• TABLE OF CONTENTS
HIDE
 Front Cover
 Half Title
 Title Page
 Table of Contents
 List of Tables
 List of Illustrations
 Foreword
 Preface
 Summary
 Agricultural production and food...
 Public distribution of food
 Ration offtake
 The impact of rationing
 Relative efficiency of public distribution...
 Economic viability of rationing...
 Conclusions and policy implica...
 Supplementary tables
 Bibliography
 Back Matter
 Back Cover














Group Title: Research report - International Food Policy Research Institute
Title: Public distribution of foodgrains in Kerala
CITATION THUMBNAILS PAGE IMAGE ZOOMABLE
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00085391/00001
 Material Information
Title: Public distribution of foodgrains in Kerala income distribution implications and effectiveness
Series Title: Research report - International Food Policy Research Institute
Physical Description: 68 p. : ill. ; 25 cm.
Language: English
Creator: George, P. S ( Poykayil Simon ), 1939-
Publisher: International Food Policy Research Institute,
International Food Policy Research Institute
Place of Publication: Washington
Publication Date: 1979
Copyright Date: 1979
 Subjects
Subject: Food supply -- India -- Kerala   ( lcsh )
Grain trade -- India -- Kerala   ( lcsh )
Income distribution -- India -- Kerala   ( lcsh )
Aliments -- Approvisionnement -- Inde -- Kerala   ( rvm )
Céréales -- Commerce -- Inde -- Kerala   ( rvm )
Revenu -- Répartition -- Inde -- Kerala   ( rvm )
Voedselverdelingen   ( gtt )
Graan   ( gtt )
Genre: bibliography   ( marcgt )
non-fiction   ( marcgt )
Spatial Coverage: India
 Notes
Bibliography: Includes bibliographical references (p. 65-67).
Statement of Responsibility: P.S. George.
 Record Information
Bibliographic ID: UF00085391
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 04804837
lccn - 79014715
isbn - 0896290085

Table of Contents
    Front Cover
        Front Cover 1
        Front Cover 2
    Half Title
        Page 1
        Page 2
    Title Page
        Page 3
        Page 4
    Table of Contents
        Page 5
    List of Tables
        Page 6
        Page 7
    List of Illustrations
        Page 8
    Foreword
        Page 9
    Preface
        Page 10
    Summary
        Page 11
        Page 12
    Agricultural production and food availability
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
    Public distribution of food
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
    Ration offtake
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
    The impact of rationing
        Page 34
        Page 35
        Page 36
        Page 37
        Page 38
        Page 39
        Page 40
        Page 41
        Page 42
        Page 43
        Page 44
        Page 45
        Page 46
        Page 47
        Page 48
    Relative efficiency of public distribution and income transfer
        Page 49
        Page 50
        Page 51
        Page 52
        Page 53
        Page 54
    Economic viability of rationing without central government subsidy
        Page 55
        Page 56
        Page 57
        Page 58
    Conclusions and policy implications
        Page 59
        Page 60
        Page 61
    Supplementary tables
        Page 62
        Page 63
        Page 64
    Bibliography
        Page 65
        Page 66
        Page 67
    Back Matter
        Page 68
    Back Cover
        Back Cover 1
        Back Cover 2
Full Text
RESEARCH REPORT


S-. C)/61

'7


Public Distribution of
Foodgrains in Kerala-
Income Distribution Implications
and Effectiveness


by P. S. George































































The International Food PolicE Research Institute is an independent, nonprofit organization
\\ hch conducts research on polihc problems related to the food needs of the developing world.
IFPRI s research Is directed toward policy makers at the national and international level and
is distributed to those concerned with food policy issues































PUBLIC DISTRIBUTION OF FOODGRAINS IN KERALA-
INCOME DISTRIBUTION IMPLICATIONS AND
EFFECTIVENESS


































































The research presented in IFPRI's Research Reports is conducted at the Institute; however, the
interpretations and views expressed are those of the author and are not necessarily endorsed
by the Institute or the organizations which support its research.






















PUBLIC DISTRIBUTION OF FOODGRAINS IN KERALA-
INCOME DISTRIBUTION IMPLICATIONS AND
EFFECTIVENESS







P. S. George


















Research Report 7
International Food Policy Research Institute
March 1979















































Copyright 1979 International Food Policy Research Institute

All rights reserved. Sections of this report may be reproduced with
acknowledgement to the International Food Policy Research Institute.









Library of Congress Cataloging in Publication Data
George, Poykayil Simon, 1939-
Public distribution of foodgrains in Kerala.

(Research report-International Food Policy Research Institute; 7)
Bibliography: p. 65.
1. Food supply- India-Kerala. 2. Grain trade-India-Kerala.
3. Income distribution- India-Kerala. I. Title. II. Series:
International Food Policy Research Institute. Research report-
International Food Policy Research Institute; 7.
HD9016.143K474 362.5 79-14715


ISBN 0-89629-008-5



















CONTENTS


Foreword

Preface

1. Summary 11

2. Agricultural Production and Food Availability 13

3. Public Distribution of Food 20

4. Ration Offtake 27

5. The Impact of Rationing 34

6. Relative Efficiency of Public Distribution and Income
Transfer 49

7. Economic Viability of Rationing without Central
Government Subsidy 55

8. Conclusions and Policy Implications 59


Appendix 62

Bibliography 65







TABLES


1. Characteristics of operational holdings,
1953/54 1970/71 15
2. Area production, and yield of major crops,
1975/76 16
3. Linear growth rates in area, production,
and productivity, 1952/53 1974/75 16
4. Daily availability of foodgrains and tapioca,
1971 -1976 17
5. Daily per capital availability of calories and
their sources, India 1960/63 and Kerala
1961/62 1970/71 18
6. Daily calorie intake in rural and urban
areas, 1971/72 18
7. Procurement of paddy from local production,
1966/67 1975/76 22
8. Procurement price and open market (farm
level) price, 1966/67 1975/76 22
9. Rates of consumer subsidy incurred by the
Government of India for public distribution,
1973/74 1975/76 26
10. Ration offtake of rice and wheat,
1964-1976 28
11. Ration price, January 1975 28
12. Ration and open market prices, wheat and
rice, 1966/67 1975/76 29
13. Household consumption of rice by income group
and source of supply, week of November
20, 1977 32
14. Household consumption of rice, wheat, and tapioca,
week of November 20, 1977 32
15. Estimated consumption level of rice by income
group, no rationing, market price corresponds
to national free market price (S2), 1974/75 37
16. Estimated production, marketed surplus, and
levy payments by size of holding,
1974/75 38








17. Estimated farm level price without rationing
and estimated price differences, 1974/75 39
18. Gains to farmers in the absence of
rationing, 1974/75 40
19. Gains to consumers in the absence of
rationing, 1974/75 41
20. Net gain to producers and consumers in the
absence of rationing, 1974/75 41
21. Gains to producers and consumers under non-
zero supply elasticity, 1974/75 42
22. Movement restrictions and pure rationing
effects of public distribution, 1974/75 47
23. Estimated weekly consumption levels when
ration income loss is compensated by cash
income 51
24. Estimated weekly consumption levels when ration
income corresponding to the national free market
25. Estimated increase in monthly calorie intake
from one rupee increase in monthly per capital
expenditure, 1971/72 53
26. Estimated rationing gains derived from ration
income and ration costs based on state importa-
tion of foodgrains from international markets,
1973/74 1975/76 56
27. Daily per capital availability of calories for
India, 1960/63 and Kerala, from 1961/62 -1970/71 62
28. Levy rates of paddy, 1975/76 63
29. Cumulative percentage of producers and gross farm
income from rice sales, 1974/75 63
30. Cumulative percentage of households and realized
household income, 1974/75 64








ILLUSTRATIONS


1. Location of Kerala in India 14
2. Influence of ration system on individual
expenditure and national economic growth
sectors 35
3. Distribution of gross farm income from
rice sales, 1974/75 44
4. Distribution of actual and realized household
income, 1974/75 45
5. Farm income with and without movement
restrictions and levy, (974/75 46
6. Consumer expenditure with and without
movement restrictions and levy, 1974/75 48
7. Expenditure on rice as a function of income,
1974/75 50
8. Components of the gains of rationing,
1974/75 58








FOREWORD


A number of developing countries,
particularly in South Asia, use large-scale
public food distribution programs in-
tended to meet the minimum food re-
quirements of low income people. Evi-
dence that agricultural growth alone may
fail to meet the food needs of the poor
and may itself be contained by lack of
effective demand has brought increasing
attention to the South Asian experience
with food distribution programs. Ques-
tions have arisen as to which groups are
reached, the degree to which food dis-
tributed through the systems represents
a net addition to consumption, the impact
these programs have on food production
and other sectors of the economy, and
the cost and the efficiency of these pro-
grams when compared with the alterna-
tives such as direct income transfers and
more narrowly targeted schemes.
While the reliability and efficiency of
public distribution systems depend on
local conditions to a great extent, ex-
perience from systems elsewhere can
provide guidelines for planning and im-
plementation of similar programs. To


this end, the study of the public distribu-
tion system in Kerala by P S. George is
valuable. His exposition is of particular
interest because of its relatively long
history of operation; its broad coverage,
particularly in rural areas; and its inter-
action of procurement and distribution
policies.
This study is part of a set of studies
initiated by the International Food Policy
Research Institute dealing with various
aspects of food subsidy/ration systems.
A study based on detailed surveys of
families by Shubh Kumar was published
in January 1979 and an analysis by Raisud-
din Ahmed of food consumption poli-
cies in Bangladesh is in press. Studies
on the experience of Sri Lanka and a
comparative analysis of the South Asian
systems are forthcoming.



John W Mellor


Washington, D.C.
March, 1979








PREFACE


The growing concern of national and
international organizations over eradica-
tion of the hunger and malnutrition preva-
lent among low income consumers in
many developing countries has generated
a sense of urgency about analyzing the
scope and effectiveness of specific policy
measures available for increasing the
consumption levels of the poor. In a few
countries in South Asia, target-oriented
public distribution systems for foodgrains
are important policy measures used to
supply foodgrains to target groups.*
Since the operation of these public dis-
tribution systems involves procurement
from local and international markets,
movement restrictions, and distribution
through fair price shops at subsidized
price levels, public distribution has a
major impact on a number of elements
of the national economy. Public distribu-
tion can be both a step toward economic
growth and a step toward achieving some
level of equity in food consumption.
The procurement and distribution
arrangements for public distribution of
foodgrains has an impact on income re-
distribution among farmers and con-
sumers. Supplying certain food items to
targeted groups at price levels below the
open market rate helps ensure a minimum
food consumption standard for those
target groups. However, the effectiveness
of such a system is often questioned be-
cause of its potential impact on the con-
sumption level of the consumer target
group, its impact on other sectors of the
economy, its cost, and its compatibility
with a direct transfer instead of price
subsidies.
This study addresses some of these


issues by analyzing the public distribution
of foodgrains in the state of Kerala in
India, where a comprehensive distribu-
tion system has existed for the urban and
rural areas for more than 25 years. The
analysis includes the factors influencing
ration offtake in Kerala; the distribution
of benefits among consumers belonging
to different income groups; the impact
of rationing on consumption levels of low
income consumers, gains to the producers
and consumers in the state, and income
redistribution; and the relative efficiency
of public distribution and income transfer.
By examining the public distribution
system in Kerala, this study attempts to
provide useful information about its
viability and effectiveness in the context
of Kerala's economy. It also provides some
generalizations, particularly in terms of
the factors which account for successful
planning and implementation of public
distribution systems.
I am grateful to Dr. James Gavan and
Dr. John Mellor for very stimulating dis-
cussions on a number of issues covered
in the paper and to Raisuddin Ahmed,
K. L. Bachman, Paul Isenman, Dharm
Narain, Leonardo Paulino, J. S. Sarma,
Peter Timmer, Alberto Valdes, and Juan
Zapata for useful comments on an earlier
draft of the paper. I thank Mr. P. M. Abra-
ham IAS and Mr. George Mathai IAS for
providing data on food distribution in
Kerala, Khai Nguyen for his excellent
statistical assistance, Ruth Rounds for her
efficient secretarial assistance, and Barb-
ara Barbiero for her most helpful and con-
structive editorial work. I alone assume
responsibility for the contents.


While the public distribution of foodgrains in some countries covers only the urban areas, the public distribution
system in Sri Lanka and the state of Kerala in India covers both urban and rural areas.









1




SUMMARY


This study analyzes the operation of
the public distribution system for food-
grains in Kerala, a southern state in India.
Kerala's public distribution system, which
reaches about 97 percent of the popula-
tion in both urban and rural areas, is re-
puted to be the best public distribution
program in India. The arrangements for
the public distribution of foodgrains in
the state include compulsory procure-
ment of paddy from farmers by using a
graded levy system, movement restric-
tions for foodgrains from outside the state,
importation of grains by the state govern-
ment from the central pool, and distribu-
tion of specified quantities of grains at
fixed prices to the consumers through fair
price shops. Since farmers sell paddy in
the open market after meeting the levy
requirements and consumers buy grains
from the market to supplement the quan-
tity obtained from the fair price shops,
the operation of the public distribution
system in Kerala has created a dual market
mechanism.
In order to understand the context in
ihich the distribution of foodgrains in
Kerala takes place, the study examined
Kerala's past agricultural production,
food availability, and procurement and
distribution performance. The factors in-
fluencing procurement volume, organiza-
tional arrangements made for procure-
ment and distribution, and governmental
expenditure on public distribution were
also analyzed. The analysis indicated that
the procurement volume was mainly in-
fluenced by the gap between the open
market price and the procurement price.


It also showed that the performance of
the public distribution system in Kerala
was influenced by the small portion of
food requirement met by production with-
in the state, large differences between the
open market price and ration price, a
comprehensive distribution network, flex-
ibility in the frequency of purchases from
the fair price shops, the limited quantity
of grains sold through fair price shops,
and the low quality of ration grains when
compared with locally preferred varieties.
Using normal demand variables, the
study attempted to determine the factors
influencing the quantities of grain sold
through ration shops. It found that the
volume of ration rice sold was influenced
by supply constraints and not by variables
influencing consumer choice, while the
volume of wheat purchases from ration
shops was affected by demand variables.
The benefits of rationing derived by
consumers belonging to different income
groups were analyzed using a small cross
section survey. Ration rice accounted for
a major share of the rice consumption of
consumers belonging to the low income
groups.
The study analyzed the impact of ra-
tioning on the consumption levels of low
income consumers, gains to the producers
and consumers in the state, and income
distribution. In order to determine the
consumption impact, the consumption
levels of rice in the absence of rationing
were estimated. The estimated rice con-
sumption levels without rationing and/or
movement restrictions were lower than
the existing consumption levels for all








consumers in Kerala. This level was lowest
for consumers belonging to the low in-
come groups. In the absence of rationing,
consumer expenses were much higher
than the gains to the producers. The
sensitivity of these gains to different
levels of supply elasticity indicated that
the result was valid for a range of supply
elasticities.
The analysis of the income distribution
aspects of public distribution in Kerala
showed that procurement arrangements
reduced the skewness in farm income
among the consumers and resulted in
interregional income transfer. The gains
to consumers and producers in Kerala
were further delineated in terms of the
movement restriction and pure rationing
effects.
The study also examined the relative
efficiency of public distribution over
direct income transfer and concluded
that, in the short-run, the objective of in-


creasing the consumption levels of the
low income consumers could be achieved
more effectively through rationing than
it could through a general income trans-
fer. Results indicated that rationing of
foodgrains provided higher operational
efficiency and political feasibility than
would direct cash transfers.
The economic viability of rationing in
Kerala without Central Government sub-
sidization was analyzed under the as-
sumption that the Kerala government
obtained the entire supply of foodgrains
at the international market price. Using
1973/74 to 1975/76 price levels, the anal-
ysis indicated that Kerala could support
its own public distribution system. Final-
ly, the gains in Kerala were analyzed based
on changes in the retail price gap, ration
quantities, share of ration quantities be-
tween supplies from within the state and
imports, and government subsidy levels.









2



AGRICULTURAL PRODUCTION
AND FOOD AVAILABILITY


Kerala, a state in southern India (Figure
1), is one of the most densely populated
regions in the developing world. It has an
area of 38.9 thousand square kilometers
and a population of 21.3 million (accord-
ing to the 1971 census). About 84 percent
of Kerala's population lives in rural areas
and 60 percent of the population is lit-
erate. During 1974/75, Kerala's per capital
income measured at 1960/61 price levels
was Rs. 307, which was Rs. 37 below the
national average.1
Kerala has a long tradition of providing
public services in the areas of health, edu-
cation, and subsidized food distribution
to most of its population. It is generally
believed that its public service programs
have contributed to a better quality of
life in Kerala, as compared with the rest
of India.2

Agricultural Setting

The agricultural production pattern in
Kerala is characterized by a large number
of small holdings, a large proportion of


area under nonfood crop cultivation, and
slow productivity growth.
During the last 25 years, agricultural
production in Kerala has changed con-
siderably. The average size of agricultural
holdings in Kerala in 1970/71 was about
1.2 acres,3 while the national average was
about five acres. During the last 20 years,
the average size of holdings in the state
decreased by half. As Table 1 indicates,
while holdings with less than one acre
accounted for 56 percent of the total
holdings in 1953/54, they increased to
more than 68 percent in 1970/71. Holdings
with more than 10 acres (1 percent of the
total) accounted for about 15 percent of
the total operated area.
During 1975/76, Kerala's agricultural
contribution to the state domestic product
was 10.6 percentage points above the
national average,4 while its cropping in-
tensity was 20 percentage5 points above
the average for the nation. More than 35
percent of Kerala's cultivated area sup-
ported nonfood crops.6 Perennial crops
such as arecanut, cashewnut, coconut,


SSee Government of Kerala, Bureau of Economics and Statistics, Statistics for Planning (Trivandrum Kerala Govern-
ment Press, 1977). According to the exchange rate in January 1979, one U.S. dollar = 8 rupees (approximately).
2 According to physical quality of life index (PQLI) developed by the Overseas Development Council, which is based
on life expectancy, infant mortality, and literacy, Kerala has a PQLI of 69 as compared to a PQLI of 41 for India.
S1 acre = .4047 hectares.
4 See Statistics for Planning, p. 74. The actual percentages were 52.6 percent in Kerala, 42 percent in India
5 The total cropped area in Kerala was 7.5 million acres and the net area sown was 5.4 million acres. Cropping intensity
was 139 percent in Kerala and 119 percent in India.
6 Of the total cropped area of 7.50 million acres, 4.66 million acres were under food crops and 2.83 million acres
were under nonfood crops Some of the areas under nonfood crops may not be suitable for growing food crops.
Even in areas where transfer from nonfood crops to food crops is feasible, there will not be any comparative
advantage in making the transfer The magnitude of food deficiency in the state is such that a transfer alone will
not make the state selt-sufficient in foodgrains.










Figure 1-Location of Kerala in India


BAY OF
BENGAL


ARABIAN
SEA


0 100 200 300 400 500MILES

0 10 200 300 400 500 600 700 800 KILOMETERS


Source: Government of India, Ministry of Agriculture, Indian Agricultural Atlas, 3rd ed. (Dehra Dun: Map
Publication Office, 1971), p. 1.









Table 1 -Characteristics of operational holdings, 1953/54 -1970/71

Size of Holdings
(acres)

Less than 1 1-5 5-10 Above 10 Total

Number of holdings (percent)
1953/54 55.6 32.4 6.5 5.5 100
1959/60 59.4 31.7 5.1 3.8 100
1966/67 59.7 32.2 5.6 2.5 100
1970/71 67.9 27.3 3.6 1.2 100
Area
1953/54 8.1 24.7 14.9 52.3 100
1959/60 11.3 30.5 15.7 42.5 100
1966/67 12.4 38.3 21.2 28.1 100
1970/71 17.3 47.5 20.1 15.1 100
Average size of
Holdings (acres)
1953/54 0.43 2.29 6.93 39.50 2.99
1959/60 0.43 2.14 6.89 25.60 2.24
1970/71 0.31 2.12 6.75 15.00 1.22


Source: Data for this table were taken from M.A Oommen, "Land Reforms and Changes in the Agrarian Structure of
Kerala Since Independence" (Trichur: University of Calicut Economics Centre, 1977) and United Nations
Department of Economic and Social Affairs, Poverty, Unemployment and Development Policy A Case Study of
Selected Issues with Reference to Kerala (New York. United Nations, 1975), p. 71.


tea, coffee, rubber, and cardamom oc-
cupied a large portion of this area. As
Table 2 shows, rice, the major food crop,
accounted for about 29 percent of the
cropped area in 1975/76; coconut, the
next important crop, accounted for about
25 percent of the cropped area; and the
third import crop, tapioca,7 accounted for
about 10 percent of the cropped area.
The changes in cropping pattern between
1952 and 1975 indicate that during this
period the area under nonfood crop pro-
duction increased more rapidly than the
area producing food crops.8
Because of the number of rubber, cof-
fee, and tea plantations and the large


area being cultivated for condiments,
spices, and other perennial crops, Kerala
has the lowest per capital foodgrain pro-
duction in India. While the average an-
nual per capital foodgrain production in
Kerala from 1974/75 to 1976/77 was
56.8 kilograms, the national per capital
foodgrain average for these years was
185.2 kilograms.
Finally, the growth rate in foodgrain
production has been much smaller than
the growth rate for all foodcrops in
Kerala. Between 1952/53 and 1974/75
(see Table 3), foodgrain production in-
creased by only 2.4 percent per year,
while production of all food crops in-


Tapioca refers to the tropical plant with a starchy root, which is commonly known as cassava.
8 M.V George, "Recent Trends in Production and Productivity in Kerala Agriculture," paper presented at the Seminar
on Kerala Economy, Economics Centre, Calicut University, Trichur, 1977.









Table 2-Area, production, and yield of major crops, 1975/76


Rice
Coconut
Tapioca
Rubber
Cashewnut
Arecanut
Tea and coffee
Plantain
Cardamom


(1,000 acres)
2,186.9
1,856.0
781.1
507.6
261.7
229.1
178.6
116.6
115.2


Production

(1,000 tons)
1,365
3,764"
5,183
126
119
13,731"
207
357
2


Yield Per Acre


(kg)
624
2,028'
6,635
248
454
5,993'
1,159
3,061
18


Source Government of Kerala, Kerala State Planning Board, Economic Review 1976 (Trivandrum. Government Press,
1977), p. 108
SMillion nuts
h Nuts per acre


Table 3-Linear growth rates in area,
1952/53-1974/75


production, and productivity,


Foodgrains All Food Nonfood All
Crops Crops Crops


(percent)
Area 0.7 1.5 3.3 2.2
Production 2.4 4.7 2.7 3.9
Productivity 1.8 2.7 -0.6 1.4

Source: M.V George, "Recent Trends in Production and Productivity in Kerala Agriculture," paper presented at the
Seminar on Kerala Economy, Economics Centre, Calicut University, Trichur, 1977, p. 3.


creased by 4.7 percent per year. This was
primarily because of the higher rates of
growth in the noncereal crops, particu-
larly tapioca.9 In addition, increased pro-
ductivity contributed more to increased
production during this period than did
increased area, thus indicating improve-
ment of farming techniques. However,
productivity of nonfood crops during
this period showed a declining tendency.


Availability of Food

Local and imported rice and tapioca
are important food sources in Kerala. As
Table 4 indicates, the per capital daily
availability of foodgrains and tapioca
in Kerala between 1971 and 1976 varied
from 458 grams in 1971, to 505 grams in
1973, to 480 grams in 1976. In general,
local production of rice accounted for


9 The yield of tapioca increased from 2,996 kg/acre in 1952/53 to 7,166 kg/acre in 1974/75. This is attributed to
introduction of high yielding varieties of tapioca and improved cultural practices. See George, "Re( ent Trends," p 7.









Table 4-Daily availability of foodgrains and tapioca, 1971-1976


Per Capita Availability

1971 1972 1973 1974 1975 1976

(gm/day)
Rice from local production 157 160 159 142 148 148
Rice from imports 95 97 88 89 60 103
Imported wheat 7 10 24 29 60 29
Rice equivalent of tapioca 199 229 234 228 222 200
Total foodgrains 259 267 271 260 268 280
Total food (foodgrains and tapioca) 458 496 505 488 490 480

Source: Government of Kerala, Kerala State Planning Board, Economic Review 1976 (Trivandrum. Government Press,
1977), p. 105


less than one-third of the total per capital
availability of food, and rice imports ac-
counted for about one-third of the total
availability of rice. The availability of rice-
equivalent quantities of tapioca exceeded
the availability of rice from local pro-
duction. During years of low rice imports,
wheat imports increased to bridge the
gap between the requirements of rice
and its availability.
Coconut is also an important source
of the total calories consumed by the
residents of Kerala. Data on this food
source were included in a study con-
ducted by the Center for Development
Studies (CDS) at Trivandrum, which com-
pared the per capital availability of total
calories and their sources based on food
balance sheets. The national averages
for 1960/63 and the Kerala averages from
1961/62 to 1970/71 are summarized in


Table 5. (See the Appendix, Table 27, for
details.) According to this study, the
average per capital availability of calories
in Kerala was higher than the national
average (2,340 versus 2,016). However,
consumer surveys1 conducted by the
National Sample Survey (NSS) Organiza-
tion indicate that calorie intake in Kerala
was lower than the national average in
1961/62 and 1971/72.11 The CDS study
attributed this discrepancy to the under-
reporting of consumption estimates of
tapioca, coconut, and other food items in
the survey.
The 1971/72 NSS survey in Kerala indi-
cated that about 35 percent of the rural
and 50 percent of the urban population
in Kerala consumed less than 2,230 calo-
ries (see Table 6). The number of calories
consumed by consumers with a monthly
per capital expenditure of more than Rs.


10 Consumer surveys are conducted periodically by the National Sample Survey Organization, Department of Statistics,
Ministry of Planning, Government of India. For a discussion on the reliability of NSS data see M S. Ahluwalia,
"Rural Poverty in India 1956/57 to 1973/74," in India Occasional Papers, World Bank Staff Working Paper No. 279
(Washington, D.C.: The World Bank, 1978), and P S. George "Inequalities in Consumption-Some Problems in
Measurement and Interpretation," IFPRI Staff Working Paper 77/33 (Washington, D.C.: International Food Policy
Research Institute, 1977).
" The NSS estimates of food consumption based on the 1961/62 survey indicate that Kerala had a daily per capital
consumption rate of about 1,620 calories, while the national average was 2,445. The 1971/72 figures for rural and
urban areas were 2,724 and 2,539 respectively throughout India and 2,023 and 2,103 in Kerala.









Table 5-Daily per capital availability of calories and their sources,
India 1960/63 and Kerala 1961/62-1970/71


Kerala
India (average
(average 1961/62-
1960/63) 1970/71)

Total calories 2,016 2,340
Share of cereals in total calories 66.7 43.0
Share of rice in total calories 52.1 91.5
Share of pulses and oilseeds in total calories 10.4 1.4
Share of tapioca, potato and sweet potato 1.3 27.1
Share of coconut kernels in total calories 0.3 10.6



Table 6-Daily calorie intake in rural and urban areas, 1970/71


Rural Areas Urban Areas
Monthly Per Capita
Expenditure Number Daily Number ,Daily
of Calorie Deficiency (-) of Calorie Deficiency (-)
Households Intake Surplus (+) Households Intake Surplus (+)


(Rs.) (percent) (percent)
Up to 15 19 893 -60 19 953 -58
15-21 36 1,229 -45 44 1,079 -52
21-24 28 1,716 -24 33 1,375 -39
24-28 49 1,466 -35 40 1,490 -34
28-34 79 1,900 -16 70 1,787 -21
34-43 58 2,320 + 5 84 1,989 -12
43-55 95 2,603 +16 82 2,289 + 2
55-75 113 2,955 +31 63 2,700 +20
75-100 56 3,614 +61 42 3,060 +36
More than 100 75 4,293 +91 102 3,907 +74
All Classes 608 2,023 -10 829 2,103 7

Source: Government of India, "National Sample Survey,"26th Round (National Sample Survey Organization), 1971/72.


100 in rural areas was more than four
times the calorie intake of consumers
with a monthly per capital expenditure of
less than Rs. 15. The extent of deficiency
in calorie intake for the population spend-
ing less than Rs. 15 was 60 percent of the
requirements in rural areas and 58 per-


cent of the requirements in urban areas.
The population with a monthly per capital
expenditure above Rs. 100 had a calorie
intake of about 81 and 74 percent above
the requirements in rural and urban areas
respectively.12
Thus, in Kerala, tapioca is an important


12 If underreporting similar to that which occurred in the 1961/62 NSS survey occurred in this more recent survey,
only about 20 percent of the rural population and 25 percent of the urban population may have actually had
inadequate diets at this time.









source of calories and rubber, tea, coffee,
and spices are important nonfood agri-
cultural items. Although the largest por-
tion of agricultural area is allotted to rice
production, the amount of rice produced
falls short of the needs of the state,
making the importation of additional


quantities of rice and wheat necessary.
In addition, although estimates vary,
calorie consumption for most of the peo-
ple in Kerala is less than the national
average, with this caloric deficiency being
slightly greater in the rural than the urban
areas.










3



PUBLIC DISTRIBUTION OF FOOD


Public distribution of food, or rationing,
is an important facet of food manage-
ment operations of a number of develop-
ing countries today.13 Kerala's experience
in public distribution has attracted the
attention of a number of social scientists,
both within and outside of India, and
international organizations such as the
United Nations.14
Public distribution of food in Kerala is
undertaken at two levels. Food is pro-
vided to primary school children through
a school feeding program15 and food-
grains are sold to the general public
through ration or fair price shops. This
study analyzes distribution through the
ration shops only.16
Controlled foodgrain distribution in
Kerala, as well as throughout India, was
instituted during World War I.17 A major


expansion of rationing in Kerala occurred
in 1964, when food shortages throughout
India led to the curtailment of private
interstate trade in foodgrains. The Civil
Supplies Department of Kerala assumed
responsibility for collecting and organiz-
ing available foodgrains and regulating
their distribution through licensed ration
shops. A portion of the rice distributed
through the ration shops was collected
from local producers using levy procure-
ment. The Central Government provided
all wheat and a large portion of rice
through its domestic procurement from
major producing areas and imports. The
ration shops, through which the food
was distributed, were linked with a chain
of wholesale distributors licensed for
this purpose. The costs of this rationing
program are incurred by the Kerala gov-


13 See J. Tobin and H.S. Houthakker. "A Survey of the Theory of Rationing," Econometrica 20 (Octobr 1952): 521-553
and I M. Davis "The Fiscal Role of Food Subsidy Programs," International Monetary Fund Staff Paper 20 (Wash-
ington, D.C.. International Monetary Fund, March 1977).
14 A fairly comprehensive analysis of the development experience of Kerala is available in a study ( conducted at the
Center for Development Studies, Trivandrum, on behalf of the United Nations Department of Economic and Social
Affairs. (United Nations Department of Economic and Social Affairs, Poverty, Unemployment and Development
Policy: A Case Study of Selected Issues with Reference to Kerala (New York: United Nations, 1975). Also see
D.R. Gwatkin "Nutrition Planning and Physical Well-being in Kerala and Sri Lanka," paper presented at the
Interciencia/AAAS Symposium on Nutrition and Agriculture, February 13-14, 1978.
'5 During 1974/75, the school feeding program served 1.83 million primary school children in 8,833 schools. Food
items supplied under this scheme were provided by CARE. The food received during 1974/75 was valued at Rs. 51.6
million. The Kerala government incurred a total expenditure of Rs. 5 million for the implementation of the program.
(See Government of Kerala, Education Department, Administration Report of the Education Department for the
Year 1974/75 (Ernakulam: Kerala Government Press, 1976).
16 Ration shops are licensed retail outlets for the distribution of foodgrains under the rationing system.
7 For a detailed discussion on the evaluation of public distribution in India, see H. Knight, Food Administration in
India, 1939-47 (Stanford: Stanford University Press, 1954), and A. Gupta, Public Distribution of Foodgrains in
India, Centre for Management in Agriculture Monograph No 69 (Ahmedabad: Indian Institute of Management, 1977).
Analysis of the achievement of public distribution is available in R. Krishna "Government Operations in Food-
grains," Economic and Political Weekly, September 16, 1967, pp. 1695-1706, and P S. George, "Government
Intervention in Foodgrain Markets," IFPRI Working Paper 78/31 (Washington, D.C.: International Food Policy
Research Institute, 1978).








ernment and the Central Government.
The state government recovers most of
its administrative overhead and direct
costs of distribution from the margins
charged at the wholesale and retail levels,
while the Central Government incurs
net costs in order to maintain the ration
system in Kerala.



Procurement for Public
Distribution

Rice for the public distribution system
in Kerala comes from local procurement
and imports from outside Kerala. Local
procurement accounts for only a small
portion of the total rice distributed through
ration shops. Since the state is not a
wheat growing area, the entire wheat
supply comes from outside sources. Paddy
is procured under the provisions of the
Kerala Rice and Paddy (Procurement by
Levy) Order 1966.
The different taluks18 in the state are
classified into three categories based on
their average yield of paddy.19 Levy rates
for these three categories are fixed on a
graded scale. Holdings with less than two
acres of paddy area are exempted from
the levy. Levy rates increase according to
the size of holdings for areas with more
than two acres. The levy rates prevalent
during 1975/76 appear in the Appendix,
Table 28.
As can be seen in Table 7, from 1966
to 1970 local procurement paddy was


about 7 percent of local production. How-
ever, during the 1970s, procurement ac-
counted for only about 3 percent of the
total production. This decrease may be
explained by land reform and other ac-
tivities that led to reductions in the size
of holdings.20 It is also possible that the
Levy Order of 1966 may have increased
the de jure subdivision of holdings.21
The procurement price of paddy is de-
termined on the basis of the price levels
fixed by the Central Government.22 As
Table 8 indicates, the procurement price
during 1966/67 was Rs. 43.81 per quintal.
It increased to Rs. 74 per quintal during
1975/76. In addition to the procurement
price, the farmers received an incentive
delivery bonus in some years. Thus the
total receipt of farmers during 1966/67
was Rs. 52 per quintal. There was a major
increase in the procurement price in
1967/68 to Rs. 65 per quintal and the
procurement price remained at that level
for six continuous years. The increase
during the nine year period beginning in
1967/68 was only 14 percent.
The procurement price of paddy real-
ized by the farmers was very much below
the farm price of paddy. When the farm
price of paddy was expressed as a per-
centage of the levy price, it varied from
139 during 1970/71 to 333 during 1974/75.
During 1974/75, when the farm price of
paddy increased by about 31 percent of
the previous year's price level, local pro-
curement declined from 4.3 percent to
3 percent of production (from about
81,000 to 60,000 tons).23 In fact, even


18 For administrative purposes, the state is divided into 11 districts and each district is subdivided into talks. (The
number of talks in a district varies between four and seven.)
9 Category A = more than 2,500 kg/hectare; Category B = 2,200-2,250 kg/hectare, Category C = less than 2,000
kg/hectare.
20 According to levy records, the proportion of paddy land in holdings with more than two acres was only about 25
percent of the total holdings. Population pressures may be another reason for the reduction in size of holdings.
21 M A. Oommen, Land Reforms and Changes in Agrarian Structure of Kerala Since Independence (Trichur: University
of Calicut Centre, 1977).
22 These levels are available from various reports of the Agricultural Prices Commission in India.
23 Throughout this study, all references to tons indicate metric tons









Table 7-Procurement of paddy from local production,
1966/67-1975/76

Procurement as a Percentage of
Total Paddy
Year Procurement
Local Total Ration
Production Offtake
(1,000 tons)
1966/67 93.1 5.7 7.3
1967/68 118.6 7.0 12.8
1968/69 138.0 7.3 14.1
1969/70 130.9 7.4 5.6
1970/71 114.5 5.9 9.3
1971/72 105.0 5.2 8.4
1972/73 78.1 3.8 5.9
1973/74 80.9 4.3 7.0
1974/75 60.3 3.0 5.1
1975/76 60.0 3.0 7.5


Source: Government of Kerala, Department of Civil Supplies, A Handbook of Statistics, 1976 (Ernakulam: Kerala
Government Press, 1977), p. 38.







Table 8--Procurement price and open market (farm level) price,
1966/67-1975/76

Procurement Ratio of
Price Incentive Total Farm Farm Price
Year of Delivery Procurement Price to Procure-
Paddy Bonus Price ment Price


(Rs./quintal)
1966/67 43.81 8.19 52.0 106.76 205
1967/68 52.0 13.0 65.0 140.48 216
1968/69 56.25 8.75 65.0 111.98 172
1969/70 56.25 8.75 65.0 100.31 154
1970/71 56.25 8.75 65.0 90.53 139
1971/72 56.25 8.75 65.0 99.62 153
1972/73 56.25 8.75 65.0 119.19 183
1973/74 63.0 8.75 71.75 187.53 261
1974/75 74.0 74.0 246.23 333
1975/76 74.0 74.0 182.98 247


Source: Government of Kerala, Department of Civil Supplies, A Handbook of Statistics, 1976 (Ernakulam: Kerala Gov-
ernment Press, 1977), p. 38.








when the production levels remained
stationary in the mid-1970s, the procure-
ment volume declined.

Factors Influencing Procurement

The procurement volume of paddy is
influenced by a number of factors, most
important of which are the gap between
the open market (farm level) and the pro-
curement prices, production levels, and
administrative efforts to enforce the levy
system.24 Of these three factors, the
first two can be analyzed with past data
on production, procurement, and prices
in Kerala.
For this analysis, the procurement
volume of paddy from 1966/67 to 1975/76
was related to the ratio of the open market
(farm level) price and the procurement
price, and to production levels. The re-
sults indicated that the procurement
volume declined as the open market price
increased. However, procurement volume
also showed a negative relationship to
production levels, which can probably
be explained by the changes in distribu-
tion of holdings. The estimated equations
for this analysis are:25
yl = 299.58 .333x, .105x2; R2 = .68,
(t values) (-3.35) (-1.69)
log yi =20.46 -.841 log xi
(t values) (-4.18)
1.606 log x2; R2 = .76,
(-2.29)
where:
yi = procurement volume of paddy,
(1,000 MT),
xl = ratio of farm level prices to pro-
curement price, and
X2 = production of paddy (1,000 MT).


Similar results were found when the
percentage of paddy production procured
by the state government was substituted
for procurement volume of paddy. The
estimated equations were:


y2 = 21.28 .0176x
(t values) (-3.31)


.009x2; R2 = .75,
(-2.96)


and log y2 = 24.71 .862 log xi
(t values) (-4.25)
2.596 log X2; R2 = .82,
(-3.66)
where y2 is paddy procurement expressed
as a percentage of paddy production. Thus,
both functional relationships indicatethat
procurement volume in Kerala in the past
was influenced by the ratio of the open
market price to the procurement price.
However, the evidence of the relationship
between procurement and production was
inconclusive.

Organizational Factors Influencing
Public Distribution

The distribution of foodgrains in Kerala
occurs through informal rationing. House-
holds eligible for ration purchases can
buy certain maximum quantities from
the ration shops at controlled prices.
Eligibility for ration purchases is deter-
mined on the basis of the size of land
holdings. Only about 3 percent of the
families with holdings sufficient to meet
their home consumption requirements
are excluded from the ration distribution.
The maximum quantities that each con-
sumer can buy from the ration shops are
fixed at different levels, which account
for only a portion of the family consump-
tion requirements.26 Consumers take their


24 See Wolf Ladejinsky, "The Failure of Wheat Trade Takeover," August 1973, p. 39. (Mimeographed.)
25 The econometric specification suffers from a problem of identification since the open market prices are likely to
be influenced by procurement level and effort. In spite of this, it is useful to show that, to some extent, the
tendency for levy evasion will be high when market prices go up.
26 For example, the daily ration quota during 1976 varied from 80 to 160 grams of rice per adult and 110 to 160 grams
of wheat per adult.









ration quotas in amounts and at times
they decide. The rest of their consump-
tion requirements are obtained from the
open market. Since the government con-
trols the interstate movement of food,
the quantities available in the open mar-
ket are limited to supplies from local
production after levy requirements have
been met. Because of this, the open
market price is always much higher than
the ration price.27
The state has an elaborate network of
retail outlets for the distribution of food-
grains. In order to facilitate physical dis-
tribution, the Food Corporation of India
(FCI) established 15 main depots and 33
subdepots in the state. These depots sup-
ply foodgrains to 256 approved whole-
salers (210 private and 46 cooperative).
These wholesalers are affiliated with
11,565 ration shops (8,462 private and
2,923 cooperative).28 On an average, one
FCI depot or subdepot supplies about
seven wholesale dealers and one whole-
sale dealer supplies 45 retail outlets. One
retail outlet serves an average of 345
households with ration cards.
One of the important strengths of ra-
tioning in Kerala is its large coverage,
both in terms of the coverage of the popu-
lation and the coverage of the distribution
network. The universal coverage of ra-
tioning in the state has been partially
responsible for minimizing leakages and
has influenced the stability of the ration-
ing system. When target-oriented distri-
bution programs are used, it is often
difficult to effectively determine who
should be eligible for these programs.
This is particularly true when income
levels of the participants are considered


to be the basis for the means test. Kerala's
answer to this problem is to avoid any
attempt to enforce a nonviable means
test. At the same time, the small volume
of foodgrains available through rationing
at relatively low levels has contributed
to preventing misuse of the ration quota.
In most areas retail shops are easily ac-
cessible to Kerala consumers. FCI and
wholesale depots are also easily acces-
sible and the network of roads and trans-
portation facilities is adequate to facili-
tate physical movement of foodgrains.
The state's huge foodgrain deficit is
another factor influencing the perfor-
mance of rationing in the state. In the
past in India, offtake from ration shops
in a good crop year was low, and there-
fore public distribution was superfluous,
while in a bad crop year there was heavy
demand for foodgrains through public
distribution. Thus in areas of marginal
shortages, it was difficult to make the
system survive during good crop years
and to make supplies available during
bad crop years. Such fluctuations in ra-
tion offtake did not create a major prob-
lem in Kerala, where market arrivals from
local production were sufficient to meet
only a relatively small portion of the con-
sumers' requirements during both good
and bad crop years. The gap between
consumption requirements and local pro-
duction resulted in the open market
prices remaining at a substantially higher
level than the ration prices, which in turn
provided adequate incentives for con-
sumers to continue their purchases from
the ration shops.
In addition to the coverage of the ration
shops and the shortage of foodgrains in


27 This dual market mechanism has implications for both producers and consumers. For a discussion of some of the
issues involved, see Dharm Narain, "Agricultural Price Policy," paper presented at the National Symposium on
Agricultural Research and Development Since Independence, New Delhi, 1974. M.L. Dantwala, Incentives and
Disincentives in Indian Agriculture." Indian journal of Agricultural Economics 22 (April-June 1967): 1-25 and
K Subbarao, "Market Structure in Indian Agriculture. A Study of Economic Efficiency of Paddy/ Rice Marketing
System in West Codavari District" (Ph D dissertation, University of Delhi, 1977).
28 Handbook of Statistics, pp. 22-23.









Kerala, a number of organizational and
administrative arrangements made by the
state government also have influenced
the performance of public distribution in
the state. The retail outlets were de-
veloped as viable units for handling ra-
tion commodities. In many other states
in India, lack of rural retail outlets suit-
able to handle ration items was considered
the major problem in extending ration
coverage to the rural areas and it was
often necessary to combine ration food
items with other essential commodities.
However administrators in Kerala de-
liberately avoided grouping rationed food
commodities with other items mainly be-
cause they feared such linkages might be
used by the retailers to force the con-
sumers to buy unwanted items. The retail
outlets were given license to sell ration
goods with the explicit understanding that
they would exclusively deal in ration
items. Each retail outlet was expected to
earn a monthly net income of about Rs.
200 from the sale of ration commodities.
Since the quantity of rice sold through
the ration shops is adequate to meet only
a portion of the consumers' requirements,
many consumers have to supplement the
ration quantities with other items. Tapi-
oca, a relatively inexpensive cereal sub-
stitute, is the most common supplement
used by the poor. Rich consumers are
able to buy rice from the open market
at high prices. The availability of food-
grains from the open market provides the
needed support for maintaining some
amount of choice for the consumers.
The administrative arrangements for
rationing in Kerala also provide some
flexibility in how much can be purchased
at one time. In many other parts of the
country, ration foodgrains are made avail-
able only once a month and many poor
families cannot accumulate enough
money to buy their ration quota in one
installment. In Kerala the ration quota
is distributed weekly and installment


purchases are possible.
Another important aspect of rationing
in Kerala is that while the Government
of India has had to incur subsidies on
food distribution in Kerala (see discussion
below), thus far the Kerala government
has been able to recover all operating
costs of the system from its consumers.
In addition, the state has not made any
capital investments in support facilities
for rationing. The storage facilities are
provided by the wholesalers and retailers
and investments in these facilities are
financed by nongovernmental agencies.
Also, transportation arrangements are
made by the wholesalers using the margins
allowed by the state government.
In addition to the universal coverage of
rationing and quantity limits, the high
literacy in the state, public awareness
of ration entitlement, and the strong
ties with a number of political parties
supported at the village level also help
reduce leakage. In addition, when ration
allotments do not reach the retail outlets
or when the consumers cannot get their
ration quota, those in the official hier-
archy are available to provide assistance.

Government Expenditures on
Public Distribution

While the state government recovers
operating costs of rationing from the
consumers, the Central Government in-
curs a consumer subsidy on foodgrains
supplied to the state. The FCI acts on be-
half of the Central Government to arrange
for procurement, importation, and dis-
tribution. The price of grains procured
from domestic markets and the issue
price of grains are fixed by the Central
Government. The costs incurred by the
Food Corporation in arranging supplies
from domestic production include the
procurement price of grains; procure-
ment charges (including gunny cost and
tax); and the movement, storage, and









distribution costs incurred by FCI for
issues through the public distribution
system. For imported grains, the costs
incurred by FCI include the purchase
price from the foreign markets, port
clearance charges, and distribution costs.
The total cost of sales incurred by the
Corporation on both imported and local
grains is often higher than the issue price
fixed by the Central Government. This
difference between the cost of sales and
issue price is met in the form of consumer
subsidies by the Government of India.
The magnitude of Central Government
subsidies varies according to the type of
grains and whether they are local or im-
ported. The rates of consumer subsidy
during 1973/75 to 1975/76 appear in
Table 9.


The total Central Government subsidy
for food distribution in Kerala was esti-
mated using the rates of consumer sub-
sidy; quantities of rice and wheat dis-
tributed during 1973/74, 1974/75, and
1975/76; and the proportions of imported
and local rice in total rice distribution.
Since the proportion of local and im-
ported rice in the total rice supplied by
the Central Government to Kerala for
these years could not be determined, it
was assumed that the proportion of im-
ported rice distributed through the public
system in Kerala was the same as the
corresponding proportion at the national
level. The Central Government subsidy
estimated for the years 1973/74, 1974/75,
and 1975/76 was Rs. 70.04, Rs. 141.93,
and Rs. 1.05 million, respectively.


Table 9-Rates of consumer subsidy incurred by the Government of
India for public distribution, 1973/74-1975/76

Item Origin 1973/74 1974/75 1975/76


(Rs./ton)
Wheat Local 165.9 16.6 107.4
Wheat Imported 587.1 533.3 408.2
Rice Local (-)19.5" (-)53.7' (-)81.5
Rice Imported 388.2 276.6 886.1
Milo Imported 419.5 346.6 636.0
Coarse grains Local n.a. 24.1 198.7


Source: Data taken from Food Corporation of India, Annual Report 1974/75 (New Delhi: Food Corporation of India,
1975) and Food Corporation of India, Annual Report 1975/76 (New Delhi: Food Corporation of India, 1976).
' A negative sign indicates net gains.









4


RATION OFFTAKE


The average annual offtake29 from
ration shops between 1965 and 1976
ranged from 893,000 to 1,218,000 tons
(Table 10). The per capital annual offtake
of rice and wheat from the fair price
shops varied between 42 and 65 kilo-
grams. Though the per capital annual
offtake shows some stability over time,
the composition of the offtake between
rice and wheat changed substantially
in different years, at least compared to
other states in India. The share of wheat
in the total offtake varied from 6.2 per-
cent in 1971 to 47.9 percent in 1975.
The variations in the commodity compo-
sition were primarily dependent upon the
availability of foodgrains from the central
pool.30 Though the amount of offtake of
rice and wheat indicates some substitu-
tion of these two items, it would be in-
correct to interpret this as an indication
of the existence of perfect substitution
between rice and wheat in the demand
sense because of the supply pattern. This
aspect is discussed in more detail in the
analysis of factors influencing ration
offtake.
The ration offtake data in Table 10 indi-
cate a decline in total ration offtake and
per capital annual offtake from 1969 to
1974. While rice offtake increased by
191,000 tons between 1968 and 1969,
wheat offtake declined by 276,000 tons
for that same period. This shortfall in
wheat offtake might have been due to the


23 percent increased availability of tapi-
oca at this time. During the entire period
from 1969 to 1974, tapioca production
continued to increase, especially during
1971/72 when production was about 18
percent above the 1970/71 production
level. Tapioca production stabilized after
1973. Wheat offtake was high in 1975
when the rice offtake was low.
The ration price is fixed at wholesale
and retail levels on the basis of the issue
price from the central pool. Generally,
the state government recovers the ex-
penditures incurred through food distri-
bution from the consumers. The nature
of margins added by the state government
to cover the distribution costs since
January 1975 are shown in Table 11. In
this table, the issue price corresponds to
the price at which the state government
received rice and wheat from the Central
Government. The maximum and mini-
mum levels of both wholesale and retail
prices indicate the difference in trans-
portation and incidental charges allotted
for the wholesalers and retailers located
in different regions. After meeting all
the direct costs of distribution, the mar-
gins between the wholesale price and
issue price, and between retail price and
wholesale price also contributed to the
administrative overheads of the state
government.
Between 1966/67 and 1975/76, the re-
tail price of ration rice in Kerala increased


29 The ration quantities purchased by consumers.
30 Since local procurement of rice accounted for only a small portion of the foodgrains distributed through ration
shops, the variation in offtake given in Table 11 represents the availability of foodgrains from the central pool.









Table 10-Ration offtake of rice and wheat, 1964-1976


Wheat


Total
(Rice and
Wheat)


(1,000 tons)
1,218
1,151
1,068
1,040
955
893
899
970
960
972
1,020
1,124


Wheat as a
Percent of
Total


25.6
26.3
42.6
37.7
12.1
7.9
6.2
8.7
20.6
19.1
47.9
19.6


Per Capita
Annual
Offtake


(kg)
65
60
55
52
47
43
42
44
43
42
43
47


1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976


Source Government of Kerala, Department of Civil Supplies, A Handbook of Statistics, 1976 (Ernakulam. Kerala
Government Press, 1977), pp. 35-36.


Table 11 -Ration price, January 1975

Wholesale Price Retail Price
Issue
Price
Item/Variety Minimum Maximum Minimum Maximum


(Rs./quintal)
Rice: Coarse 135 141.40 143.15 146 148
Rice: Medium 150 156.40 158.15 161 163
Rice: Fine 162 168.65 170.40 173 175
Rice: Superfine 172 178.65 180.65 183 185
Wheat 125 131.00 133.00 134 136


Source: Government of Kerala, Department of Civil Supplies, Administration Report of the Supplies Department for
the Year 1974/75 (Ernakulam: Kerala Government Press, 1976), p. 17.


by about 95 percent (see Table 12).
During the same period, the ration wheat
price increased by about 116 percent.
Throughout this period, the open market
price of rice was substantially higher
than the ration price of rice. The open
market price and ration rice price ratio


was lowest during 1971/72, when it was
about 41 percent higher than the ration
price. The ratio between these two prices
was the highest in 1967/68 when the open
market price was about 174 percent above
the ration price.









Table 12-Ration and open market prices, wheat and rice,
1966/67-1975/76

Ration Ration Rice Open Market Price Ratio of
Year Wheat Price Price Rice Price Open Market Rice
to Ration Rice


(Rs./quintal) (percent)
1966/67 62 76 161 212
1967/68 74 76 208 274
1968/69 74 102 198 194
1969/70 85 103 166 161
1970/71 85 104 155 149
1971/72 85 108 152 141
1972/73 98 108 176 159
1973/74 134 134 240 179
1974/75 134 136 349 260
1975/76 134 148 381 268


Source: Government of Kerala, Department of Civil Supplies, A Handbook
Government Press, 1977), pp. 64-65.


Factors Influencing Ration Offtake

A number of factors influence the
quantities of foodgrains sold through the
ration shops.31 Because of quality and
price considerations it is possible'to treat
ration rice and wheat as additional com-
modities entering the consumer's bundle
of choice goods.32 When ration com-
modities are treated as additional items
entering the consumer's choice function,
the demand for ration commodities is
influenced by the same set of variables
that influence other nonration commodi-
ties. Following conventional economic
theory, the variables influencing demand
are price, income, taste, and preference.
Since the demand for ration commodities
is a rising function of income for the low


of Statistics, 1977 (Ernakulam. Kerala


income groups and a falling function of
income beyond certain income levels,33
and persons with comparatively large
holdings (and large incomes) are excluded
from rationing,34 it may not be appropri-
ate to use income to explain ration off-
take in an aggregate sense. Also, since
in the past the price of ration commodi-
ties remained constant over various
periods of time, it is appropriate to use
the gap between open market and ration
price instead of the absolute price levels.
The following regression models were
specified to explain the quantities of ra-
tion rice and wheat sold through the ration
shops:


31 The quantities sold through the ration shops indicate both ration offtake (which has a demand connotation) and
availability. While availability was a serious constraint for rice, it was not for wheat.
32 The consumers in different parts of India, and sometimes even within a state, have definite foodgrain preferences
based on taste, cooking quality, and milling quality. See P.S. George, V.V. Choukidar, and M.B. Dave, Consumption
Pattern and Preferences for Rice (Ahmedabad: Indian Institute of Management, 1972.)
3 This is because at the low income levels ration rice is often substituted for tapioca and as income goes up, open
market rice is substituted for ration rice.
4 About 3 percent of households with production from their own land sufficient to meet their family consumption
requirements were not eligible for ration foodgrains.








Por
qrr = f(r Prw, Pt), and
'rr
P in r P wt ),35
qrw f(qrr, Porp P' p)3
Prr 'rw
where:
qrr = quantity of rice sold through
ration shops,
Por = open market price of rice,
Prr = ration rice price,
Prw = ration wheat price,
Pt = tapioca price, and
qrw = quantity of wheat sold through
ration shops.

In order to estimate the coefficients of
the above regression models, monthly
data on quantities and prices from 1970
on were used. The estimated equations in-
dicated that none of the equations for rice
were statistically or economically sig-
nificant. However, a large portion of the
variations in quantities of wheat sold
through ration shops could be explained
by the four variables of ration rice off-
take, open market price of rice, ratio of
ration wheat price to ration rice price,
and ratio of tapioca price to ration wheat
price. While all coefficients showed mean-
ingful directions of change, indicated
by the signs of the coefficients, only the
first two variables had statistically sig-
nificant coefficients. The estimated equa-
tion was


qrw = 55304 0.624 qrr +
(t values) (-8.91)
elasticities -2.43


7000.2 Por
(2.78)
0.68


-16004 PWR + 29790 PTW; R2 = .78,
(-1.26) (1.04)
where:
qrw = monthly wheat sales
through ration shops (tons),


qrr = monthly rice sales through
ration shops (tons),
Por = monthly open market price
of rice (approximated with
farm level prices) Rs./kg),
PWR = Prw = ratio of ration wheat
Prr price to ration rice
price, and
PTW = t--= ratio of tapioca price
Prw to ration wheat price.
Before reporting this equation, the cor-
relation between qrr and Prr was checked
to make sure that multicollinearity did
not exist. A low correlation coefficient be-
tween these two variables further con-
firmed the result that variations in rice
offtake could not be explained by market
variables, especially price differentials.
The regression coefficient for rice sales
through ration shops indicates that con-
sumers did not substitute rice and wheat
freely. When rice sales through ration
shops declined by one kilogram, wheat
sales increased by .62 kilograms; thus
indicating that during rice shortages, con-
sumers might have used only a portion of
the money saved from the reductions in
rice purchases on wheat and the balance
for the purchase of rice or tapioca from
the open market. Absence of monthly
data on consumption of these items make
it difficult to test the validity of this
statement.
The inability to explain rice sales in
ration shops by normal demand variables
suggests that rice offtake by consumers
was probably influenced by supply con-
ditions, rather than by consumer choice.
It was pointed out that the supplies to the
ration system in Kerala were mainly pro-
vided by the Central Government through
FCI depots. The Central Government
gave fixed monthly rice and wheat allot-
ment quotas to the state, and state


35 In addition to the usual price variables, qrr was introduced in the equation to test the influence of the supply con-
straint of ration rice in determining the quantities sold through ration shops.









officials directed ration shops to withdraw
supplies based on these allotments. An
analysis of the monthly allotments from
the central pool and the offtake from the
ration shops indicated that, in most
months, the rice allotment was used en-
tirely and the wheat allotment used only
partially. During 1975, rice allotment was
substantially reduced from the previous
year's allotment, and this influenced a
higher proportion of allotment of wheat
being lifted during 1975.36 It is possible to
infer that offtake of wheat reflects non-
availability of rice and when rice is made
available, the maximum allotment is
lifted.37 This, along with the results of
the regression analysis, leads to the con-
clusion that ration offtake of rice in
Kerala was the result of supply con-
straints and therefore cannot be explained
through demand variables. However, since
supply was not a limiting factor for wheat,
its offtake can be explained through de-
mand variables.38

Distribution Aspects of Rationing
on Consumption Levels

In order to determine the extent of
benefits derived by consumers belonging
to different income groups, it is necessary
to obtain data on distribution of ration
offtake among consumers belonging to
different economic categories. In par-
ticular, it is important to determine the
extent to which households belonging to
different income groups depend on ration
shops to meet their consumption re-
quirements.


Since existing data on ration distribu-
tion provide only the aggregate picture,
an attempt was made to obtain primary
data from household surveys. For this
purpose, a household survey was under-
taken during the week of November 20-
26, 1977 to determine the proportion of
consumption requirements met through
ration shops. The household sample was
taken during the week of November 20-
26, 1977 to determine the proportion of
about 800 households registered with the
ration shops in these two villages, a
random sample of 100 households was
selected and the required information was
collected through personal interviews
using a structured questionnaire.
During the reference week of the survey,
the average household consumption of
rice was 11.32 kilograms (see Table 13).
Purchases from the ration shop accounted
for about 56 percent of the rice consump-
tion. Open market purchases accounted
for about 33 percent of rice consumption
and retentions from own production ac-
counted for !he rest (about 11 percent).
The average consumption of rice in house-
holds with annual incomes of Rs. 600 or
less was 8.4 kilograms. With the exception
of the households with annual incomes
of Rs. 3,601 to 4,800, consumption of
rice increased as incomes rose. About
two-thirds of the total rice consumed in
families with incomes of Rs. 1,200 or less
came from ration shops. About 40 per-
cent of the rice consumed in families
whose incomes were above Rs. 3,600 was
purchased in ration shops.
The ration availability of rice was suf-


36 While the daily rice ration during 1975 remained at 80 to 100 gm/adult, daily wheat ration was allowed to reach
240 gm/adult.
37 This is particularly true since in most cases, open market prices were substantially higher than the ration price.
When the margin between these two prices is high and when the availability is less than the quantity demanded by
consumers at the corresponding margin, the actual offtake of rice cannot reflect the true demand.
38 This result for Kerala is also consistent with the results obtained by R. Krishna and A. Chhibber, "A Policy Model of
the Indian Wheat Sector," paper presented at the International Food Policy Research Institute/International Maize
and Wheat Improvement Center Conference on Food Security, Mexico, 1978. They indicate that the interplay of the
issue price fixed by the government and the open market wholesale price does influence the offtake of consumers
from the fair price shops.










Table 13-Household consumption of rice by income group and source
of supply, week of November 20, 1977


Annual
Income
Group


Percentage
of
Households


(Rs.)
Up to 600
601-1,200
1,201-2,400
2,401-3,600
3,601-4,800
More than 4,800
Total


Weekly
Household


Consumption Ration Open
of Rice Shops Market


(kg)
8.40
9.43
13.47
13.89
12.00
13.42
11.32


67.3
67.8
57.2
48.0
40.8
38.3
56.1


32.7
32.2
13.1
44.0
42.5
19.2
33.0


Table 14 Household consumption of rice, wheat, and tapioca, week of
November 20,1977


Rice From Ration
Wheat Tapioca
Annual Open
Income Ration Own Market Own Market
Group Shops Production Purchases Production Purchases


(Rs.) (kg)
Up to 600 -2.75 0.10 0.40 12.50
601-1,200 3.04 1.09 2.96 8.35
1,201-2,400 1.77 4.00 3.87 4.13 11.33
2,401-3,600 1.11 6.11 1.44 4.33 8.33
3,601-4,800 2.00 5.10 0.50 4.50 2.20
More than 4,800 5.71 2.57 0.71 3.29 -
Total 1.24 3.73 1.89 3.71 9.48


ficient to meet only a portion of rice re-
quirements of the consumers. While the
consumers belonging to upper income
groups deliberately gave up a portion of
their rice quota in favor of other alterna-
tive commodities, consumers belonging
to the lower income groups were forced
to buy alternative commodities because
of the supply limits from the ration


shops.39 Whether alternatives were chosen
deliberately, or because of supply con-
straints, it is useful to examine these
choices made outside of the ration system.
The major items of household con-
sumption and their sources included rice
from ration shops, open market rice (local
production entering the market), rice
from own production, ration wheat, and


3 While the consumers belonging to the low income groups used more than 90 percent of ration quota, consumers in
the higher income groups used only about 60 percent.


Percentage of Rice Consumption From


Own
Production






29.7
8.0
16.7
42.5
10.9









tapioca. For the total sample, the weekly
consumption basket included 1.24 kilo-
grams of rice and 3.71 kilograms of tapi-
oca produced by the consumers (Table
14). The dispersal of these items indi-
cates substantial variations among the
different income groups. Consumers be-
longing to the lowest income group did
not have their own rice production. After
obtaining their ration quota of rice, they
preferred to buy open market tapioca
and rice instead of utilizing their ration


wheat quota.
Table 14 indicates that many rural
households consumed only a small quan-
tity of wheat. When their rice quota was
exhausted, consumers preferred to pur-
chase tapioca from the open market than
wheat from the ration shops.40 Wheat
purchases from ration shops accounted
for only about one-third of the total wheat
allotment for the total sample and were
the lowest in the low income households.


40 The relative calorie prices of ration wheat (2500 calories/Rs. of grain) and tapioca (2700 calories/Rs. of tapioca)
were comparable









5


THE IMPACT OF RATIONING


Rationing has major direct and indirect
impacts on a number of areas of the
national economy (see Figure 2). Local
procurement efforts needed to maintain
supplies to the ration system influence
open market supply, farm price, farm
income, and thus agricultural resource
allocation by farmers and the level of pro-
duction of different agricultural com-
modities. Imports for rationing restrict
the foreign exchange available for other
sectors and government allocation of re-
sources for other development activities,
particularly intersectorai allocation. Thus
the imports and local procurement for
the ration supply influence the level of
economic growth of the nation.
At the consumer end, the ration avail-
ability influences the consumption pattern
through income and substitution effects.
The level of expenditure on ration com-
modities, other food items from the open
market, and nonfood items generally
influence the quality of life. If ration
commodities are available for only the
low income consumers, they also in-
fluence the inequalities in living stan-
dards among the populations belonging
to different income groups. When food-
grains distributed in a deficit area are
procured from a surplus area outside of
Kerala, it results in some amount of in-
terregional transfer of income. The nature
of this transfer depends on the changes
in intersectoral resource allocations in
both the surplus and the deficit areas.
This brief description of the direct ef-
fects of rationing highlights some diffi-
culties associated with evaluating the


impact of rationing in Kerala, where
most of the commodities supplied through
ration shops originate from outside the
state. A complete analysis of the inter-
sectoral and interregional losses and
gains both within and outside Kerala in-
volves developing an appropriate analyti-
cal framework for the analysis. Though
this can be developed by adopting a
complex regional analysis framework,
the empirical nature of the analysis might
still introduce serious limitations on the
use of such models. Because of this, the
present analysis has a restricted scope and
does not attempt to estimate the full
impact of rationing.




Impact of Rationing on Consump-
tion Levels

To determine the impact of rationing
on consumption levels, the levels that
might prevail in the absence of rationing
were estimated and compared with the
actual consumption levels under ra-
tioning.
In the absence of a complete demand
interrelationship matrix for each income
group, the impact of rationing on the
consumption level of rice for each group
of consumers was estimated on the basis
of each group's actual expenditures on
rice. For this purpose it was assumed that
the consumers determined their total ex-
penditures on rice first. These quantities
then were adjusted according to price






Figure 2-Influence of ration system on individual expenditure
and national economic growth sectors


Individual
Expenditure
on Ration
Commodities











Imports for
Ration Supply


Local Procure-
ment for
Ration Supply


Individual
Expenditure
on Nonfood
Items


Quality
of Life


Food Consumption .. Nutrition


Individual
Expenditure
on Nonration
Foods




Imports in
Other Sectors


G government
Allocation
of Resources


Consumer Price


NATIONAL
ECONOMIC
GROWTH


Market -- Farm ---Farm Cropping -- Agricultural
Supply Price Income Pattern Production
Resource
Allocation



Market Structure
and Supporting
Services


Income
Distribution


Ration
Supply


,









changes.41
Expenditures on rice in each income
group corresponding to the purchase
pattern in Table 13 were used as the basis
for determining the quantities corre-
sponding to two price levels:42 the exist-
ing open market price level in Kerala
(Si) and the hypothetical national free
market price level (S2).43 When S1 is
used, the retail price within the state re-
mains at the existing open market price
level. When S2 is used, it implies that
rationing is abolished and interstate move-
ment restrictions are removed. Thus, in
the absence of structural inadequacies,
the difference between the market price
of rice in Kerala and the market price of
rice in other parts of the country is the
transportation costs and related mar-
keting margins.
Si was available from published data.
The open market price in a paddy growing
state in South India was used for S2. Since
rice from Andhra Pradesh was used for
ration distribution in Kerala, the price
in Andhra Pradesh was taken as the base
price and appropriate transportation costs
were added to this price level.44
The estimated consumption levels of


rice in the absence of rationing indicated
that consumers belonging to all income
groups possibly would experience a fall
in the rice consumption levels. In other
words, when rationing is removed and the
market prices in the state become com-
parable to the prices in surplus states,
the actual consumption level in all groups
falls below the consumption levels under
rationing. The fall in consumption is
greatest for the low income groups where
consumption is already low. As pointed
out earlier, the actual consumption levels
are likely to fall below the levels reported
in Table 15 because the retail price used
in obtaining these figures corresponds
to the retail price in a surplus state where
zonal restrictions existed.


Rationing Gains to the Producers
and Consumers in Kerala

In the absence of analytical procedures
and data needed to quantify the full im-
pact of rationing (both the direct and
indirect income distribution gains of
rationing), the gains of rationing were
measured through income gains or losses


41 This is somewhat consistent with the assumptions of a two-stage maximization process considered in demand
theory. Though there exists some amount of substitution among the different commodities, the extent of free sub-
stitution of wheat or tapioca for rice in a given income group may be relatively small However, this assumption is
limited. It overlooks the fact that price changes for rice, wheat, and tapioca will have a significant real income
effect even within an income group, and hence will probably cause significant price responsiveness (among the
poor), even when the pure substitution effect is the same at all income levels Also, the substitution of other com-
modities for rice might change the expenditure pattern when rationing is abolished. If rice expenditures increase in
the process, using this assumption, the estimated decline in actual consumption will be exaggerated. However,
since the increase in rice expenditures will occur at the expense of other items, the omission of this aspect
probably compensates for its exclusion in the analysis.
42 These two price levels correspond to the possible range in which the price level in Kerala will fall when rationing
is abolished. Therefore the results corresponding to these two price levels can be treated as upper and lower limits
of gains and losses.
43 Though the national free market is only hypothetical when zonal restrictions exist, it is no longer hypothetical for
the period after 1977 when these restrictions were removed.
44 The price level in Andhra Pradesh corresponds to the period when both levy and restrictions on interstate move-
ments of foodgrains were in force. When levy procurement is abolished, increased market supply in Andhra
Pradesh would influence a downward movement in prices and at the same time movement restrictions are re-
moved, demand pull from outside the state would influence an upward movement in prices. While it is difficult
to predict the exact outcome of these two conflicting pulls, the price increase due to demand pull would probably
more than offset the price depressing tendency of increased open market supply when levy is removed. Thus it may
be safe to assume that the price levels prevailing in Andhra Pradesh during the past would be a lower bound
(minimum level) of 52.









Table 15-Estimated consumption level of rice by income group, no
rationing, market price corresponds to national free
market price (S,), 1974/75

Income Actual Estimated Percentage
Group Weekly Weekly Decline
Consumption Consumption from Actual
Consumption

(Rs.) (kg)
Up to 600 8.40 6.91 17.7
601-1,200 9.43 7.72 18.1
1,201-2,400 13.47 11.54 14.3
2,401-3,600 13.89 13.26 4.3
3,601-4,800 12.00 11.74 2.2
More than 4,800 13.42 12.09 9.9


to both producers and consumers.45
Farm incomes with and without ra-
tioning were estimated in order to de-
termine the income gain to the farmers
as a result of abolition of rationing. The
estimated income gain to the producers
as a result of the abolition of rationing
over the actual income realized under
rationing was defined as:46


n
Wp = {(qoi + qli) Pfo
i=1
qo

n -
Wp = qoi(Pfo Pfr)
i=


i Pfr -qli PI},or


n
+ qli (Pfo
i= 1


where:
Wp = producer gain,
qoi = quantity of paddy sold in the
open market by farmers
belonging to ith area group,
Pfo = farm level price of paddy in
the absence of ration,


Pfr = farm level price of paddy
under ration (historical
price),
qli =quantity of paddy sold under
levy in ith group, and
PI = levy price of paddy.

The gain to the consumers as a result of
the abolition of rationing was defined as
the difference between the consumer
expenditures with and without rationing,
or
Wc = Rr (P P) + qm(Pr -P
where:


Wc = consumer gain,
), R = quantities of rice distributed
through ration shops,
P* = market price of rice in the
absence of ration,
P* = ration price of rice,
qm = quantities of rice purchased
from the open market, and
r = open market price of rice
under rationing.


45 These measures provide a partial estimate of the impact of a dual price system and therefore cannot be used to
compare the efficiency loss of the dual market mechanism with a free market. The basic approach followed here is
to estimate the changes in farm income and consumer expenditures in the absence of rationing over their current
levels under rationing in Kerala
4 Supply elasticity is assumed to be zero. The effect of a relaxation of this assumption is discussed later on.


n









The total gains to the producers and con-
sumers in Kerala as a result of abolition
of rationing were defined as:

W = Wp + Wc 47

The producer gain in the absence of ra-
tioning depended on the quantity of levy
in different area groups, open market sales
in different groups, farm level prices in
the absence of rationing, levy price, and
farm level price under rationing.
The total production of paddy in the
state during 1974-75 was about two mil-
lion tons. The marketed surplus during
1959 was estimated at 23 percent of pro-
duction. Because of the reductions in the
size of holdings during the last 15 years,
the marketed surplus was taken as 20
percent of the total production. As noted,
levy accounted for about 3 percent of
production. The Kerala Directorate of
Economics and Statistics estimated the
market arrivals of paddy in Kerala during
1974/75 to be about 8 percent of pro-
duction. Therefore, the remaining 9 per-
cent of production was marketed in rural
areas. These estimates of production,
marketed surplus, and levy payment for
the entire state were further divided into
levy categories using the distribution of


holdings, proportion of marketed surplus,
and the incidence of levy on producers.
In order to obtain production estimates
in each category, data on the distribution
of holdings of paddy area published by
the Board of Revenue (Civil Supplies)
was used. The quantity of levy was de-
termined on the basis of levy rates found
in the Appendix, Table 28. The open
market sales were obtained from the total
marketed surplus and levy sales. In order
to obtain the marketed surplus according
to size of holdings, cross-section survey
data on marketing patterns were used.
The estimated marketed surplus and levy
payments according to size of holdings
are available in Table 16.
The producer gain was determined at
price levels corresponding to Si and
S2. In order to derive the farm level prices
from the retail prices corresponding to
Si and S2, the relationship between the
retail and farm prices was established
using time series data. The estimated
regression equations provided the fol-
lowing results:

Pr = .227 + 1.065 Pf; R2 = .96, and
(t value) (14.88)
log Pr = 0.044 + 1.034 log Pf; R2 = .96,
(t value) (15.63)


Table 16-Estimated production, marketed surplus, and levy payments
by size of holding, 1974/75

Size of Paddy Open Market
Holding Production Levy Sales

(acres) (1,000 tons)
Up to 2 1,399 -113.2
2-5 430 28.9 155.4
5-10 144 23.9 53.8
More than 10 28 7.5 17.4
Total 2,001 60.3 339.8


47 When compulsory procurement is undertaken in surplus states, it has implications for both farm incomes and con-
sumer expenditure in the surplus states. Since this analysis excludes this aspect, the results should be viewed
strictly from the point of view in Kerala.









where Pr is the retail price (Rs./kg.) and
Pf is the farm level price (Rs./kg of paddy
equivalent to 1 kg of rice).
During 1974/75, the open market price
of rice in Kerala was Rs. 3.49 per kilo-
gram and the national free market price
was Rs. 2.50 per kilogram. From these
consumer prices, the farm level prices
were derived using the above relation-
ship between retail prices and farm level
prices.48 If the national free market price
were used (thus distinguishing the price
level inside and outside of the state by
the transfer cost), the farm prices in the
absence of rationing would fall below the
actual open market price. Thus, the
farmers in Kerala were protected against
a price decline through the zonal ar-
rangements.
The quantity data in Table 16 and the
price data in Table 17 provide the basis


for determining the net income gains to
the farmers in Kerala. Table 18 provides
the gains on paddy sold in the open mar-
ket, the gains on levy sales of paddy,
and total gains to the paddy producers.
When zonal restrictions and rationing
are removed under a free market, the
farmers in Kerala lose about Rs. 260 mil-
lion, of which about 85 percent of the
loss is for farmers with less than 5 acres
of paddy land. Thus the graded levy and
rationing operations in the state have
enhanced the income opportunities of
small farmers in Kerala.
Consumer gain in the state from the
abolition of rationing depends on the
ration purchases, open market purchases,
market prices with and without rationing,
and rationing price.49 Using the values
for these variables, the gains to the con-
sumers were determined under the price


Table 17-Estimated farm level price without rationing and estimated
price differences, 1974/75

Open Market Price National Free
Level in Kerala Market Price Level
(Si) (S2)

(Rs./ton)
Farm level price of paddy absense of rationing' 2,460 1,550
Actual farm level price of paddy" 2,460 2,460
Levy price of paddy' 740 740
Price difference on open market sales' -910
Price difference on levy sales' 1,720 810


Pfo
I Pfr
PI
Pfo Pfr
Pfo-PI
48 Throughout this paper, the consumer price, or retail price, is expressed in terms of rice price and the farm level
price, or farm price, is expressed in terms of paddy price.
49 While estimating the impact of rationing on consumption levels, it was assumed that the expenditure on rice
remained the same and the quantities were adjusted to changing price situations. However, in this situation, it is
assumed that the quantities remained the same and the expenditures under rationing and nonrationing were
estimated at the two price levels.









C Table 18-Gains to farmers in the absence of rationing, 1974/75


Net Income on Quantities Sold in the Open Market Net Income on Quantities Sold Under Levy

Gains', Gains, Total Gains

Open Market National Free Open Market National Free Open Market
Quantity of Price Level Market Price Quantity Price Level Market Price Price Level National Open
Size of Open Market in Kerala Level' of Levy in Kerala Level in Kerala Market Price'
Holding Sales" (Si) (S2) Sales' (Si) (S2) (Si) (S2)

(acres) (1,000 tons) (million Rs.) (million Rs.) (1,000 tons) (million Rs.)
0-2 113.2 -103.01 -103.01
2-5. 155.4 -141.41 28.9 49.7 23.41 49.7 -118.00
5-10 53.8 48.96 23.9 41.1 19.36 41.1 29.60
Above 10 17.4 15.83 7.5 12.9 6.07 12.9 9.76
Total 339.8 -309.21 60.3 103.7 48.84 103.7 -260.37


Sqi (Pfo- fr)
A negative sign indicates that farmers in Kerala would incur a loss when zonal restrictions are removed.
"qli

qli (Pfo-PI)
qoi (Pfo-Pfr) + qli (Pfo-P1)









levels corresponding to S, and S2 (see
Table 19). The estimated values of gains
to the Kerala farmers provided in Table 18
and the income gains to Kerala consumers
provided in Table 19 determine the total
gains resulting in the absence of rationing.
These estimates, summarized in Table
20, indicate that when rationing is re-
moved, the combined effect on the pro-


ducers and consumers in the state under
both price levels mentioned causes an
overall loss. In particular, the prices
corresponding to a national free market
price for foodgrains would result in com-
bined losses to the producers and con-
sumers in a major deficit state such as
Kerala.
The welfare gains of the state under


Table 19-Gains to consumers in the absence of rationing, 1974/75


Open Market
Price in
Kerala
(Si)


Assumed retail price of rice in the absence of rationing'
Ration rice price"
Actual retail rice price'
Cap between ration and assumed open market prices''
Gap between ration and actual open market prices''


Consumer gains on ration purchase
Consumer gains on open market purchase
Net consumer gain'


3,490
1,360
3,490
-2,130



-1,384.5

-1,384.5(


(Rs./ton)
2,500
1,360
3,490
-1,140
990
(million Rs.)
0 741.00
224.24
0 -516.76


P p*


' Pr


SPr- Pr
' A negative sign indicates a net loss to consumers.

Table 20-Net gain to producers and consumers in the absence of
rationing, 1974/75


Consumer Producer Net
Situation Gain Gain Gain


(million Rs.)
Actual Kerala price (Si) -1,384.50 103.70 -1,773.21
National free market price (52) 516.76 -260.37 777.13

Note: A negative sign indicates loss.


National Open
Market Price
(S2)








rationing would be incurred partly at
the expense of welfare losses in surplus
states. Since evaluation of welfare loss
in surplus states would involve a some-
what detailed analysis of the agricultural
production and consumption pattern
in these states, no attempt is made to
determine whether such welfare losses
in surplus states exceed the welfare gains
of deficit states, thereby resulting in a
net welfare loss to the country. How-
ever, a comparison of the estimates of
direct subsidy by the Central Govern-
ment with the gains of the producers
and consumers in Kerala at both price
levels indicates that the Central Govern-
ment's contribution to ration distribution
in Kerala during 1974/75 (Rs. 143.93
million) accounted for only a portion of
the net gains to the state.


Sensitivity of Gains with Respect
to Supply Elasticity

The analysis of the producer gains in
the absence of rationing in the last sec-
tion made an implicit assumption that
supply elasticity was zero. Though this
assumption simplified the analysis, it is
unrealistic to assume that the farmers
would produce the same amount of rice,
irrespective of the price levels. In order
to analyze the sensitivity of the results
with respect to a nonzero supply elas-
ticity, the net gains to the producers and
consumers in Kerala were estimated50
on the basis of assumed supply elastici-
ties at 0.1, 0.2, and 0.3.51
The results provided in Table 21 indi-
cate that the conclusions arrived at on
the basis of a zero supply elasticity re-


Table 21 -Gains to producers and consumers under nonzero supply
elasticity, 1974/75

Supply Consumer Producer Net
Elasticity Gain Gain Gain

(million Rs.)
.1 -538.70 -247.00 -785.70
.2 -554.13 -233.53 -787.66
.3 -572.90 -220.07 -792.97



50 To obtain these revised estimates it was necessary to:
1. Obtain the production levels of paddy corresponding to the new price levels. Since Si assumed no change in
price levels, it was necessary to carry out the analysis only for the national free market price (S2).
2. Obtain the new levels of total sales and open market sales according to the size of holdings from the estimated
production levels.
3. Determine the net income to the producers corresponding to the estimated levels of open market sales. The
changes in total production will also influence the market prices, and the gains to the consumers. However,
since the national price (S2) was influenced by conditions outside the state, the consumer price under this
situation was assumed to be the same as before.
4. Determine the consumer prices and consumer gains corresponding to supply elasticities of 0.1, 0 2, and 0.3. This,
together with the net income to the producer, provided the revised estimates of the net gain.
51 In general, aggregate supply elasticity for foodgrains in India is assumed to be small. (See M.L Dantwala, ed.,
"Symposium on Farmer's Response to Prices," journal of the Indian Society of Agricultural Statistics 22 (June
1970): 1-10 and ).W. Mellor and A. Dar "Determinants and Development Implications of Foodgrain Prices, India
1949-50 to 1963-64," American Journal of Agricultural Economics 50 (November 1968): 962-974. Since there is no
major foodgrain competing for rice in Kerala, what is true for all foodgrains could be true for rice.








main valid even after providing adjust-
ments for supply elasticity.


The Impact of Public Distribution
on Income Distribution in Kerala

Though the general conclusion that
abolition of rationing would result in
welfare losses to Kerala is in itself an
important result, the analysis of the im-
pact of rationing on income redistribution
in the state is of relevance as well. As
mentioned earlier, the income redistri-
bution aspects of rationing can be an-
alyzed at both the producer and con-
sumer levels.
For this analysis, the farmers' gross
income from rice sales was determined
based on the distribution of marketed
surplus according to sales to the govern-
ment and open market sales in different
farm size groups shown in Table 16. When
rationing is abolished, the entire mar-
keted surplus is sold at the open market
prices. (The extent of income gains to
the farmers as a result of abolition of
rationing appears in Table 18.) However,
the share of total income for the different
size of holdings is independent of the
realized price levels. The distribution of
gross income from rice sales with procure-
ment and with no procurement is repre-
sented in Figure 3.52 It is evident from the
graph that the present levy procurement
reduces the inequalities in gross farm in-
come from rice sales.
In order to analyze income redistribu-
tion aspects of rationing on consumers,
the realized income of consumers be-
longing to different groups was deter-
mined using the household consumption
pattern of rice according to the sources
of purchase. For this purpose the ration
income was defined as:


R = PQ,
where:
R = the ration income,
P = the gap between price in the
absence of rationing and ration
price, and
Q = the ration quantity.
The ration quantities were taken from
the actual ration offtake (Table 13).
As before, the price in the absence of
rationing was considered at two levels,
Si and S2. The realized income to the
consumers was defined as the sum of
their actual cash income and the im-
plied ration income. Figure 4 indicates
that rationing had an impact on reducing
the inequalities in actual income dis-
tribution.53
To sum up, when the impact of ration-
ing using the national open market price
level was compared with the impact of
rationing using the existing open mar-
ket price level, there was evidence that
Kerala benefitted from the ration opera-
tions. The benefits to the state included:
1. Increased consumption levels of
rice for all consumers, particularly
for the low income consumers.
2. Some redistribution of farm income
in the state through levy opera-
tions. The small farmers were able
to realize higher income levels as
compared to a free market situation
and graded levy operations took
away some of the gains from the
large farmers.
3. Redistribution of realized incomes
among the consumers.
4. Redistribution of income from sur-
plus areas outside the state in favor
of Kerala.
Thus it appears that the abolition of
both rationing and movement restrictions
would result in a net welfare loss to the
state.


2 For the values of the cumulative distribution of producers and gross income see the Appendix, Table 29.
53 For the values of the cumulative distribution of households and household income see the Appendix, Table 30.









Figure 3-Distribution of gross farm income from rice sales, 1974175


100





80



Co
a,

a
E 60

E
0


( 40
0

a
20

20


L, = Distribution under Procurement
L = Distribution under No Procurement


Sources of Gains to Producers
and Consumers

As mentioned, public distribution in
Kerala has two important elements: move-
ment restrictions on foodgrains into
Kerala from outside the state and sale of
foodgrains imported from outside the
state by the government through fair
price shops. In the past the farm level
price received by the producers and the
retail price paid by the consumers in
Kerala were subject to the influence of
both these policy elements. While this


study has estimated rationing gains to
the consumers and producers, gains
from movement and levy restrictions
were not viewed separately. This dis-
tinction was made with data from Kerala
for 1974/75.
Figure 5 depicts the producer sector
in Kerala as it existed during the 1974/75
production year and hypothetically how
it would have existed with the removal
of movement restrictions and levy. During
1974/75, the total amount of paddy sold
in the open market was 339,800 tons at
Rs. 2,460 per ton and the amount sold to


20 40 60 80
Percentage of Producers








Figure 4-Distribution of actual and realized household income, 1974175


100





80-





60 -
/ /
a //


a 40 -
/ /D,



20





0 20 40 60 80
Percentage of Households
D, = Actual Household Income
D2= Realized Income Corresponding to Ration
Valued at Current Market Prices
Da = Realized Income Corresponding to Ration
Valued at NationalOpen Market Price Levels


the government as levy was 60,300 tons
at Rs. 740 per ton, making the total re-
alized income to farmers Rs. 880.5 million
(Figure 5, Part 1). In the absence of move-
ment restrictions and levy, the same total
amount would be sold at a price of Rs.
1,550 per ton, making the total realized
income to farmers only Rs. 620.2 million
(Figure 5, Part 2). Viewed separately, the
loss to farmers through lifting movement
restrictions, or the movement restriction
effect, would have been Rs. 309.2 million
and the gain to farmers by lifting levy
requirements, or the pure ration effect,
would have been Rs. 48.8 million (Figure 5,


Part 3). Thus, the total net gain of Rs.
260.4 million to farmers during 1974/75
had a movement restriction effect of Rs.
309.2 million and a pure ration effect of
Rs. -48.4 million.
Figure 6 represents consumer expendi-
tures in Kerala during 1974/75 with move-
ment restrictions and rationing in effect
and what the situation would have been
without these restrictions. Total consumer
expenditure on rice with movement re-
strictions and rationing in effect was Rs.
1,674.5 million. In this situation, 226,500
tons of rice were bought at the open mar-
ket price of Rs. 3,490 per ton and 650,000






0 Figure 5-Farm income with and without movement restrictions and levy, 1974/75


PART 1


Total Realized Income to Farmers
with Movement
Restrictions and Levy

Rs. 880.5 million


PART 2


--------------------------------------

Total Realized Income without
Movement Restrictions and Levy

Rs. 620.2 million





L -------------------------------------------


Government
Levy
60.3


(1,000 tons)
400.1


PART


Movement
Restriction Effect

Rs. 309.2 million


---------------------~------- -----------
Pure
Ration
Effect

Rs. 148.8
million






(1,000 tons)
400.1


TOTALPADDYSOLD


Rs./ton)

2460









70
a-
Z 1550
c
o




5 740
L_.
G.


E.

0a
S-0


(1,000 tons)
Open Market Paddy
339.8


TOTAL PADDY SOLD


TOTAL PADDY SOLD







tons were bought from ration shops at Rs.
1,360 per ton (Figure 6, Part 1). In the
absence of movement restrictions and ra-
tioning, the consumers would have spent
Rs. 2,191.3 million on purchases at the
existing level of consumption (Figure 6,
Part 2). Therefore, the elimination of the
movement restrictions (Rs. 224.24 million)
and rationing (Rs. 741.00 million) would
have resulted in an increase in consumer
expenditures of Rs. 516.76 million (see
Figure 6, Part 3). Thus, while the pure
ration effect reduces consumer expendi-


Table 22-Movement restrictions
distribution, 1974/75


ture, the movement restriction effect in-
creases consumer expenditure.
The estimated levels of the movement
restriction and pure rationing effects
indicate that the movement restriction
effect is more than six times the absolute
value of pure rationing effect on farm in-
come (see Table 22). Further, the con-
sumer savings through the pure rationing
effect is more than triple the consumer
loss due to the movement restriction
effect.54



and pure rationing effects of public


Movement Pure Total
Source Restriction Effect Rationing Effect Effect

(million Rs.)
Farm Income (+)309.21 (-) 48.84 260.37
Consumer Savings (-)224.24 (+)741.00 516.76
Total Gains in Kerala (+) 84.97 (+)692.16 777.13


54 Since this study did not make any estimates of the income loss to the farmers in areas outside Kerala, it is not
possible to determine whether this loss exceeds the gains in Kerala or not.







Figure 6-Consumer expenditure with and without movement restrictions and levy, 1974


(Rs./ton) PART 1


PART 2


Total
Consumer
Expenditure
on Rice
Rs. 1674.5
million


(1,000 tons)
Rice Bought ---
in the Rice Bought in
Open Market Ration Shops
226.5 650.0
TOTAL RICE PURCHASED


Total Consumer Expenditure
without Levy or
Movement Restrictions

Rs. 2191.3 million




L-------------------------------------
(1,000 tons)
876.5


Movement
Restriction
Effect
Rs. 224.2
million





-- - -


----------------------------

Pure Ration
Effect
Rs. 741.0 million


(1,000 tons)
876.5


TOTAL RICE PURCHASED


PART 3


(
Ca


TOTAL RICE PURCHASED









6


RELATIVE EFFICIENCY OF PUBLIC
DISTRIBUTION AND INCOME
TRANSFER


Since price reductions affect consum-
ers in much the same way that increases
in consumer income do, rationing should
cause an increase in realized income to
the consumers.55 Traditional welfare eco-
nomics assumes that cash transfers are
superior to price subsidies as a means of
improving income redistribution.56 How-
ever, as Davis points out, when the object
of rationing is to increase the consump-
tion levels, a justification for subsidies
over general income transfers is provided
by collective or nonindividualistic pref-
erences. In the context of such theoretical
welfare considerations, it is useful to an-
alyze the relative efficiency of income
transfers and rationing in increasing the
consumption levels of low income con-
sumers based on empirical evidence
from rationing in Kerala.
The framework for this analysis is based
on a comparison of actual consumption
levels under rationing to estimated con.
sumption levels when cash incomes are
provided to offset the loss in ration in-
come. In order to carry out the analysis,
it was necessary to determine the ration
income and the consumption levels cor-
responding to new income levels when
the loss in ration income was offset
through direct cash payments. The pro-
cedure for determining ration income was
discussed in Chapter 5. The ration quanti-
ties (Q) were taken from the actual ration


offtake data provided in Table 14. As
before, the values of P were estimated at
the open market price level of rice in
Kerala (Si) and the national free market
price level of rice (S2).
The consumption levels of rice cor-
responding to the new income levels were
obtained from an estimated relationship
between expenditures on rice and income
levels using the functional form:57
log y = a + b + c log x,
x
where y is expenditure on rice, and x is
family income.
The estimated equations are graphed
in Figure 7. In this figure, C1 corresponds
to actual family income used as the in-
dependent variable in the regression
equation. G2 and G3 correspond to graphs
when ration incomes at price levels cor-
responding to Si and S2 respectively were
added to the actual income levels. (The
realized income levels were used as the
independent variable.)
When the consumers are compensated
for the loss in ration income by means of
cash income, a new level of expenditure
on rice is obtained from each of these
curves. In fact, G1 implies that the ration
income has a zero weight in the con-
sumer realized income, and G2 and G3
assume that the weight of ration income
is one. In reality, the implied consumer
weight may be between zero and one.


55 The term "realized income" is used to represent the sum of cash income and imputed value of ration income.
56 See Davis, "The Fiscal Role."
57 This functional form is particularly suitable for determining the expenditure elasticities at different income levels.
See I W. Mellor, "Agricultural Price Policy and Income Distribution in Low Income Countries," World Bank Staff
Working Paper 214 (Washington, D.C : World Bank, September 1975).








S Figure 7-Expenditure on rice as a function of income, 1974175


4

3




G2
3. i G3
Cr


( 9
S= Actual family income
:5 7
C& 6

W 5

4

3


2






500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 7,500 8,000 8,500 9,000
Family Income (Rs.)

aThis curve pertains only to cases in which the prices are given. It is
possible that in the absence of rationing, the curve would shift upward.

G, = Actual family income
G2 = Open market price level in Kerala added to actual income
G3 = National free market price level added to actual income









However, in the absence of any satis-
factory approach to determine this weight,
the results obtained from the assumed
weights of zero and one could be con-
sidered as the two extreme limits. In
particular, since C1 lies above G2 and G3
at all income levels, the consumption
levels obtained from GC will provide the
upper limit of the expenditures on rice
under the new income levels.
Since the ration income depends on
the assumed price levels, the new ex-
penditure levels and the corresponding
quantities of rice consumed were esti-
mated using the same price levels used
earlier. The estimated consumption levels
given in Table 23 indicate that these
levels were below those under rationing
in all cases, except for marginal increases
in the two bottom income groups for S2.


Thus, compensating ration income with
money income will contribute to higher
consumption levels of the lowest income
groups only if the rice prices are suf-
ficiently low.58
Since the consumption levels of rice
obtained from the curves corresponding
to different ration incomes (incomes
corresponding to different levels) using
a unit weight for ration income would
be less than the consumption levels re-
ported in Table 23, the general conclusion
that consumption of rice under cash pay-
ments would be below the levels ob-
tained under rationing is still valid. How-
ever, the estimated consumption cor-
responding to the national free market
price needs further consideration since
the observed increase in consumption
levels for the lowest income groups is


Table 23-Estimated weekly consumption levels when ration income
loss is compensated by cash income-

Change
Estimated Weekly in Actual
Consumption When Consumption When
Prices Correspond to Prices Correspond to
Income Actual Open Market National Free Open Market National Free
Group Weekly Price Level Market Price Price Level Market Price
Consumption in Kerala Level in Kerala Level
(Si) (S2) (Si) (S2)


(Rs.) (kg) (kg) (percent)
Up to 600 8.40 6.93 8.64 -17 3
601-1,200 9.43 7.87 10.32 -16 9
1,201-2,400 13.47 8.77 11.76 -35 -13
2,401-3,600 13.89 9.65 11.93 -31 -14
3,601-4,800 12.00 9.99 11.95 -17 1
More than 4,800 13.42 10.85 13.05 -19 2

' The estimated consumption values were determined based on the relationship between rice expenditures and income
assuming a zero weight for ration income in the consumers realized income.

5 For these values, it was assumed that the consumer income had gone up to the extent of the loss in ration income
at different price levels. The estimated consumption under the new income level will be influenced by the gap
between the open market and ration prices, the income elasticity, and the price elasticity. When the open market
price falls, the ration income falls causing a drop in the consumption level through income effect. At the same
time, the consumption level increases as a result of the price effect. Probably in the lowest income groups, as the
price falls to S2, the reduction in consumption through income effect will be more than offset by the increases in
consumption through price effect.








likely to disappear when ration income
has some influence on realized income.
In Figure 7, G3 corresponds to the case in
which ration income obtained from prices
corresponding to the national free market
price is used to determine the realized
income. The consumption levels esti-
mated from this curve found in Table 24
indicate that rice consumption in all
income groups will fall when rationing
is substituted with a cash subsidy.
In summary, the analysis on the relative
efficiency of income transfer and ration
distribution leads to two conclusions.
First, the ration system provides realized
income opportunities for low income
groups. While the ration income ac-
counted for only a small portion of the
realized income of consumers belonging
to upper income categories, about half
the realized income of the low income
families was accounted for by ration in-
come. Thus the removal of rationing
would have a very serious impact on these
low income consumers. Second, replace-


ment of ration income with cash income
to the consumers would involve sub-
stantial government expense.59 Com-
pensation with the same amount of cash
income as the loss in ration income would
not be sufficient to retain the rice con-
sumption at the current levels achieved
under rationing. In other words, in order
to retain the current consumption level
of rice, the required increase in income
would be much higher than the ration in-
come derived by the consumers. Thus
the objective of increasing the consump-
tion level of the target group of consum-
ers can be achieved more effectively
through rationing than through a general
income transfer.
These conclusions are based on the ob-
served rice consumption pattern from
the cross-section data. However, the ex-
istence of possible substitutes for rice,
especially tapioca, makes it possible to
infer that the consumers in different in-
come groups will respond differently to
the abolition of rationing. The choice com-


Table 24-Estimated weekly consumption levels when ration income
corresponding to the national free market level (S2) has the
same weight as money income


Income
Group


(Rs.)
Up to 600
601-1,200
1,201-2,400
2,401-3,600
3,601-4,800
More than 4,800


Estimated
Weekly
Consumption


Percentage
Change
from
Actual Consumption


(kg)
6.53
9.14
11.23
12.96
11.62
12.77


' The estimated consumption values were determined based on the relationship between rice expenditure and income
assuming that the ration income has the same weight as money income.



59 In addition to being financially infeasible, large scale income transfers are politically infeasible as well.








binations involving substitution among
open market rice, ration rice,60 wheat,
and tapioca available to the consumers
belonging to different income groups,
though significantly different in terms of
quantities consumed, may lead to a
smaller amount of variations in calorie
consumption levels. Because of this, itwas
considered appropriate to determine the
effect of an income transfer on calorie
intake. For this purpose the calorie con-
sumption data according to monthly per
capital expenditure groups obtained from
1971/72 NSS data were used. The esti-
mated relationship between calorie con-
sumption levels and the monthly per
capital expenditures are provided the
following regression equations:
rural areas

log C = 4.96 + 2.739 + .722 log x;
x
R2 = .97, and
urban areas

log C = 4.64 + 4 + .759 logx;
R2
R2 = .97,


where C is the daily calorie intake per
adult unit and x is the monthly per capital
expenditure in rupees.
The marginal values obtained from
these equations provide the monthly in-
creases in calorie intake as a result of
one rupee increase in monthly per capital
expenditure. These values are presented
in Table 25.
During 1971/72, the ration rice price in
Kerala was Rs. 1.08 per kilogram and the
open market rice price was Rs. 1.55 per
kilogram. Therefore, for each kilogram of
rice purchased from the ration shop, the
consumers had an implied ration income
of Rs. 0.47. Since the Central Government
obtained rice at below market price, the
subsidy involved in distributing one
kilogram of rice would be less than Rs.
0.47, which implies that one rupee pro-
vided by the government could subsidize
at least two kilograms of rice distributed
through ration shops. The calorie con-
tribution of the rice so distributed would
be much higher than the additional cal-


Table 25-Estimated increases in monthly calorie intake from one
rupee increase in monthly per capital expenditure, 1971/72

Expenditure Additional Calorie Intake for One
Group Rupee Increase in Expenditure

Rural Urban

(Rs.)
Up to 15 1,270 975
15-21 1,166 870
21-24 1,370 998
24-28 1,040 977
28-34 1,165 1,037
34-43 1,170 977
43-55 1,060 922
55-75 927 850
75-100 855 737


60 Since the ration rice was usually raw rice (instead of the locally favored parboiled rice) and more inferior than
local varieties, the consumers consider this a different commodity.









ories obtained from an increase of one
rupee in monthly expenditures reported
in Table 25. Thus, the evidence from
estimated consumption levels of rice
corresponding to the situation where
income supports are provided for loss
in ration income (obtained from cross-
section data) and the evidence from
NSS data suggests that increasing con-
sumption levels of the target group of
consumers can be achieved more effec-
tively through rationing than general
income transfer.61
Rationing is also operationally efficient.
One of the major problems in implemen-
tation of target-oriented programs is the
identification of target groups. Since
rationing provides an opportunity to
choose the commodity composition and
the quality of grains to be channeled
through the ration system, these can be
chosen in such a way that only the needy
will make use of the ration facilities.
Thus rationing of food commodities can


lead to self-targeting even in situations
where administrative methods cannot
effectively determine the target groups.62
However, since cash income transfers do
not provide an opportunity for such self-
targeting, implementation of cash income
transfers could provide larger organiza-
tional problems in identifying the target
groups. Again, in the absence of large-
scale opportunities of resale of ration
foodgrains, most consumers are likely
to make use of the ration quota only to
the extent of their own personal con-
sumption. In many situations, this might
often lead to a reduced ration offtake.
This is not true for cash transfers where
the entire quota will be utilized. A ration
system might also be better able to re-
duce the possibility of leakages than a
direct cash transfer could. Thus foodgrain
rationing may provide higher operational
efficiency and political feasibility over
direct cash transfers.


61 This result is also consistent with the experience of food stamps in the United States. R.B. Rees, I G. Feaster, and
C.B. Perkis, Bonus Food Stamps and Cash Income Supplements-Their Effectiveness in Expanding Demand for
Food, Marketing Research Report No. 1034 (Washington, D.C.: U. S. Department of Agriculture/Economics Re-
search Service, October 1974), reported that on the average, participants of the U.S. food stamp program spent
50 cents of each subsidized dollar on food. However, they found that a direct income transfer would provide only
20 cents worth of food consumption for every dollar. Similar results are also available in S. Lane, "Food Distribution
and Food Stamp Program Effects on Food Consumption and Nutritional Achievement of Low Income Persons in
Kern County, California," American Journal of Agricultural Economics 60 (1978): 108-116 and D A West and D W
Price, "The Effects of Income, Assets, Food Stamps and Household Size on Food Consumption." American Journal
of Agricultural Economics 58 (November 1976): 725-729.
62 The experience of food distribution in Pakistan also indicates that distribution of low quality foodgrains through
ration shops can introduce self targeting. See D. McCarthy, "Consumption Planning in Pakistan: Preliminary Analysis
of Some Options." mimeo, International Nutrition Planning Program, Massachusetts Institute of Technology,
December 1975 and B.L. Rogers and F.J. Levinson "Subsidized Food Consumption Systems in Low Income Countries:
The Pakistan Experience," Discussion Paper No. 6, International Nutritional Planning Program, Massachusetts
Institute of Technology, April 1976. A detailed analysis of target group policies is also available in S. Reutlinger
and M. Selowsky, "Malnutrition and Poverty: Magnitude and Policy Options," World Bank Occasional Paper 23
(Baltimore: Johns Hopkins University Press, 1976), and P. S. George and 1. Gavan, "Market Intervention in Food
Distribution," IFPRI Working Paper 78/5 (Washington, D.C.- International Food Policy Research Institute, 1977).
Ahluwalia points out that direct provision of consumption goods financed through the fiscal system as an in-
strument of redistribution derives importance because it operates directly to provide additional consumption and it
can operate selectively in terms of the type of consumption good provided and in defining the beneficiaries of
these schemes (See M.S. Ahluwalia "The Scope for Policy Intervention" in H. Chenery, M.S. Ahluwalia, C.L. Bell,
J.H. Duloy, and R. Jolly Redistribution with Growth (New York: Oxford University Press, 1974).










7


ECONOMIC VIABILITY OF
RATIONING WITHOUT CENTRAL
GOVERNMENT SUBSIDY


The analysis of the impact of rationing
on consumers and producers in Kerala
indicated that the ration system in Kerala
resulted in substantial gains to the state.
Also, rationing in Kerala was maintained
partially at a cost to the Central Govern-
ment and partially at a cost to surplus
states. Therefore, it is natural to ask
whether rationing would be socially and
economically viable in Kerala or in any
food deficit country with characteristics
similar to those of Kerala but without
the aid of the Central Government or
other surplus states. In order to provide
a partial answer to this question, a hypo-
thetical situation was analyzed in which
Kerala was considered a separate nation
directly importing foodgrains for public
distribution from the international mar-
ket.63 In this analysis it was assumed
that the past realized levels of produc-
tion, procurement, ration distribution,
and prices within the state would be the
same64 and that the Kerala government
would incur the cost of subsidizing food
distribution previously met by the Central
Government. Since the cost of subsidizing
imported rice and wheat incurred in the
past reflected the prices actually paid
by the Government of India in the inter-


national market, it was not necessary
to determine the international market
price.65 Further, since this analysis as-
sumed that all foodgrains used for the
public distribution system were pur-
chased from the international market,
it was not necessary to estimate the
transfer payments from other states to
Kerala.


Estimated Impact of Rationing

Based on these criteria, the possible
impact of rationing in Kerala was esti-
mated for 1973/74, 1974/75, and 1975/76.
As before, the implied ration income of
the consumers was estimated using the
relationship:
R = PrQr,
where:
R = ration income,
Pr = gap between open market and
ration price, and
Qr = quantity of ration rice offtake.
The gains to the consumers were deter-
mined based on the producer loss from
levy sales of paddy, and the government
cost of subsidizing imported rice and


63 The analysis is only partial because the full impact of this assumption on various aspects of the national economy
is not traced out. Such a complete analysis of the Kerala economy was beyond the reach of this analysis.
64 This is quite realistic because the quantities entering the Kerala market remained the same. The assumption is
only in relation to the mode of import. Ihus, the analysis in this section uses the historical data with the modifica-
tion that the incidence of subsidy incurred by the Central Government on supplying grains to Kerala is transferred
from the Central Government to the Kerala government.
65 As noted in Chapter 2, the subsidy incurred by the Central Government was the difference between landed cost
of grains (the purchase price from foreign markets, ocean freight, port clearance, and domestic transport costs),
and the issue price. Therefore, the use of subsidy rates avoids the necessity of estimating foreign market price,
freight charges, and related costs of imports directly.









wheat. The loss to the producers in Kerala
was estimated using the relationship:

L = PfQl,
where:

L = loss of producers in Kerala on
account of levy,
Pf = gap between farm level price
(open market) and levy price,
and
QI =quantity of rice sold under the
levy operations.

Government subsidies of rice (Sr) and
wheat (Sw) were based on the rates of
actual imported rice and wheat subsidies
incurred by the Central Government in
the past. Thus, the total cost was defined
as:
C = L + Sr + Sw.


The economic viability of rationing was
determined through a comparison of R
and C. When the estimated value of R
exceeds the estimated value C, it implies
that the possible gains to the consumers
in the state exceeds the possible costs
incurred by the state government and
the local producers in maintaining the
public distribution system, and therefore
that rationing is an economically viable
proposition. The .estimated values of R
and C, and the actual data used in ob-
taining the elements for 1973/74, 1974/75,
and 1975/76 appear in Table 26.
The estimated values indicate that
for all three years, the gains to the con-
sumers (R) exceeded the costs (C) even
when Kerala was considered to be an in-
dependent entity. Since the gap between
R and C is fairly large, this conclusion


Table26-Estimated rationing gains derived from ration income and
ration costs based on state importation of foodgrains from
international markets, 1973/74 -1975/76


Symbol


Year

1973/74 1974/75 1975/76


Ration rice offtake
Open market retail price
Ration rice price
Retail rice price gap
Ration income
Local levy procurement
of paddy
Procurement price of paddy
Farm level price of paddy
Farm price gap
Loss in farm income
Subsidy rate on rice
Total rice subsidy
-Ration wheat offtake
Subsidy rate on wheat
Total wheat subsidy
Total cost = L + Sr + Sw
Gains


Qr 1,000 tons
Rs./ton
Rs./ton
Pr Rs./ton
R million Rs.

QI 1,000 tons
Rs./ton
Rs./ton
Pf Rs./ton
L million Rs.
Rs./ton
Sr million Rs.
1,000 tons
Rs./ton
Sw million Rs.
C million Rs.
R-C million Rs.


774
2,400
1,340
1,060
820.4

80.9
630
1,885
1,255
101.5
388.2
300.5
192
587.1
112.7
514.7
305.7


650
3,490
1,360
2,130
1,384.5

60.3
740
2,462
1,722
103.8
276.6
168.7
338
53 .3
180.3
452.8
931.7


717
3,810
1,480
2,330
1,670.6

60.0
740
1,830
1,090
65.4
886.1
629.1
354
408.2
144.5
839.0
831.6









will be valid even after making adjust-
ments for any possible overestimation of
R or underestimation of C.66 However,
the results of this analysis cannot be used
to establish the relative merits of ration-
ing over other alternative policy options
such as open market operations of govern-
ment imports. Since the income distribu-
tion aspects of rationing were discussed
earlier, this chapter is only concerned
with the question of whether such re-
distribution would be justified if Kerala
had to incur consumer subsidies on food
distribution.



Sensitivity of Estimated Gains

Close examination of the estimated
rationing gains in Kerala presented in
Table 26 indicates that the large gains
(R C) were obtained as a result of the
high proportion of cereals imported from
outside the state and the large retail rice
price gap (P,). The actual contribution
made by these two factors is represented
in Figure 8. The ration income is divided
into its four components: loss in farm
income (L), wheat subsidy (Sw), rice
subsidy (Sr), and excess ration income
(R C). The excess ration income is sensi-
tive to the retail price gap (Pr), the quan-
tity of ration (Qr), the share of ration
quantities between supplies from within
the state and imports, and government
subsidy (Sr and Sw).The break-even levels
of these variables can be estimated by
assuming that when R = C,
QrPr = Ql(Pf M)
+ (Qr b.QI)Rs + Sw, (1)
where:
Qr, Pr'Ql, Pf, andSw are defined accord-


ing to Table 25,
M = marketing margin on levy rice,
b = conversion ratio from paddy to
rice, and
Rs = subsidy rate on imported ration
rice.- M
We further assume that Pr-
Therefore, equation (1) can be rewritten
as:

QrPr = b.QIPr + (Qr b.QI) R + S
or
(Qr b.QI)Pr (Qr b.Q])Rs

+ Sw. (2)
If equation (2) contains only one un-
known variable, the break-even level of
that particular variable can be deter-
mined. To illustrate the procedure, the
break-even levels of retail price gap (Pr)
are estimated for 1974/75. Substituting
the actual values for all variables other
than Pr in equation (2), Pr = Rs. 572 per
ton. Therefore, with other things being
held constant at the levels existing during
1974/75, the net gains from rationing in
Kerala will be positive as long as the
retail price gap is more than Rs. 572 per
ton. This holds true if at the given level
of ration price (Rs. 1,360 per ton), the
retail price in Kerala does not fall below
Rs. 1,932 per ton, or the ration price does
not exceed Rs. 2,918 per ton at the given
open market retail price level.
Given the levels of the retail price,
ration price, levy price, quantities of levy,
and wheat subsidy, the maximum subsidy
rate for rice (S) that Kerala can afford
without incurring welfare losses is Rs.
1,803 per ton. Therefore, if the other
variables remain at the levels prevailing
during 1974/75, the net gains from ra-
tioning in Kerala will be positive as long


66 For example, one could argue that the movement restrictions have raised the open market price in Kerala, and when
this price is used to evaluate ration income (R) it may also provide the movement restriction effect. However, the
conclusion obtained in this section is valid even when the national market price is used in the place of retail
price in Kerala. (During 1974/75, the national price of Rs. 2500/ton gives ration income of Rs. 741 million compared
to the total cost of Rs. 466,1 million.)








as the subsidy rate on rice remains below
Rs. 1,803 per ton.
It is possible to extend this analysis
further to cover situations where simul-
taneous changes in the levels of different
variables occur. For example, if the retail
price gap were to fall by 50 percent67 and


government subsidy were to double,68
the entire rationing gains in Kerala during
1974/75 would be eliminated. Thus, the
framework discussed in this section pro-
vides a basis for determining the critical
levels of the variables that are sensitive
to the gains of rationing in a given region.


Figure 8-Components of the gains of rationing, 1974175a

(Rs./ton)
4,000


(1,000 tons)
100 200 300 400 500 600 700 800 900

Open Market Kerala Imported Rice
Purchases Rice

Ration Purchases
TOTAL CONSUMER PURCHASES
aFor simplicity in this diagram, the marketing margins on levy rice
were not included.
bL= Rs. 103.8 million. CS,= Rs. 168.7 million.


dS = Rs. 180.3 million.
W


eR C = Rs. 931.7 million.


67 A fall in retail price gap by 50 percent would imply only 30 percent fall in the retail price of rice in the open market.
68 Doubling of government subsidy on rice would imply a 17 percent increase in the landed cost of imported rice.










8


CONCLUSIONS AND POLICY
IMPLICATIONS


This study has focused primarily on an
analysis of the past performance of public
distribution of foodgrains in Kerala, India.
The analysis emphasized the factors in-
fluencing procurement, ration offtake, and
general performance of public distribu-
tion; the impact of public distribution on
the consumption levels, gains to the pro-
ducers and consumers, and income re-
distribution; and relative efficiency of
public distribution and income transfers.
The procurement level of paddy in
Kerala was mainly influenced by the gap
between the open market price and the
procurement price. As the gap between
these two prices increased, there was a
fall in the procurement volume. Thus, for
a given procurement price, the procure-
ment level increased as the open market
price fell; and for a given open mar-
ket price, the procurement level increased
as the procurement price increased. The
procurement level was negatively related
to the production level. It is usual for
procurement volume to increase with
production levels,69 however, since the
levy system of procurement in Kerala is
based on the size of holdings, the negative
relationship between procurement and
production levels might be the result of
the reduction in the average size of hold-
ings over the year.
This study also indicated that public
distribution in Kerala was influenced by
the small proportion of food produced


within the state, the large difference be-
tween the open market price and ration
price, a fairly comprehensive distribution
network covering both rural and urban
areas, the high level of public awareness
of the ration system, the flexibility in the
administrative arrangements for ration-
ing, and the limited quantities made
available through the public distribu-
tion system.
Since the amount of rice sold by the
ration shops was determined by the avail-
ability of rice, which in turn was deter-
mined by the supply allotted by the Cen-
tral Government, ration offtake of rice
was not explained by usual demand vari-
ables. This study indicated that the short-
fall in rice availability was compensated
through an increased wheat supply. There-
fore, the wheat offtake from the public
distribution system was explained by rice
offtake, open market price of rice, and
price of tapioca relative to wheat price.
Ration rice accounted for a major share
of the rice consumption of consumers
belonging to the low income groups.
Consumers in the low income groups ob-
tained about two-thirds of their house-
hold consumption of rice from the ration
shops, while consumers belonging to
upper income groups obtained about
one-third of their rice from the ration
shops. The consumers belonging to the
low income groups supplemented their
rice ration with tapioca, a cereal sub-


69 This is particularly true for wheat procurement in India. The elasticity of internal procurement of wheat with respect
to production of wheat was about 3.4. Production level of wheat explained about 90 percent of the variations
in procurement. P S. George, "Government Interventions in Foodgrain Markets," Working Paper 78/31 (Washington,
D.C.: International Food Policy Research Institute, 1978).








stitute. As the income levels increased,
tapioca purchases were replaced by rice
purchases from the open market.
The public distribution system had an
impact on the consumption level of the
low income families, income redistribu-
tion among producers and consumers
in Kerala, and some Central Government
transfer payments to Kerala through
food subsidies. Thus, procurement and
distribution of foodgrains had an impact
on reducing the intra- and interstate dis-
parities in income distribution.
This study also found that eliminating
rationing and movement restrictions led
to reduced consumption levels of rice
in Kerala and an overall net loss to the
producers and consumers in the state.
The decline in consumption levels in the
absence of rationing was maximum for
the consumers belonging to the low in-
come groups. The open market prices
in Kerala remained much higher than
the prices in other areas and levy ac-
counted for a small portion of produc-
tion, thus indicating that a return to
free market would reduce the incomes
of farmers in Kerala. The consumer ex-
penditure on rice in the absence of ra-
tioning was higher than the expenditure
levels under rationing.
While the Kerala government recovered
the operating costs of public distribution
from the consumers, the Central Govern-
ment had to incur consumer subsidies
to supply rice and wheat to the distribu-
tion system. However, the partial analysis
of the gains to the producers and con-
sumers in Kerala indicated that the gains
in Kerala were much greater than the
expenditures incurred by the Central
Government on ration distribution in
Kerala.
A comparative analysis of rationing and


direct income transfers indicated that
rationing may be superior to income
transfers for achieving certain short-term
objectives because of the food consump-
tion levels that can be achieved at lower
costs, the organizational feasibility that
exists for reducing leakages, and the
political feasibility of rationing.70 How-
ever, this study did not consider the
relative merits of rationing and direct
income transfer from the point of view
of long-term impact of employment and
growth linkages.71
The ration distribution in Kerala can
be viewed as a consumer price subsidy
system. The financial burden of this
subsidy to Kerala was mainly carried by
the Central Government (through the
consumer subsidies incurred by the Cen-
tral Government) and to a lesser extent
by the farmers in Kerala (through sales
to the government at prices below open
market level). However, when the possi-
bility of extending a system of subsidizing
consumers through a dual pricing mech-
anism is considered in areas where op-
portunities for such transfer do not exist,
it is important to analyze the economic
feasibility of the system. In this analysis
it was assumed that Kerala obtained its
entire supply of foodgrains required for
maintaining the public distribution from
the international markets. The estimated
costs and gains corresponding to the
actual levels of operations from 1973/74
to 1975/76 indicated that the two price
systems in Kerala would result in positive
net gains to the consumers in Kerala even
after meeting the consumer subsidies
resulting from direct purchases from the
international markets.
Consumer price subsidy programs are
often viewed with scepticism because
of their high budgetary requirements,


7o While it is recognized that the most direct approach to solving the food problem is to provide increased income
to the poor, in many countries there are strong political pressures against a direct income transfer.
71 John W. Mellor, The New Economics of Growth: A Strategy for India and the Developing World ((Ithaca: Cornell
University Press, 1976).








large administrative opportunity costs,
depressing effects on domestic agricul-
tural prices, and leakages to the non-
target groups. The experience of the
public distribution system in Kerala indi-
cates that, under certain circumstances,
these obstacles can be overcome through
appropriate policies of procurement,
pricing, and distribution. While it may
be possible to take a position that the
long-term answer to achieving increased
consumption levels of the poor is to pro-
vide increased income opportunities,
this cannot be a short-term solution. The
short-term solution for areas such as
Kerala is an effective public distribution
system. However, this is not necessarily
true for all countries since the financial
burdens of a consumer subsidy program
may be beyond the budgetary constraints
of many countries. While it was estab-
lished that a food subsidy scheme might
be more cost-effective in achieving the
consumption objective than a general
income transfer, it is still possible that
the reduced financial requirements also
may use a substantial portion of the
national budget and thereby introduce
severe limitations on funds for develop-
ment activities. If this is indeed so, the
options open to national governments
include reduced expenditures (through
reduced coverage of population, smaller
per capital quantities, or reduced sub-
sidies) and financing food subsidies
through international aid.
Finally, a word of caution should be
added. This case study of rationing in
Kerala provides some empirical evidence
that indicates:
1. Subsidized public distribution re-
duced the skewness in consumption
levels among the different groups
of consumers;
2. Procurement of rice through graded


levy at price levels below open mar-
ket price reduced the income dis-
parities among farmers;
3. Subsidized public distribution was
better than direct income transfer
for raising the consumption levels
of low income consumers, from the
point of view of feasibility and cost
effectiveness; and
4. The partial gains to the producers
and consumers in Kerala exceeded
the direct cost of government sub-
sidy.
While this study established the via-
bility and effectiveness of public distri-
bution in achieving certain income and
consumption objectives of the poor with
some empirical evidence, it should be
remembered that the estimates of income
transfers provide only part of the picture.
In fact, the analytical procedures used
in the paper and the empirical estimates
should not be used to measure efficiency
losses of rationing or to determine the
trade-off between such efficiency losses
and distributional gains. Further, the
analysis does not discuss alternative
short- and long-term strategies for increas-
ing the consumption levels of the poor.
In addition, while rationing has produced
the desired effects under the socioeco-
nomic conditions in Kerala, it is important
to analyze the specific conditions for
other areas before establishing its feasi-
bility in those areas. The Kerala experience
offers some preconditions and guidelines
for extending such coverage. When deter-
mining the feasibility in other areas, the
economic conditions in each area should
be analyzed to provide the justification for
extended coverage and to judge whether
some of the organizational and administra-
tive requirements of an efficient rationing
system can be developed in the area.














APPENDIX
SUPPLEMENTARY TABLES




Table 27-Daily per capital availability of calories for India, 1960/63
and Kerala, from 1961/62-1970/71


India Kerala
(Average 1960-63) (Average 1961/62 to 1970/71)
Source


(calories) (percent) (calories (percent)
Rice 701 34.8 920 39.3
Wheat 255 12.6 81 3.5
Other cereals 390 19.3 5 0.2
Tapioca 11 0.5 628 26.8
Sweet potatoes 7 0.4 7 0.3
Potatoes 8 0.4 -
Coconut 6 0.3 254 10.6
Pulses and oilseeds 210 10.4 33 1.4
Vegetables 2 0.2 -
Fruits 27 1.3 70 3.0
Fish 3 0.1 39 1.7
Milk 108 5.4 22 0.9
Meat 6 0.3 6 0.3
Eggs 1 0.1 3 0.1
Oils and fat 93 4.6 172 7.4
Sugar 188 9.3 100 4.3
Total 2,016 100.0 2,340 100.0

Source: U.N. Department of Economic and Social Affairs, Poverty, Unemployment and Development Policy. A Case
Study of Selected Issues with Reference to Kerala (New York: United Nations, 1975), pp. 26 and 161.









Table 28--Levy rates of paddy, 1975/76


Levy Rates in Category'
Area Under Rate
Paddy Applicable
for A B C


(acres) (quintal/acre)
Up to 2 nil nil nil
2-3 area in excess of two acres 3 2.5 2
3-5 area in excess of one acre 3 2.5 2
5-10 the first 5 acres 3 2.5 2
every acre in excess of 5 acres 7 5 3.5
More than 10 the first 10 acres 7 5 3.5
every acre in excess of 10 acres 9 7 5.5


Source: Government of Kerala, Department of Food, Annual Report 1975/76 (Trivandrum: Kerala Government Press,
1977), pp. 35-38.
' The average yields assumed for the three categories were as follows:
Category A: 2,500 kg/hectare.
Category B: 2,000-2,500 kg/hectare.
Category C: less than 2,000 kg/hectare.






Table 29-Cumulative percentage of producers and gross farm income
from rice sales, 1974/75


Farm Income
From Rice Sales

Size of With Levy Without Levy
Holding Producers Procurement Procurement


(acres) (percent)
Up to 2 69.9 31.6 28.3
2-5 91.4 77.5 74.4
5-10 98.6 94.5 93.8
More than 10 100.0 100.0 100.0









Table 30-Cumulative percentage of households and realized
household income, 1974/75


Household Income When
Ration Rice is Valued At

Actual
Income Household Market Price National Open
Group Households Income In Kerala Market Price


(Rs.) (percent)
Up to 600 20 4.4 7.7 6.5
601-1,200 43 15.0 21.8 19.0
1,201-2,400 73 39.9 49.2 45.4
2,401-3,600 83 55.0 63.7 60.2
3,601-4,800 93 75.8 80.9 78.9
More than 4,800 100 100.0 100.0 100.0














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Subbarao, K. "Market Structure in Indian Agriculture: A Study of Economic Efficiency of
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Tobin, i. and Houthakker, H. S. "A Survey of the Theory of Rationing." Econometrica 20
(October 1952): 521-553.
United Nations Department of Economic and Social Affairs, Poverty, Unemployment and
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(November 1976): 725-729.
































































P. S. George came to IFPRI as a Research Fellow in 1977 on a leave of absence Irom the In-
dian Institute of Management in Ahmedabad, Gujarat, India, where he is a Professor.


68







International Food Policy
Research Institute




Board of Trustees


Sir John Cra\\ford
Chairman, Australia

Ralph Kirb\ Da idson
\'ice Chairman U S.A

Ojetunji Abo ade
Nigeria

Nicolas Ardito Barletta
Panama

David E Bell
US \.

Norman E Borlaug
Mexico

Ikan L Head
Canada

Mohamed El-Khash
S, ria

Nurul Islam
Bangladesh

LucioC. Reca
Argentina

Roger Savary
France

Snoh Unakul
Thailand

Andrew Shonfield
United Kingdom

\V S. V'\as
India

John \V. Mellor. Director
Ex Officio, U S..A.












IFPRI PUBLICATIONS


MEETING FOOD NEEDS IN THE DEVELOPING WORLD:
LOCATION AND MAGNITUDE OF THE TASK IN THE NEXT DECADE

COMMODITY TRADE ISSUES IN INTERNATIONAL NEGOTIATIONS,
by Barbara Huddleston

RECENT AND PROSPECTIVE DEVELOPMENTS
IN FOOD CONSUMPTION: SOME POLICY ISSUES

POTENTIAL OF AGRICULTURAL EXPORTS TO FINANCE INCREASED
FOOD IMPORTS IN SELECTED DEVELOPING COUNTRIES,
by Alberto Valdes and Barbara Huddleston

FOOD NEEDS OF DEVELOPING COUNTRIES:
PROJECTIONS OF PRODUCTION AND CONSUMPTION TO 1990

FOOD SECURITY: AN INSURANCE APPROACH,
by Panos Konandreas, Barbara Huddleston, and Virabongsa Ramangkura

IMPACT OF SUBSIDIZED RICE ON FOOD CONSUMPTION
IN KERALA, by Shubh K. Kumar

INTERSECTORAL FACTOR MOBILITY AND AGRICULTURAL
GROWTH. by Yair Mundlak


Intrnaionl Fod oliy Rseach nsttut




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