Briefly explain the role of buffer stocks in the context of agricultural marketing.

Question

Accepted Answer

The Government of India has adopted the policy of buffer stocks to minimise fluctuations in food prices. The Food Corporation of India (FCI) purchases wheat and rice from farmers at the procurement prices to maintain the buffer stock. Buffer stock is created in years of surplus production and used during shortages. It serves as a shock absorber and provides a defence mechanism against widely fluctuating price levels; the government releases stocks for sale in the domestic market when prices are rising and also prevents unduly low prices consequent to bumper crops. In this way, buffer stocks ensure regularity in supply and stability in prices.