Attempts by the Food Corporation of India (FCI) to mop up some of the bumper harvest of food grains that rose from 232 mt last year to 253 mt this year have caused distortions in the private market for jute bags. While the FCI scrambles to buy jute bags to store grain, private dealers of jute bags are, well, being left holding the bag, literally.
Typically, FCI buys 25-30% of food grain production from farmers, but is now buying nearly 50%. With fewer private buyers of grains, there are fewer sales by private sellers of jute bags.
Much of the problem here is that public-sector officials tend to disregard knock-on effects of their policies
Another question arises over costs by limiting storage of FCI purchases om jute bags rather than using cheaper plastic bags.
Meanwhile, FCI officials anguish over the “correct” price for exported food grains. This mind-numbing exercise is most often solved elsewhere by relying on the novel mechanism of “markets”, something that is spoken about in India, but seldom seen.
The opinions expressed in this essay are those of the authors. They do not purport to reflect the opinions or views of CCS.