An Honest Account of Market Intervention in Support of Public Distribution in Kerala





Reviewing an Economic Thriller on Kerala that Every Student of Government or Economics in Kerala Should Read


A major milestone in the development of Kerala’s Distribution System for Civil Supplies: C. Balagopal’s book, ‘Maveli and Market Intervention: How SUPPLYCO helped to hold the price line’ helps us understand an innovative and politically astute step in the evolution of Kerala’s Public Distribution System.

The book on SUPPLYCO recounts the Author’s third stint in the IAS where the uncompromising and creative Administrator had been transferred yet again after running afoul of a powerful politician. 

The year is 1980 and the winds of change were blowing. Nationally, Indira Gandhi was back in power on Jan 14th. New ideas were swirling into the nation. One indicator: the 526 foreign collaborations signed in 1980 were double the average of 250 foreign collaborations annually for the previous 20 years.

In Kerala the stage is set for governmental market collaboration for the first time: Just a day before Republic Day in 1980, the Nayanar LDF Ministry takes charge in a delicate alliance with AK Anthony’s faction of the Congress. Not long after, “Bala” as he is known to his friends makes one of the gutsy moves he is known for. He chooses to accept a non-cadre post in Kerala as Secretary to E. Chandrasekharan Nair, the LDF Civil Supplies & Housing Minister who was already widely respected for his work in the cooperative sector.  Here for the first time, led by Minister, E. Chandrasekharan Nair, Bala and his colleagues work hard to create a vital innovation in Kerala’s public distribution system. This is no airy-fairy technology transfer. “As a net (and substantial) importer of food grains, the availability and cost of food grains was a complex and politically sensitive matter. (Kerala’s farmers were (and still are) cash crop oriented. With market prices for food grains that were often manipulated by the trade as they were naturally sensitive to supply and demand.

Bala, the author of this book was a young IAS officer just three years into his career. First in Manipur, then as a Deputy Collector in Kollam. He had been involved in an issue located in the Minister’s constituency and hence been noticed and appreciated by him. Bala had studied Economics at Loyola College, Tamil Nadu but never imagined he would have the chance for the up close and personal curriculum in economics and market demand for commodities that awaited him.

MAVELI assures low food commodity prices: Within a few months of the Minister’s announcement, the Civil Supplies Team was working with the Food Corporation of India to monitor stock levels at FCI warehouses in Kerala, curb misappropriation of supplies and intervene in the market. The plan was to procure rice from Andhra Pradesh and hold it in warehouses so that it could be released as needed to maintain a downward pressure on prices. 

SUPPLYCO announced that good quality rice would be sold at select Area Ration Depots (ARDs) for Rs 2.65 per kg even when the open market rice was over Rs 3.50 per kilo. In the process, the working capital reserves of SUPPLYCO were also expanded, commensurate with demand. “Purchases by households tended to peak in the week before the Onam Festival between late August and early September 1981. When markets opened and SUPPLYCO’s outlets, MAVELI STORES announced AP rice at low prices, there was much interest among consumers.”

The Civil Supplies Team holds the course despite political change: Though the Government fell on October 20th, 1981 Balagopal and the Civil Supplies team continues to build on this initiative. The Governor of Kerala appoints Bala as the General Manager Operations for SUPPLYCO (after being recommended for the job by the outgoing Civil Supplies Minister. The Civil Supply team’s goal was to ensure that the people of Kerala got the essential commodities they needed at a price they could afford; hence they took the following steps making socio-political history in the process:

- The Civil Supplies Department/ SUPPLYCO continued to step in and buy large quantities of grain from the cultivating states during the crop season (when prices were low). They could hold as much as one lakh metric tons at a time. These stocks were to be released in the market during the festive season through the ration shop network as well as through SUPPLYCO retail stores at process fixed by the Government.

- Procurement processes became more efficient. If the market were to try for higher prices, SUPPLYCO would not buy.

- SUPPLYCO would be selling grain at a loss and hold the price line on essential commodities.

- Instead of profiteering at the expense of the people, traders would be forced to lower their prices to compete with SUPPLYCO,

Lessons Learned: The book also...

- Makes an eloquent case for Market Intervention as the best means for consumer welfare (versus statutory rationing).

- Explains how SUPPLYCO was able to get its working capital using persuasion with a visiting RBI team that arrived to evaluate the project (not approaching the issue with an attitude of entitlement).

Indicates that at least in this case, opting for a non-cadre post was beneficial for one IAS Officer.

- Describes new ways of projecting demand for food grains more realistically, thereby reducing the scope for waste and corruption.

- Educates Manager’s on practical methods for transportation fleet and vendor management.

- Addresses SUPPLYCO’s forays into cement and liquor distribution.

- Makes a case for the computerized optimization of delivery routes,

- Studies strategies to reduce demurrage costs.

Advocating for a review of current practices: Says Balagopal overall in his book, “The more lasting impact of this (Market Intervention) program, was that open market operations aimed at price stabilization became established as powerful instruments of public policy, for the first time in India.” Unfortunately, in later years procurement procedures became slack and inefficient with ample opportunities for corruption.” Government subsidies later became the norm. 

Concludes Balagopal in an implied appeal for a review of current practices,“The Public Distribution System today is a perversion, indeed a caricature, of the system that took place in those (early) days. 




About the Author; C. Balagopal: "Bala" (as he is known to his friends) is the inspiration behind "CitizenzNews." After a few years serving in Manipur and Kerala as an IAS Officer, Bala went out on a limb and started a company in Trivandrum that soon became one of the world's largest packagers of blood.

Tags:

* Kerala Public Distribution
* SUPPLYCO
* Civil Supplies Ministry
* Food Corporation of India
* Controlling Food Prices


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