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Harish Damodaran

NEW DELHI, Feb. 22

WITH less than a week to go for the presentation of the 2002-03 Budget, the Government is yet to give a clear indication of its strategy to tackle the problem of the ever-mounting foodgrain inventories in public godowns.

Officials say that there are three options currently under consideration. The first pertains to announcing a physical ceiling on the quantity of wheat that the Food Corporation of India (FCI) and State agencies will procure for the Central pool during the ensuing 2002-03 rabi marketing season, beginning April.

As on January 1, 2002, total foodgrain inventories in the central pool amounted to 581.12 lakh tonnes (lt), comprising 324.15 lt of wheat and 256.17 lt of rice, whereas the normative stocking requirement for this date was only 168 lt (84 lt each of rice and wheat).

``We can address the problem by halting further procurement or announcing a cap on the quantum of purchases in the next rabi season. But halting procurement altogether will be far too harsh a step. As for setting a physical ceiling on the total quantity of procurement, this is also problematic because how do we decide how much wheat is to be bought from each State?'', the officials noted.

Even if the Centre allocates procurement quotas for individual States on the basis of previous years' average purchases, there would be additional complications arising from fixing sub-quotas for each region or group of farmers within a State. ``The problem is that even within say Punjab, procurement takes place simultaneously across different mandis, which makes it impossible to judge as to whose grain has arrived first, whether farmers in the Malwa belt have gained at the expense of those in the Doaba, and so on'', they said.

The second option is to revive the 2001-02 Budget proposal to put in place a decentralised procurement system (DPS).

This would entail State Governments undertaking procurement and distribution operations on their own account.

While the Centre would continue to make available funds for this purpose and re-imburse the consumer subsidy borne by the States on account of the difference between their economic cost of procuring, handling and distributing the grain and the average sale price, it would, however, not finance the `carrying cost' of the entire accumulated stocks.

Under the DPS, the Centre would maintain stocks only to the stipulated minimum requirement, on which it will bear the necessary interest and storage costs.

The onus of financing the carrying cost on stocks beyond this level would lie on the concerned State Government that undertakes its own procurement and distribution operations.

Given that the carrying cost component is expected to account for over 60 per cent of the total projected food subsidy bill of Rs 20,000 crore this year, the DPS would help the Centre to net massive savings.

But then, the DPS idea has not found favour with the grain surplus States of Punjab and Haryana, which together contribute roughly 82 per cent of the wheat and 44 per cent of rice to the central pool. ``In Madhya Pradesh, Uttar Pradesh and West Bengal _ where the DPS is now being implemented _ there are both surplus as well as deficit areas, which makes it possible for these Governments to procure and distribute the grains within their State. This is not the case with Punjab or Haryana, where the entire State is surplus and there is resistance from their Government, therefore, to dispense with the central pool'', the officials observed.

That raises the third option, which is setting `realistic' minimum support prices (MSP).

That this is the route that is likely to be taken has also been indicated by the Union Agriculture Secretary, Mr J.N.L. Srivastava, who, on Thursday, hinted that the MSP of crops would henceforth be `market-determined' and not fixed based on their cost of cultivation.

Mr Srivastava has highlighted the fact that the under the World Trade Organisation's (WTO) rules, if the MSP is fixed above prevailing international prices, the difference would be treated as `trade-distorting' producers' subsidy.

The High Level Committee on Foodgrain Management under Prof Abhijit Sen, which is still to submit its final report, is also understood to be favouring a reduction in MSP levels, rather than announcing any ceilings on procurement.

Alongside, the Government is also examining the option of further slashing the central issue price of foodgrains for the above poverty line (APL) segment, the officials added.

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