IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/1236.html
   My bibliography  Save this paper

The impact of two tier producer and consumer food pricing in India

Author

Listed:
  • Schiff, Maurice

Abstract

India's government procures agricultural products such as rice, wheat, and sugar at below-market prices and sells them in both urban and rural ration shops. The rest of such crops is sold in the open market. This creates a two-tier price system for consumers and producers. Many (including Dantwala, Mellor, and Hayami, Subbarao, and Otsuka) claim that such a policy raises the open-market price so much that it ultimately increases the average price received by farmers. Iftrue, the gainers would be the farm sector as a whole and low-income urban consumers with access to the ration shops. Losers would be the high-income urban consumers who buy at the open-market price. This view has provided an intellectual basis for the policy. The author examines a variety of cases: with and without rationing, with rationing by ration cards or by queuing, with and without the urban rich having access to the ration shops, with and without free trade, and with a marketable surplus with positive, negative, or zero price elasticity. He finds that in most cases the policy's impact on the average price is either negative or ambiguous, and it is negative in the more realistic cases. A negative impact implies that farmers on the whole lose from the procurement policy. But small farmers who are net buyers of the procured crops, and landless laborers, gain from a lower average price in the short run (especially if they have easy access to the rural ration shops). The long-run effect depends on the impact of the lower average price on rural employment and wages.

Suggested Citation

  • Schiff, Maurice, 1993. "The impact of two tier producer and consumer food pricing in India," Policy Research Working Paper Series 1236, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1236
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1993/12/01/000009265_3961005164527/Rendered/PDF/multi_page.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Yujiro Hayami & Keijiro Otsuka & K. Subbarao, 1982. "Efficiency and Equity in the Producer Levy of India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(4), pages 655-663.
    2. Mellor, John W., 1968. "The Functions of Agricultural Prices in Economic Development," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 23(1).
    3. Dantwala, M.L., 1967. "Incentives and Disincentives in Indian Agriculture," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 22(2).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Simrit Kaur, 2014. "Food entitlements, subsidies and right to food: a South Asian perspective," Chapters,in: Handbook on Food, chapter 19, pages 482-514 Edward Elgar Publishing.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1236. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: http://edirc.repec.org/data/dvewbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.