In the field of distribution government exercises its control through rationing and public distribution system. Sometimes the forces of demand and supply in the market create situations which cannot be regarded good from the point of view of the society. In our country the glaring example of subtype of situation can be seen in the field of essential goods such as food, fuel and cloth.
From the point of view of supply, there is scarcity of essential goods in our country. There are three main reasons for this scarcity. (a) There is inadequacy of production. (b) There is lack of storage and marketing facilities in our country. (c) Hoarding with a view to speculation and black- marketing creates artificial scarcity of these commodities in the market. It makes the problem of supply much more complicated.
From the point of view of demand, the main problem is of poverty and lack of purchasing power. Since the purchasing power of the poor class is very low, they are unable to purchase these commodities at higher prices.
If the forces of demand and supply are allowed to act freely in the market, the prices of essential commodities will be determined at a very high rate. At these prices poor people would not be able to get goods. Thus, on the one hand poor people would be forced to live in starvation and miseries while on the other, rich people would indulge in wastages and extravagancies. Hence it becomes the bounden duty of the state to intervene in the economy to avoid such an unhealthy situation. The government takes the responsibility of price determination and distribution of such commodities with a view to fair distribution to all the persons in the country. Government, generally, adopts three types of measures for this work.
- The government provides the guarantee of fair price to the producers for their product, for this, the government announces the minimum support price of many agricultural commodities. The government announces these support prices on the recommendations of the Agricultural Price Commission. The Indian government announces the support price of agricultural commodities such as rice, wheat, coarse grains, cotton, jute, and sugarcane etc. The advantage of this support price is that if there is excess of production of any commodity in any year, the price of that commodity cannot go down below the level of this support price. The government is always ready to purchase any amount of that commodity on that support price. Thus with this scheme of guarantee of a minimum price the confidence and incentive of farmers have increased.
- In our country the government has increased storage facilities and created buffer stocks. The government maintains its buffer stocks, especially of rice and wheat, by procuring these commodities from the market. When the prices of these commodities start to increase in the market the government releases these commodities from its buffer stock, this results in reduction in prices. In India this buffer stock has helped a lot in controlling the prices of food grains in the market.
- Government supply essential commodities through fair price shops and ration cards. Supply of key essential commodities at reasonable prices to the public through fair price shops is known as public distribution system. It is an important instrument of government policy to moderate open market prices. Currently government is supplying through PDS six essential commodities, viz, wheat, rice, sugar, imported edible oil, kerosene and soft coke. These commodities are distributed to the consumers through the network of fair price shops. At present there are more than 4.40 lakh fair price shops in our country. Now more stress is given on the expansion of public distribution system in rural, vanvasi and far off areas of our country. Mobile shops are being deployed in these areas.
Consumer cooperative societies are also playing important role in providing goods to the common people at reasonable rates. These cooperative societies are working as an ancillary to the public distribution system. Super Bazars are also making important contribution in the work of public distribution.