What are the various commodities in India for which government maintains buffer stocks? Elucidate while analyzing the pros and cons for a cotton buffer stock in the country.
Buffer stock is the reserve commodity that is stored for the purpose to check the unreasonable and sudden increase in the market price of the essential commodities due to various factors. These commodities are bought when they are available in abundance in the system, these are then stored and then sold when there is a shortage of these products.
The various commodities kept as buffer stocks in India are foodgrains pulses, wheat, rice, cotton, sugar, edible oils, jute, kerosene, etc.
- It is maintained to fulfill the requirements of the Targeted Public Distribution Scheme and Other Welfare Schemes.
- It makes sure adequate food reserves for the citizens during a lean agricultural year where there is less production.
- During an emergency like a natural disaster, war, etc buffer stock is used to supply foodgrain to the public.
- Prevent the prices of essential products to rise beyond a certain limit and stabilize the market.
- The problem with the buffer stocks is that it provides a subsidy to the agricultural markets that causes market distortions and reduces efficiency. And as a result, the farmers would stop planting crops like corn and will shift to something else if the market became gratifying.
- The cost of procuring excess supply for storage and security of the stockpiles increase government spending.
It may create a false shortage in the market and sometimes the procured commodities like cotton became rotten
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