Modelling Indian Wheat and Rice Sector Policies

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Tables Table 1 Correlation matrix of different prices for wheat and rice p.22 Table 2 Regressions for wheat production p.26 Table 3 Regressions of rice production p.27 Table 4 Procurement regression estimates p.30 Table 5 Regressions of wheat demand p.37 Table 6 Regressions of rice demand p.38 Table 7 Results of the public October stock level estimation p.46 Table 8 Regression for the private rice stocks p.48 Table 9 Foreign trade regression estimates p.52 The study revealed the strong impact of policy measures on production, procurement, stocks and trade. We detected several market distortions and mounting fiscal costs. Terms of use: Documents in EconStor mayWheat and rice supply strongly and significantly respond to the minimum support price (MSP). Wholesale prices at planting or lagged harvest time prices are largely irrelevant for production. The Food Corporation of India's (FCI's) procurement volume is driven by the production level and the difference between the MSP and market price. The signs of the estimated price elasticities of demand are consistent with the theory; however, for rice they turned out to be insignificant. Rice consumption turned out to be strongly influenced by distribution of subsidised rice, which can be linked to high coverage and subsidy under the public distribution system (PDS). In the case of wheat, the influence of subsidised wheat is much less pronounced, probably due to weaker functioning of the PDS for this grain.The public stock analysis suggests higher storage losses for rice (10 per cent) than for wheat (2 per cent). Public stocks are found to strongly crowd out private stocks but not to the same extent as public stocks are build up. Total exports are highly distorted by trade regulations.Therefore, there was no correlation detected between exports and domestic vs.international price difference in the case of rice and in the case of wheat, the correlation turned out to be contrary to theoretical expectations. The analysis of intra-year data revealed strong seasonality in prices, procurement and stock levels, in particular, for wheat (this was lower for rice).Starting from 2006-07, there is a clear upward trend in inflation adjusted costs of operating the public food procurement and distribution system, mainly because of rising procurement volume and MSPs. On the other hand, revenue has declined in real terms, due to lower real central issue prices and only marginal revenue from domestic sales and exports. As a...

Food Grain Policies in India and their Implications for Stocks and Fiscal Costs: A Dynamic Partial Equilibrium Analysis

“…Kozicka et al . () combined this reduced‐form equation with an instrumental variable approach to quantify the determinants of private stocks in India while accounting for private–public storage interactions. The authors calculated private rice stock levels as a difference between public stock levels (reported by the Food Corporation of India) and total stock levels (provided by the USDA) .…”

“…Many of the functional forms and parameter values were estimated using national aggregates from 1982 till 2012 (see Online Appendix A; Kozicka et al ., ). All parameters are reported in Tables and .…”

“…Most functional forms are based on the empirical ex-post analysis (see Online Appendix A and Kozicka et al (2015) for private stock analysis) and match the current policy frameworkopen-ended procurement with the MSP, distribution through the PDS and corresponding private and public stocks.…”

“…The absence of clear rules to release surplus stocks resulted in mounting stocks and high food price inflation. The combination of high public stocks and limits to private stockholding under the Essential Commodities Act led to a further marginalisation of private stocks (Kozicka et al, 2015).…”

“…Functional forms and most of the parameters used in the model are derived from the ex-post econometric analysis of the data from 1982 to 2012. Some elasticities are taken from other studies (Kumar et al, 2011;Kozicka et al, 2015). Major data sources include FCI, USDA and government reports.…”