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| Problems of plenty | | Minimum price and maximum benefit |
| Business Standard / New Delhi Apr 16, 2010, 00:56 IST |
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With official foodgrain stockholdings topping 45 million tonnes on the eve of the rabi harvest and the public grain-handling agencies all set to mop up over 25 million tonnes more wheat in the next few weeks, the government’s food coffers are likely to swell to unmanageable, perhaps undesirable, levels. Even in the beginning of April, when the new rabi harvest entered the market, the government had nearly 16 million tonnes of wheat, four times the required buffer of four million tonnes; and close to 30 million tonnes of rice, about two-and-half times the needed buffer of 12.2 million tonnes. Since the procurement of rice from the last kharif crop is also in progress, there is every possibility that the country might face a situation similar to the one in June 2002 when foodgrain inventories had soared to a whopping 65 million tonnes, forcing the then government to export grains at heavily subsidised prices. Present stock accumulation is all the more untenable because, unlike the comfortable overall food supply and price scenario of 2002, open market supplies as well as prices are under strain today. Food hoarding of this scale is unjustifiable even on the grounds of food security and the need to feed the poor. For, even if it gives a sense of food security to the government, it leaves the market-dependent common man food insecure due to unaffordable prices. The public distribution system (PDS), which is used to channelise subsidised food to the poor, is in total disarray, as affirmed even by the Supreme Court, besides having a limited reach. Therefore, a sizable section of the poor, too, has to rely on the market for sourcing food supplies where the prices remain high partly because the government corners the bulk of the marketed surplus at the time of peak post-harvest marketing season.
This apart, such huge stocks seem difficult to manage as well. The Food Corporation of India, the chief public sector foodgrain management agency, does not have adequate storage capacity to safely hold even half of the present inventories and is, therefore, forced to keep grains in the open, exposing them to the risk of rotting. The heavy carrying cost of grain-holding, moreover, has pushed up the food subsidy bill to a level difficult to sustain. Even at conservative reckoning, the food subsidy may exceed Rs 72,000 crore this year, against the budgetary provision of around Rs 58,000 crore. If the stocks swell further as predicted, the actual subsidy may turn out to be even higher, putting an avoidable strain on the exchequer.
Clearly, a review of food management policies is overdue. Is it any longer worthwhile continuing open-ended food procurement and that too at the minimum support price (MSP) which has de facto become the procurement price? The government’s food procurement policy should be need-based and at market-driven prices. The MSP should be true to its name — a minimum price — for all food growers and not just for a section of them in a few states. Such a policy would leave more grains in the market to take care of supply-side concerns and keep food prices under check to make food affordable for the common man.
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