Relevance of Supplyco and its Operations in Kerala’s Current Scenario

Supplyco was formed in 1974 with the primary objective of controlling the rise in prices of essential commodities. However, very few know about this objective of Supplyco since it’s commonly perceived as a manifestation of the welfare state, selling commodities at lower prices.
The study examines the effectiveness of Supplyco model in achieving the objective of controlling the rise in prices of essential commodities. After 44 years of operations and expanding itself into retailing with a strength of 1406 outlets across Kerala, it is necessary to evaluate whether the Supplyco model of government intervention is capable of transferring maximum benefits to the consumer. Some of the findings are contrary to popular belief.
Key Findings
Supplyco has 1406 retail outlets across Kerala selling essential commodities at subsidized prices with the objective to control the rise in prices of those commodities. However, a comparison shows that the Consumer Price Index (CPI) for food has increased by 50.61 percent in Kerala from 2012 to 2017, while the national level CPI rose by 37 percent during this same period. It means that a food commodity that had cost Rs 100 in 2012 will cost Rs 150.61 in 2017 in Kerala, while at the national level it would cost Rs 137. This shows the poor results from Supplyco.
The study finds that food inflation in the state could also be a result of many other factors in the economy such as Minimum Support Prices (MSP) or agricultural wages. Therefore, in order to arrest food inflation an overall strategy taking into account all such factors is necessary. These are well beyond the ambit of Supplyco’s operations. Supplyco’s retail chain model where certain subsidized commodities are sold at lower prices through its outlets across Kerala is not simply capable of controlling the rise in prices of essential commodities.
The study reveals that Supplyco’s share in Kerala’s consumption of those commodities is near negligible. Even the quantity of coconut oil, which is the most sold and preferred item at Supplyco outlets, distributed through 1406 outlets across Kerala contributes only 2.52% of Kerala’s total consumption demand. Similarly, for other most sold items, the majority of the demand is met by the market outside Supplyco.
The study reveals the poor financial performance of Supplyco by evaluating many financial factors. The grants given by the government never suffice for the losses incurred by Supplyco in its Market Intervention Scheme (MIS) operations for the government. This brings to light Supplyco’s economically unsustainable model of financing.
To transfer the intended subsidy benefits worth ?121.60 per person per month, the government spends an additional Rs 61 per person per month for running Supplyco.