Sunday, February 15, 2015

A food policy worthy for the archives!-India's food woes

Recent clashes between India and rest of the world at the Bali meeting of WTO helped us to get an insight into the problems India has been facing in the food front because of lack of objective changes in the country's food policy during the last 5 decades. According to many impartial observers the stand of India in the above meeting was not rational and it does not recognize its own deficiencies vis-a-vis policies and practices involved in food production, procurement, storage, distribution and price subsidization. It is a late realization that our existing policies need to be moth balled because they are out of sync with what is happening else where in the world, that a revamp was considered by the new government at Delhi. The panel vested with this responsibility did a commendable job within a short period of time. India's "committee culture" which has the incredulous capacity to delay taking decisions in any field, did not come in the way of completing the report in record time and  the recommendations made by them deserve speedy implementation with high priority. Here is a take on this report which provides interesting reading.

"The report makes five sensible and practical suggestions. First, get the FCI out of the business of procurement in grain-surplus states like Punjab, Haryana, Madhya Pradesh, Chhattisgarh, Andhra Pradesh and Odisha, and shift its focus to eastern Uttar Pradesh, Bihar, Assam and West Bengal. The FCI can purchase grain above its NFSA needs from surplus states, but the actual purchasing should be handled by the states themselves. Getting the FCI out of direct procurement is a good idea and it's not clear why pushing it into procurement in the eastern states is desirable. It would be better to build procurement capacity in eastern states and help fuel another green revolution. Second, the report pushes for a national warehousing system under a PPP model to reduce wasteful storage and transport costs. Farmers can deposit their produce at these warehouses and receive up to 80 per cent of the MSP value of this produce from banks — and then sell it later at market prices. This will be a major improvement as it would reduce storage costs and wastage. Third, the panel suggests that state bonuses be the responsibility of the states and levies be made uniform at 3 per cent. This would help avoid the costs of huge bonuses paid by the states and financed by the levies they charge the FCI to procure from their farmers. Fourth, the panel moots shifting to cash payments for inputs like fertilisers and rationalising the price of urea so that the NPK mix, which has been distorted by urea pricing, is reversed. Smuggling to neighbouring countries and other distortions caused by urea pricing would also be removed. Huge productive investments in the fertiliser sector are needed but have been held back by the absurd pricing system, which has made India even more dependent on fertiliser imports. Fifth, the panel suggests amending the NFSA and reducing the subsidised population to 40 per cent instead of the current 67 per cent. It also suggests BPL consumers get more subsidised grain — 7 kg vs 5 kg — but that the issue price be linked to MSPs, except for the very poor. Further, in cities that have a population of more than one million, fair price shops should be replaced by DBTs. If implemented, these recommendations would provide more food for the poorest population, reduce FCI costs, bring private trade back into the system and give poor urban consumers greater choice in their food basket. It will hurt labour unions that are gaming the FCI system and states that use bonuses as a political handout, which they get the Centre to pay for through levies. This would hugely reduce the massive leakages and corruption in the food chain. If India can implement these reforms in the coming years, it would also avoid unnecessary battles at the WTO. It's time to begin reforming a system that may have served us well 50 years ago but is now benefiting a few at a huge cost."

Subsidy is not a bad word when it comes to upliftment of poor people from their poverty ridden life but when such subsidies are doled out mindlessly as a part of the vote bank politics, it becomes a scandal bordering on crime and shame. It is beyond any body's comprehension as to why government must subsidize well to do citizens even for buying a cooking gas cylinder or for that matter why should subsidized food grains be given under the APL card system to people who have sufficient income to buy the same from the open market? One of the most brilliant suggestions coming from the above panel is to reduce the population coverage under the NFSA from 67% to 40% saving enormously on the total outgo on this count. Similarly the country should have a reliable data base on its citizens vis-a-vis income details, in stead the politicians trying to conduct surveys on caste and religion! To start with, all government employees, those owning a mobile phone, two wheelers, four wheelers, houses, paying IT regularly, registered business men, air travelers, higher class train travelers, etc must be taken out of the list of people eligible for receiving government subsidy. Whether the present government has the courage to do it is another matter. Unless this is done, we as a nation is going to be left behind in the global race to attain economic strength and status.


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