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Rice and wheat are the two major foodgrains in India and their level of production determines the country self-sufficient. Forecasts on cereals supply range from 250 to over 300 million tones in the country by the year 2020. Mere availability of foodgrains is not a sufficient condition to ensure food security but also necessary that the poor have sufficient means to purchase food. Poor economic access leads to food security and it has been checked by the government mechanism through the operation of Targeted Public Distribution System (TPDS) and foodgrains are distributed at subsidized prices to the people living Below Poverty Line (BPL). It is a safety net to more than 330 million poor and those nutritionally at risk and an important delivery channel with a network of half million Fair Price Shops (FPS) catering to the needs of 199 million of ration cardholders. Food subsidy amounting to Rs. 25,800 (approximately US$ 5,730 million) was allotted during the period 2004-05, which rose ten times in the past 15 years. Higher level of procurement, revising the Minimum Support Price (MSP), inventory cost for stocking foodgrains and a lower level of issue price together absorb huge subsidy. Monte Carlo Technique was used to examine the implications of several policy options by simulating the 2002-03 base scenario. Optimum or the normative level of procurement, improving offtake from Food Corporation of India (FCI) godowns, private participation, issuing food stamps and food credit cards are the possible options to improve the efficacy of the system and reduce the budgetary burden due to subsidy.


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