Thursday, January 10, 2013


Any news regarding increased food production should be welcomed, especially in a country like India where hunger and poverty live side by side. If so why is that the latest "projection" by government agencies ( based on sowing estimates!) predicting a bumper harvest of food grains this year should create panic in the government? The answer is simple. Those in power at Delhi is again going to be caught in a state of unpreparedness to store the grains that will flow into the government granaries in the coming months. The problem is further accentuated by the higher support price being decided by the government against the advice of its own expert panel for political expediency. Those keen observers of the "grain politics" GOI is practicing in the past, cannot forget the rap it got from the Supreme Court last year for allowing precious food grains to rot in the open as sufficient storage facilities were not organized in spite of knowing the problem for almost two decades. With no clarity still emerging regarding the so called "Direct Cash Transfer" scheme and the fate of PDS in the coming years, what is in store for millions of people living below poverty line in future is still uncertain. Here is a critique on this vital issue facing the nation.   

Officials said wheat production in 2013-14 season that starts from April 1, is expected to be between 85 and 90 mt as sowing till Friday is around 458,000 hectares more than last year. This year, the country harvested a record 94 mt of wheat compelling state agencies to procure an all-time high 38 mt, a staggering 10 mt more than 2011-12. A situation similar to this year is also expected in 2013-14. Already, in rice state agencies have procured 1.2 mt more till yesterday as compared to the same period last year. By the close of the season, government plans to procure almost 40 mt of rice from farmers this year, 5 mt more than 2011-12. Wheat and rice procurement seasons are different. Rice procurement starts from October every year, while wheat begins from April. However, all this will not come at a low price. Infact, with government increasing the minimum support price (MSP) of wheat for 2013-14 season by Rs 65 per quintal, the food subsidy burden will straight away rise by Rs 2,275 crore. In 2012-13 Union Budget, the food subsidy has been pegged at Rs 75,000 crore. "With increase in MSP by Rs 65 a quintal, procurement cost of FCI will surely go up, and depending upon how much is procured and for how long it is stored and at price it is distributed under PDS, the subsidy Bill will get inflated. Presuming that FCI will procure at least 35 mt of wheat (last year it procured 38 mt), and if all other costs remain the same, the subsidy bill will go up by minimum Rs 2,275 crore," Gulati said. The burden will also be no less on consumers as wheat prices along with that of wheat flour will further move up. "Retail prices of wheat will go up further unless larger leakages from PDS flood the market at lower prices," Gulati said. The direct fallout of over-emphasis on grains, which the CACP sought to correct by recommending freezing the MSP of wheat for 2013-14 season is that import of edible oils and pulses is expected to cross Rs 65,000 crore in 2012-13 financial year, a steep jump of almost 16 per cent from the previous year. But, a bumper harvest does not necessarily mean that the farmers are getting benefit from producing more. A recent field visit by senior officials from the department of agriculture found that rice prices in eastern India has plummeted to almost Rs 800-1,050 a quintal, as against the Centre determined MSP of Rs 1,250 a quintal in the absence of suitable state intervention mechanism. Official data showed that this year (2012-13) rice procurement in the three major eastern states of Bihar, West Bengal and Odisha has been less than one-fourth of last year."This clearly shows that something is serious wrong with the policy as farmers are producing more, but in many area they are not getting adequate returns for their labour," another expert said.

What is becoming tragic is that farmers who toil hard against all adversities are becoming more and more stressed financially while the consumer prices are soaring making the lives of both more and more miserable! One of the funny reasons attributed to food inflation is that many states are succeeding in plugging leakage from the PDS, resulting in less and less transfer of cheaper grains from the distribution chain to the open market! Openly or surreptitiously GOi is bound to allow more and more export of grains to prevent spoilage like last year due to shortage of storage facilities. If direct cash transfer system were in place throughout the country probably there would have been higher off take of grains by those economically poor families with the cash received from the government. But this "gift" of the government may take years to come to the hands of all the beneficiaries as the infrastructure for fund transfer is grossly inadequate as of now. Thus bumper harvest or normal harvest, it makes very little difference to the two important players in this ball game, viz the poor farmer and the ever suffering aam aadmi!  

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