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Economic Cost of Foodgrains : INDIAN ECONOMIC

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Economic Cost of Foodgrains : INDIAN ECONOMIC The economic cost of foodgrains consists of three components, namely the MSP including central bonus (the price paid to farmers), procurement
incidentals, and the cost of distribution.

The economic cost for both wheat and rice witnessed significant increase during the last few years due to increase in MSPs and proportionate increase in incidentals as well as other costs. As per the Government, the economic costs of wheat and rice in 2016-17 are estimated to be over Rs. 30 and Rs. 22 per kg, respectively (they were around Rs. 20 and Rs 15 in 2010–11).

High economic cost necessitated a detailed review of the open-ended procurement policy, especially in states that offer high bonus on top of MSP and those that impose high taxes and statutory levies, as well as stocking and distribution policies. In this regard, the government set up a High Level Committee (HLC) in August 2014 (Shanta Kumar as its Chairman) to suggest inter- alia restructuring or unbundling of the FCI wit a view to improve its operational efficiency and financial management.

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