Food
insecurity
A
critique of the report of the high-level committee on restructuring the FCI and
reviewing its role. BY T.K. Rajalakshmi
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.
(Published in Frontline.in)
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