Impact Of Dual Pricing Policies On Agricultural Producer Incentives In India

This paper examines the theoretical and practical effects of the government procurement and dual pricing on the producer prices for rice and wheat in India. Contrary' to the previous research this paper shows that the impact depends on whether the subsidies are infra-marginal or extra-marginal in nature. Econometric analysis of the pooled cross sectional and time series data for the selected states reveals a negative impact of the grain procurement on the weighted average prices of rice and wheat. Thus, the so called Dantwala-Mellor hypothesis of positive impact is not supported by the data.