Objectives Of Price And Distribution Controls

OBJECTIVES OF PRICE AND DISTRIBUTION CONTROLS Price and distribution controls refer to various policy measures aimed at regulating prices and supply of key goods and services in the economy. Some of the key objectives behind such controls are:  Ensuring equity and protecting the vulnerable sections of society from inflationary pressures by keeping prices of essential commodities stable  Maintaining quality standards for important goods and services through pricing policies  Preventing monopolistic, restrictive and unfair trade practices in pricing and distribution which can harm consumers  Taking steps to increase the supply and availability of essential commodities to meet demand  Expanding and smoothening the supply and distribution system to remove imperfections and ensure availability of goods in all regions   Ensuring adequate and timely supply of key inputs like credit, power, raw materials etc. to priority sectors like agriculture, small industries etc. Enabling the government to steer allocation of resources across sectors in line with plan priorities through pricing policies  Preventing hoarding and blackmarketing of essential goods by unscrupulous traders, especially during shortages  Using price regulations appropriately to control inflationary and deflationary tendencies in the economy Evolution of Price Policy The importance of price stability and distributive justice was emphasized since the Third Five Year Plan  Fiscal, monetary and commercial policies were outlined as key constituents of the pricing policy  The need for selective physical controls and direct pricing for certain essential commodities was also recognized  Enhancing production capacities was underlined as a sustainable way to ensure reasonable prices Instruments of Price Control Indirect Controls  Monetary policy instruments like bank rate, CRR, open market operations are used to control money supply and credit availability, thereby influencing aggregate demand and prices  Fiscal policy tools like taxation, subsidies, public expenditure are used to affect disposable incomes and purchasing power and thereby control inflationary pressures  Commercial policy measures like imports, exports, tariffs are used to adjust domestic supply and demand conditions and stabilize prices Direct Controls  Administered prices are fixed for some commodities by government through mechanisms like the Tariff Commission  Dual pricing systems with differential prices for priority and non-priority users have been used in the past  Subsidies are provided to keep prices low for vulnerable sections for goods like food, fertilizers  Laws like the Essential Commodities Act empower government to regulate production, distribution and supply of key commodities