The Hindu Business Line : Food for thought

Those States that produce more and procure less but lift substantial volume for PDS need to think whether such self-aggrandising would be proper over the long haul for the collective good of the country, says G. SRINIVASAN.

Inflation in India, as it is elsewhere, is being fuelled by rising prices of food, fuel and commodities. The UPA government, headed by Dr Manmohan Singh, has been dealing with inflation through a three-pronged policy — fiscal, monetary and administrative.

The fiscal measures include steep cuts in tariffs to zero, for rice, wheat, pulses, edible oil and maize, to 7.5 per cent on hydrogenated oils and vegetable oils, to 30 per cent on butter and ghee, and withdrawal of 4 per cent additional countervailing duty on edible oils.

The monetary measures announced on April 29 by the RBI, in its annual policy statement, exemplified tight money policy regime to suck out excess liquidity in the system so as to moderate demand. Administrative measures encompass ban on exports of non-basmati rice, wheat, major edible oils, major pulses, imposition of stock limits on rice, wheat, edible oils and oilseeds, periodic hike in minimum support price (MSP) for rice and wheat, using minimum export price (MEP) to regulate exports of onion and basmati rice and maintaining central issue price (CIP) for rice and wheat, frozen since July 1, 2002. Besides, States have been directed to invoke the Essential Commodities Act to penalise hoarders and launch de-hoarding drives to prosecute the culprits.

The Government is alive to the deleterious effects of inflation which is mostly imported on the back of India’s costly dependence on imported crude, the price of which has been on a high, breaching $100 a barrel in recent weeks. The flare-up in fuel price is also exacerbated by higher prices for food and other commodities, mostly metals.

Though India is not in the list of the 37 countries facing a food crisis, in the FAO’s latest report, the authorities have launched a medium-term strategy to augment production by public investment of Rs 30,000 crore to improve agricultural productivity through Rashtriya Krishi Vikas Yojana (Rs 25,000 crore) with a remit to spur the States to enhance outlays in agriculture and allied sectors and a National Food Security Mission (Rs 4,883 crore) to push production of rice, wheat and pulses. A silver lining in the dim horizon on the food front is that India’s total foodgrain production, which was 217.28 million tonnes (mt) in 2006-07, is estimated at 227.32 mt in 2007-08, as per the third advance estimates released on April 22, 2008. The estimated production for the crop year 2007-08 is, rice at 95.68 mt, wheat at 76.78 mt, coarse grains at 39.67 mt and pulses at 15.19 mt. The production of total foodgrains in 2007-08 is about 13 mt more than the projected demand of 214.02 mt during the year.

With the country’s foodgrains production in excess of demand in 2007-08 crop year, the government has resolved to build a strategic reserve of 5 mt of foodgrains, pending revision of buffer norms, to ensure food security. The basic responsibility for procurement and stocking of foodgrains is that of the public sector organisation, the Food Corporation of India (FCI) and the distribution part of it is the remit of the public distribution system (PDS). Even as the issue price to the beneficiaries of PDS is much less than the market price, the government has seldom revised the central issue price lest the poor get affected, leading to the ballooning food subsidy bill of the Central government, which crossed Rs 25,000 crore in 2007-08.

More laggards than leaders

The minimum support price set by the Centre is applicable to the farmer in Haryana or in Thanjavur in Tamil Nadu or in Malda in West Bengal. But a note circulated at the recent Chief Secretaries Conference convened by the Ministry of Consumer Affairs, Food and Public Distribution, shows that in terms of production, procurement and PDF offtake, only five States put their whole effort into this operation while the rest of as many as 30 States and Union Territories remain laggards but keep making vociferous demands for more supply from the Central pool!

In the case of wheat, while Punjab and Haryana produced 145 lakh tonnes and 100 lakh tonnes in 2006-07, they procured 68 lakh tonnes 34 lakh tonnes, respectively, even as their PDS offtake was 1.18 lakh tonnes and 2.48 lakh tonnes, respectively. In contrast, West Bengal, which produced 8 lakh tonnes of wheat in 2006-07, did not do any procurement but got 12.90 lakh tonnes for PDS offtake. Even States such as Uttar Pradesh, which produced 250 lakh tonnes, lifted 14.97 lakh tonnes for PDS, procured only 5.49 lakh tonnes.

In the case of rice, while Punjab and Haryana produced 101.38 lakh tonnes and 33.71 lakh tonnes in 2006-07, their procurement was 78.28 lakh tonnes and 18 lakh tonnes, respectively, even as their PDS offtake was 32,000 tonnes and 62,000 tonnes, respectively. Chattisgarh and Orissa produced 50.41 lakh tonnes and 68.25 lakh tonnes in 2006-07, procured 29 lakh tonnes and 20 lakh tonnes, respectively, while their PDS offtake stood at 8.11 lakh tonnes and 11.61 lakh tonnes, respectively. Andhra Pradesh produced 119 lakh tonnes, procured 53 lakh tonnes and its PDS offtake in 2006-07 was 31.53 lakh tonnes. In contrast, Uttar Pradesh and West Bengal produced 111.24 lakh tonnes and 147 lakh tonnes, procured 25.49 lakh tonnes and 6.44 lakh tonnes, with their PDS offtake at 30 lakh tonnes and 11 lakh tonnes.

Thus, in procurement operation, only a few States headed by Punjab and Haryana followed by Andhra Pradesh, Chattishgarh and Orissa stood tall in the case of rice and in wheat, except Punjab and Haryana, other big wheat producers such as Uttar Pradesh, Rajasthan, Madhya Pradesh, Gujarat and Bihar were nowhere in the picture.

Boost procurement pace

While commending the performance of these five States in rice and more specifically Punjab and Haryana in wheat, the Secretary in the Ministry of Food, Civil Supplies and Public Distribution, Mr T Nanda Kumar, told Business Line that with good incentives in the form of higher MSP for wheat, the procurement of wheat this season had crossed 155 lakh tonnes with Madhya Pradesh, Uttar Pradesh, Rajasthan and Gujarat purveying substantial volume to the Central pool. He said that with incentives in the form of uniform MSP for all grain growers, the onus is on the State administrative machinery to ensure that procurement picks up pace so that contribution to the Central granary for operation of the welfare schemes in the country is assured.

In sum, as the menace of inflation induced by elevated prices of food and commodities stalks the economy, political parties need to eschew partisan postures as rightly highlighted by the Prime Minister. Those States that produce more and procure less but lift substantial volume for PDS need to think whether such self-aggrandising would be proper over the long haul for the collective good of the country.