Besieging the Free Market: the Effects of the Paddy-Rice Levy

Abstract

One of the welfare measures which the Indian economy is able to sustain is the public distribution system for essential commodities by means of which wheat, rice and sugar and often kerosene are bought and sold at fixed rates, sometimes involving a government subsidy. The levy in paddy and rice has been an integral part of this system in Tamil Nadu since the abandonment of monopoly procurement and total rationing in January 1970: it is a percentage of the marketed surplus varying temporally and spatially from zero to 50 per cent compulsorily taken as either paddy or rice, and bought at a standard All India price, fixed and periodically revised by the Agricultural Prices Commission. Both the State-run Civil Supplies Corporation and the Central Food Corporation of India act as purchasing agents for within-State distribution and for contributions to inter-State trade. The consumers of levy rice within Tamil Nadu in 1973 were the ‘vulnerable sectors’ in the urban areas of Madras, Coimbatore and Madurai and rural people in the highly deficit District of Kanyakumari, defined as those earning under Rs300 per month (raised in late 1974 to Rs1000 per month) and therefore not liable to income tax. For the percentage of marketable surplus levied and procurement prices see Tables 18.1 and 18.2.