Food security through price stabilisation - Buffer stocks vs variable levies

The Indian government has traditionally maintained buffer stocks as a means to stabilise domestic foodgrain prices. In the scenario of liberalised ext ernal trade in foodgrains, we examine the cost effectiveness of variable le vies on trade as an alternative option to stabilise domestic prices. We fin d that the use of variable levies is much more effective in stabilising pri ces and reducing food insecurity as compared to buffer stocks. Buffer stock operations are also found to be less effective in reducing food insecurity under free trade as compared to the case of autarky or no trade.