Food insecurity

At a ration shop in Cuddalore, Tamil Nadu. A large section depends on the PDS for foodgrains.

SOON after assuming power at the Centre, Narendra Modi’s National Democratic Alliance government set up a high-level committee on re-structuring the Food Corporation of India that was mandated to make the food management system more efficient. It was headed by Shanta Kumar, former Union Minister for Rural Development and former Chief Minister of Himachal Pradesh. The committee’s main recommendations claim to address the question of reorienting the public distribution system (PDS) in order to give a better deal to economically vulnerable consumers and make storing and stocking operations more efficient.

On the face of it, the mandate and the terms of reference appear aimed at managing food procurement, stabilising grain markets and addressing public distribution issues. A closer look suggests that the real purpose is to bring in the private sector in procurement operations, reduce the benefits of food security and truncate the FCI’s role as a central procurement agency. The FCI should, according to the committee, hand over all procurement operations of wheat, paddy and rice to States such as Andhra Pradesh, Chhattisgarh, Haryana, Madhya Pradesh, Odisha and Punjab, which have gained experience and also created reasonable infrastructure for procurement. The FCI should accept only the surplus to be moved to the deficit States.

Of more serious import is its suggestion that the private sector should be brought in to compete with state agencies in the procurement of grains. The committee urges the government to review its Minimum Support Price policy in the case of items such as pulses and oilseeds and ensure that the MSP does not fall below the landed cost. This is baffling in view of the Bharatiya Janata Party’s (BJP) electoral promise to raise the MSP to over and above 50 per cent of the cost of production if voted to power. The most damaging recommendations have to do with further dilution of the commitment to implement the National Food Security Act (NFSA), which in any case did not envisage universal coverage.

The committee recommends deferring of the implementation of the NFSA in States that have not digitalised the PDS, listed the beneficiaries online for verification and formed vigilance committees to check pilferage. In short, the committee proposed to penalise States for administrative lapses that will supposedly lead to leakages.

The committee also says that 40 per cent of the population should be covered under the NFSA for entitlement to grain at subsidised rates, instead of the current 67 per cent. It argues that the 5 kg grain for every person to priority households was making BPL households worse off, especially those who used to get 7 kg under the Targeted PDS, a scheme launched in the early 1990s. The TPDS failed to produce its intended effect. The high-level committee recommends that BPL beneficiaries be given 7 kg of rice as before, but also says that the number of BPL beneficiaries under the NFSA be reduced. The pricing for priority households, it says, should be linked to the MSP, or else the NFSA would put undue burden on the exchequer. In short, the burden of the heightened MSP should be borne by the beneficiary.

The committee also resurrects the problematic idea of introducing cash transfers in the PDS, saying it would be much more effective to help the poor without causing any distortion in the production basket and in line with the best international practices. Cash transfers in the PDS in a country like India are not possible if the amount is not indexed to inflation. While the committee partially addresses this issue, it does not offer a plausible argument about whether it can be guaranteed that the money would be used for purchasing subsidised foodgrain and that leakages would not happen and also does not clarify whether PDS ration shops would continue to function as always or whether the beneficiaries would have to purchase from the open market.

Vijoo Krishnan, joint secretary of the All India Kisan Sabha (AIKS), said that the signs were visible soon after the Modi government took charge. A letter titled “Declaration of Bonus by Some State Governments Over and Above MSP—Change in Policy of Procurement for Central Pool”, directed at States that were giving a bonus over and above the MSP, was issued on the pretext that such bonuses “distorted the market” and drove “private buyers out of the market”. The MSP, he explained, was calculated on the basis of the All India Weighted Average Cost of Production and the States exercising the right of providing production incentives or bonuses were usually those that had a higher cost of production than the All India Weighted Average Cost of Production. The MSP did not reflect the actual cost of production, was largely non-remunerative, and was the primary reason for making agriculture unviable, he said.

He pointed out that the Commission of Agricultural Costs and Prices (CACP) calculations of cost were often based on dated data collected by the Directorate of Economics and Statistics (DES), which were disputed not only by farmers but by several State agricultural departments as well. There were States like Kerala and even some States ruled by the BJP such as Madhya Pradesh and Chhattisgarh that had been providing bonuses to farmers growing wheat and paddy based on these considerations. The withdrawal of these bonuses, the AIKS has said, would compel farmers to quit agriculture and divert the land for non-agricultural purposes, affecting food security further.

Also, in a seeming violation of federal principles, the Central government declared that in case a surplus Decentralised Procurement State (DCP State) declared bonus for wheat or paddy from Kharif Marketing Season (KMS) 2014-15 and Rabi Marketing Season (RMS) 2015-16 onwards, the Central government would limit the procurement to the central pool to the extent of requirement of foodgrains for TPDS/ Other Welfare Schems (OWS) allocations of that State and would provide acquisition and distribution subsidy to the State accordingly.

The letter warned that such States alone would be responsible for the disposal of any surplus procured over and above this and also bear all the financial burden in that regard. There were more draconian provisions for non-DCP States wherein it was decreed and decided that if a State announced a bonus over and above the MSP, the FCI would “not take part” in procurement and the MSP operation in the State, and the State agencies would have to mobilise resources and take care of the entire procurement and MSP operations including storage of the foodgrains procured. Krishnan added that in such States the FCI in consultation with the Department of Food and Public Distribution would decide how much stock of wheat or rice it should acquire in a particular season and restrict its Central Pool procurement to that extent. The rest of the surplus stocks would have to be disposed of by the State government “at its own risk and cost”. The letter that predates the recommendations of the high-level committee seemed to set the tenor of the government’s overall plan regarding the FCI and public stockholding of grains.

Krishnan said that the committee had far exceeded its brief and made recommendations that would have an adverse and irreversible effect on food security and livelihood security of the peasantry and agricultural workers. On the recommendation to cease procurement from certain States, he said this was no remedy and that further expansion of public procurement was required. He said that the observation that Odisha had sufficient experience and infrastructure was not true as every harvest in the State was accompanied by protests from farmers to open procurement centres and guarantee an MSP. To outsource the stocking operations to various agencies under a Private Entrepreneur Guarantee scheme on a competitive bidding basis would finish off the FCI, which was the backbone of India’s food security programme, he said.

At a time when developed countries in the European Union and the United States are going ahead with their domestic subsidies (the U.S. spent $100 billion on food aid programmes alone in 2012; India’s food subsidy bill is less than $20 billion annually), and with general food inflation showing no signs of abatement despite the reduction in global and domestic oil prices, the recommendations of the Shanta Kumar Committee are indeed surprising. Its suggestion to the FCI to reduce buffer stocks is also baffling as buffer stocks were to be raised by 60 per cent to meet the needs of the NFSA; besides, buffer stocks are always needed to meet exigencies like floods, famines and droughts. Farmers’ organisations like the AIKS have also expressed their concern over the Trade Facilitation Agreement with the U.S. at the World Trade Organisation (WTO) ministerial talks without so much as a consultation in Parliament or with the State governments. The TFA merely states that a permanent solution would be arrived on food security.

The Central government seems to be doing exactly what its predecessor had attempted to do, that is, cut down on welfare schemes and allocation, under the name of fiscal prudence and efficiency. The United Progressive Alliance government had coalition compulsions which made it adhere to some semblance of being a welfare government; the present dispensation with its overwhelming majority does not seem to be hamstrung by such compelling factors.