice exports were also put under the prohibited category from July 2023.
  • Buffer Stock Management: The government maintains buffer stocks of rice through procurement from farmers and imports to stabilize prices and manage supply-demand imbalances. These stocks are released into the market during periods of scarcity to prevent sharp price increases.

Effectiveness of these measures

  • Leakages and Inefficiencies: The PDS, while essential for food security, suffers from leakages, corruption, and inefficiencies in distribution, limiting its effectiveness in reaching the intended beneficiaries and stabilizing prices.
  • Buffer Stock Management Challenges: Maintaining buffer stocks requires significant storage infrastructure and incurs carrying costs. Inadequate storage facilities can lead to spoilage and waste, undermining the effectiveness of buffer stock operations.
  • Trade Policy Constraints: Export and import restrictions may distort global rice markets and limit opportunities for farmers to access international markets. Moreover, sudden policy changes can create uncertainty for traders and disrupt supply chains.
  • Distortionary Effects: MSPs can distort market signals and lead to overproduction of rice, contributing to surplus stocks and storage costs. This can strain government finances and distort resource allocation in the agriculture sector.

Conclusion

The data collected by the government should help in indicating the stock levels and prioritize the rice stock for consumption rather than for ethanol production. A more holistic approach is needed, combining supply-side interventions with addressing demand-side factors, promoting market efficiency, and investing in long-term solutions like improved storage, infrastructure, and sustainable agricultural practices.

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