Wednesday, March 26, 2014

Today's Editorial 27 March 2014

                          The food court

Source: By MG Devasahayam: The Statesman
Food security for India’s teeming millions is among the most critical and challenging issues of governance. However, it is being addressed by the political parties contesting the general election in a rather perfunctory manner. This includes the BJP, which by all accounts is poised to capture power at the Centre.

While addressing a rally in Punjab, the food-bowl of India, wannabe Prime Minister Narendra Modi condemned the rotting of food grains in the Food Corporation of India godowns even as the poor are starving. He suggested the unbundling and restructuring of this ‘leviathan’ into separate procurement, storage and distribution entities as a solution to the country’s food security concerns. This is a management-based approach.

The Food Security Act recently enacted by the UPA Government has attempted a different solution. For up to 75 per cent of the rural population and up to 50 per cent of the urban population, this security is sought to be achieved through the entitlement of 5 kg of foodgrains per month at highly subsidized prices of Rs. 3, Rs. 2, Rs. 1 per kg. for rice, wheat, coarse grains respectively. This will entitle about two-thirds of our 1.2 billion populations to subsidised foodgrains under the Targeted Public Distribution System. This is a fundamental right/welfare-based approach.

Food security for the country’s millions is being considered from different perspectives. Both approaches are flawed because these do not involve the two key stakeholders in food security ~ rural farmers who produce the foodgrains and the traders who reach it to the urban consumers. In fact, food security is something quite different from what is being perceived and actually means access to foodgrains to all sections of society at all times at affordable prices. This does not require a huge stockpile of grain that is stored by FCI under asbestos roofs and canvas canopies exposed to the sun and rain. The crux of the matter is whether the government or its agencies like the FCI should go through this faulty and terribly expensive procurement process or would it suffice to keep the foodgrains trade within well-specified parameters of social discipline.

This matter was examined and debated in the early 1990s by the high-powered Committee on Agricultural Policies and Programmes, set up by the Government of India. It was headed by Bhanu Pratap Singh, former Union Minister for Agriculture and Rural Development. Based on the deliberations, the committee submitted specific recommendations on how the food security system should be structured and managed.

The core issues identified were: the need to rely more on the personal involvement of the farmers, who are the producers, and the market mechanism that influences consumption; protecting the farmer and the consumer against the vagaries of production and the market forces in order to enhance agricultural productivity and ensure fair prices; reduction in the cost of foodgrain procurement, storage, transportation and distribution; an efficient delivery system under which those in genuine need of subsidies and support are properly targeted and given sufficient access to foodgrains and effective intervention powers in the hands of the government in times of need to protect the interests of producers or consumers.

A series of policy initiatives were suggested. The emphasis was on withdrawal of all controls ~ except that of quality ~ on movement, processing, marketing and export of farm products except in years of scarcity. The concept of “triple pricing” was advocated in order to regulate the market and protect the producer, consumer and the trader. There will be a ‘parity price’ to fully compensate the farmers for a rise in the cost of inputs and their other necessities of life, a ‘support price’ below which prices will not be allowed to fall, and ‘intervention price’ beyond which prices would not be allowed to rise.

An important suggestion was to establish a chain of professionally managed rural and peri-urban godowns/warehouses with infrastructure and banking facilities. The farmers may, at any time, sell their produce to the warehouses at the support price and this stock will go in government account. The farmers will have the option to deposit the same in their own accounts and take bank loans against their pledged stock. It should be obligatory for all stockists who wish to stock more than 20 tonnes of foodgrains to do so only in these warehouses. The private sector could be involved in building and managing these godowns.

As soon as the price of foodgrains in the open market would rise above the intervention price (already fixed), all stocks or part of it would be acquired by the government agencies on payment of “parity” price plus storage charges. If the price would fall below the support price, the farmers would have the right to sell their stocks to the government at the support price already fixed, plus the storage charges. This mechanism could be made to work effectively by establishing appropriate Food Security Regulatory Authorities at the Centre and in the states invested with adequate powers to implement and monitor.

Under this policy mechanism, farmers will be assured of minimum support price and consumers of supplies at reasonable and relatively stable prices. Traders ~ private as well as cooperatives ~ will also know the limits within which they can operate. Small farmers will be saved from going in for distress sales, and the government will have the facility to quickly locate and acquire foodgrain stocks in times of need.

This mechanism would also remove the damaging flaws inherent in the present impersonal, “command and control” bureaucracy-oriented policy and system regarding food security. These flaws have kept the food prices artificially depressed while providing huge subsidies to the FCI. This has neither helped the predominantly urban consumer nor relieved the suffering of the vast majority of the poor living in villages and small towns. The only beneficiaries are the FCI and the food department employees, some traders/contractors and their political mentors. This has stunted the growth of Indian agriculture, a segment that has vast potential not only for productivity and production-growth, but also in providing additional employment in rural areas.

At the core of this innovative policy is the simple device of relying on the real stakeholders who have personal stake in the system instead of a bunch of “bureaucrat-employees” who are more interested in their job security than the nation’s food security. This is sought to be done by trusting the farmers and giving them incentives to stock foodgrains at the chain of government/privately-owned or contracted godowns and warehouses located in rural areas and small towns. Even if a small fraction of the procurement and storage cost incurred by the FCI is passed on to the farmers as an incentive, in addition to the parity/support price, they would gladly leave their stocks in these godowns, to be lifted and utilised as and when required by the government. This in turn would achieve real food security that is in peril today.

This policy was accepted by the Government of India in principle and would have been implemented in the early 1990s but for the fall of the VP Singh government. For this delay, India and its teeming millions have paid a heavy price while vested interests have flourished from the status quo that continued. Neither the right-based Food Security Act nor the management solution of restructuring the incompetent and corruption-ridden FCI is going to resolve the critical issue. It is time an alternative, based on the stakeholder, and is brought in as the real solution.

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