Wheat stocks at 7-year high point to complex food logistics problems

Wheat stocks with the central pool touched a seven-year high of 35 million tonnes as on December 1 ( BusinessLine , December 18), once again raising questions on how the complex exercise of food procurement, storage and distribution should be conducted. This spurt in stocks is on account of ‘open-ended’ procurement in recent years, as a result of which the Centre has been procuring a third of the wheat output, against about 25 per cent some years back. With wheat output expected to be above 105 million tonnes in 2019-20, an additional 35 million tonnes could enter the FCI godowns over the next six months. A sizeable stock will need to be evacuated before April. The FCI will need to drop its rates for open market sales, besides pushing more stocks through the National Food Security Act route, under which wheat is sold at ₹2 a kg. The loss so incurred should be seen against the savings in storage and reduced crop damage. A shift to maize and pulses should be encouraged through higher MSP, so that micro-nutrient deficiencies are addressed.

Costs apart, there is, surprisingly, no serious constraint of storage capacity, going by the Dalwai panel report on doubling farm incomes, which observes that “storage availability may be higher than assessed and the projected gap in storage may be far less than estimated”. It cites studies to say that 196 million tonnes of warehousing is required today, of which a capacity of at least 165 million tonnes is available, including private storages. The problem seems to lie in the distribution of stocks; this is despite the fact that procurement is a more decentralised operation now, with Punjab and Haryana accounting for 60 per cent of the wheat procured, against about 80 per cent a decade or so back.

India’s food logistics system has to perform the hard task of reconciling producer and consumer interest, while keeping an eye on the subsidy (about ₹1.5 lakh crore). Price support has come under a cloud in the WTO, for being allegedly “price distorting”. That said, the Shanta committee report of 2015, which argues for paring the PDS on the assumption that only 6 per cent of the farmers producing wheat and paddy benefit from procurement, is based on an earlier reality, when the procurement system had not expanded. Today, its outreach has helped small farmers in central India. The PDS needs to be supplemented with WTO-friendly options, such as income support schemes for farmers (PM-KISAN and Rythu Bandhu). Markets could spur farmers to produce diversified crops, but that should not undermine farmer or food security. To curb procurement costs, a careful shift to ‘food stamps’ or its variants can be introduced. To assume that India’s food output is ‘surplus’ is a misnomer. It is a supply and logistics challenge.

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