B. Buffer stocks and Public Distribution System

Buffer stock operations are an integral component of agriculture price in India. It is used as an instrument to minimize the fluctuations in the prices of agriculture products. Buffer stocks have a price stabilizing impact on the economy. Under the buffer stock policy, government builds up stock of agricultural commodities either through purchases from domestic market or through imports and release these stocks in the domestic market when the prices are rising. The government supply thus moderates the sharp increase in the price of agricultural products. In the event of bumper crop, the market price is substantially reduced. In this situation government make procurements at MSP or procurement price and prevent fall in price. This helps to prevent distress sales among farmers. The sufficient buffer stock is required to be maintained to meet emergencies like droughts, crop failures floods and crop damages or other such calamities to prevent sharp rise in market prices.

The public distribution system (PDS) is used to supply the buffer stock to the weaker sections. At present PDS consists of a network of 3,50,000 fair-price shops that are monitored by state governments. Supplying basic food commodities through PDS not only serves the purpose of reaching the needy, it also acts as a control for general consumer prices. FCI is the sole repository of food grains reserved for PDS. The Corporation has functioned effectively in providing price support to farmers through its procurement scheme and in keeping a check on large price increases by providing food grains through PDS.