|Demand of the question
Introduction. Contextual Introduction.
Body. Discuss the need to reform grain management system. Government efforts.
Conclusion. Way forward.
India, with a population of over 1.2 billion, has seen tremendous growth in the past two decades. Its GDP has increased 4.5 times and per capita consumption has increased threefold. Similarly, food grain production has nearly doubled. However, despite the phenomenal growth and while India produces sufficient food to feed its population, the nation is unable to provide access to food to a large number of people, especially women and children.
Need of reforms in grain management system:
- Outdated grain management system: While trade policies became liberal, domestic food grains management continues to remain the same, dominated by public intervention. The dominance of the public sector discourages the development of the private marketing sector which can promote diversification. Over time, the costs of the policies and the institutions implementing the policies have risen and the benefits have declined.
- Low Demand: Demand for food grains has not been keeping pace, due both to a decline in the share of expenditure on food due to poverty. Further, dietary preferences towards non-grain food items, due to rising income levels has led to less food grain consumption.
- Malnourishment: The Food and Agriculture Organisation (FAO) in a report, said 194.6 million people in India are under-nourished. The Global Hunger Index 2019 ranks India at 103 out of 119 countries. On the other hand, it is estimated that nearly 40% of fruits and vegetables and 20% of the food grains that are produced, are lost due to inefficient supply chain management. Food grains do not reach the consumer market.
- Food wastage: According to a Government study, India is growing more food but also wasting up to 67 million tonnes of it every year. The value of the food lost Rs 92,000 crore, is nearly two-thirds of what it costs the Government to feed 600 million poor Indians. The result is that lower supplies add to inflation and reduce the farmers’ returns.
- Inefficient food management: The massive accumulation of grain stocks is the result of a deeply inefficient strategy for food management wherein the procurement for wheat and rice remains open-ended, but the disbursal of these stocks remains largely restricted to the public distribution system (PDS). The open market operations (OMO) are much less compared to what is needed to liquidate the excessive stocks. We don’t have a clear strategy.
- Targeted PDS: The foodgrain management policy in India is detailed in the Targeted Public Distribution System. Through targeted PDS government has tried to provide food grain to the needy. Allocation of food grains for TPDS is made by the GOI for Below Poverty Line (BPL), Antyodaya Anna Yojana (AAY) and Above the Poverty Line (APL).
- Procurement: Before the start of every marketing season, Department of Food and Public Distribution convenes a meeting of State Food Secretaries to make advance arrangements for procurement of foodgrains/coarse grains.
- Open market operations: The foodgrains are also disposed off by FCI and State Governments, through sale under Open Market Sales Scheme.
- Implement Shanta Kumar panel recommendations: The Shanta Kumar panel provided for a blueprint for reforming the grain management system. According to it:
- While the poor under the Antyodaya category should keep getting the maximum food subsidy, the issue price for the others should be fixed at, say, 50% of the procurement price (as was done under former PM Atal Bihari Vaypayee for the BPL category).
- Limit subsidised grain distribution under NFSA to 40% of the population rather than the current 67%.
- Limit procurement of rice, particularly in the north-western states of Punjab and Haryana, where the groundwater table is depleting fast, and invite the private sector in grain management.
- Private sector involvement: Long-term vision should be of a liberalised market environment in which the private sector should participate extensively in performing the primary roles of marketing, distributing, exporting and importing food grains.
- Protection of poor: The food grains market policies must be complemented with programs to protect the poor from price and income shocks. Government must follow a clearly articulated and transparent price stabilisation policy.
- Reducing PDS: Employment programs that provide a wage income to the beneficiaries thus stand out to be a better form of real income transfer than consumption subsidies. Reducing the size of the PDS and expansion of MGNREGA should go on simultaneously. Eventually, safety net for the poor should be through income transfer schemes such as MGNREGA, income coupons, etc. that enables the poor to meet their food requirements from market purchases at the prevailing market prices.
The money locked in these excessive stocks (beyond the buffer norm) is more than Rs 1 lakh crore. Even if the government decides to liquidate half of it, it can garner Rs 50,000 crore to finance at least half of its infrastructure projects. We need bold moves to reform our grain management system. It will help the government to reduce its fiscal deficit. And it will also help in containing inflation too.