Coal to Newcastle

The rural population, which feeds the public distribution system (PDS), is in turn more dependent on it for sourcing daily essentials than those living in urban areas. This revelation from the Government’s latest household consumer expenditure survey data for 2009-10 is significant, for it further confirms how flawed the existing centralised system of procuring and distributing grains through the Food Corporation of India (FCI) is. The survey shows PDS purchases to account for 23.5 per cent of rice consumed in rural areas, as against only 18 per cent in urban India. The share of PDS rice in rural consumption is even higher for select States: Almost 53 per cent in Tamil Nadu, 40-45 per cent in Karnataka and Chhattisgarh, 33-34 per cent in Maharashtra and Andhra Pradesh, and 25-28 per cent in Kerala and Orissa. The same pattern, of rural Indians relying more on the PDS for securing consumption needs, holds for wheat and sugar. While roughly 28 per cent of rural households reported consumption of these from the PDS, the corresponding all-India urban ratio was just 18 per cent.

The above fact – of growing dependence on the PDS to meet home grain consumption requirements even in rural areas – is not a bad thing in itself. A one-hectare farmer may produce 3-4 tonnes of wheat, compared to his own family’s annual consumption that wouldn’t exceed 600-700 kg. There is nothing wrong if he were to sell the bulk of the 3-4 tonnes output at the Government’s minimum support price (MSP) of Rs 13,500 a tonne and meet his family’s requirement of 700-800 kg at subsidised rates of Rs 5-6/kg through the PDS. Through this, he is able to derive both income as well as food security. Chhattisgarh, one of India’s most backward States, has actually sought to do that. Today, it not only has a well-functioning PDS, but also a robust system of procurement to ensure paddy growers in the State do receive the officially declared MSP.

If farmers and agricultural labourers are increasingly consuming from the PDS what they are themselves producing in the first place, it reaffirms the case to completely de-centralise official procurement operations. The Government should, indeed, even allow private players to procure on its behalf, with adequate safeguards for enforcement of MSP payments by them. This will, then, set off a virtuous process, wherein private capital would flow into rural areas for establishing warehouses to store produce procured from farmers on Government account. To the extent the grain from these decentralised storage facilities gets consumed within local PDS networks, they would obviate the need for the FCI or State agencies to have large centralised systems for stocking and moving rice or wheat over long distances. The resultant savings in food subsidy from lower transport and other logistic costs are obvious. Decentralised procurement and creation of rural warehousing capacities will also benefit farmers, apart from strengthening the PDS itself.