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Resource centre on India's rural distress
 
 

A fair food deal for all by Arjun Sengupta

The Indian economy is picking up and should be able to expand at eight to nine per cent. It is high time that the government initiates a universal public distribution system covering at least the essential commodities.

Incomes of the rich will go up and India will be a major player in the world when it revives. But the bulk of the population, about 70 per cent, will remain poor with their dire struggle for minimal livelihood. About 350 million people will remain below the poverty line.

In the past, growth has bypassed them and unless there is a total change in the approach, growth will continue to bypass them.

As a revolutionary change in the system is not in the agenda of any political party, the government has to try to keep the system going without being destabilised and losing the growth momentum itself in the process. For that, the universalisation of the public distribution system would be the first important step.

The prices of essential commodities have been rising at an unprecedented rate. Not only foodgrains but vegetables like onions and potatoes are becoming costlier day by day. These affect all Indians but for the poor they are devastating as all their meagre incomes get exhausted, not meeting even a portion of the necessities.

Although a universal public distribution system should cover both those living below the poverty line (BPL) and above the poverty line, for at least a limited amount of essentials, the government should begin with the BPL population by supplying them with the essential commodities at cheap and affordable prices.

There are many problems that have to be solved even for a limited PDS. At least to foodgrains, should be added dal, oil and some basic vegetables. Prices of these products are no doubt largely due to shortfall in production but there are clear signs of market cornering, hoarding and price fixing.

It is, however, very difficult to control speculatory tendencies by physical measures because the players are too many in the country and not just big traders and producers, even the common rehriwalla is hoarding. Unless those expectations are dampened they cannot bring down the speculation. The only way to do that is to increase supplies, if not through temporary production increase measures, then through additional imports.

If PDS is targeted to a limited BPL population it may also be possible to increase their supplies through market purchase of these products and sell them at subsidised prices. This would push up the open market prices somewhat further. But targeted PDS can be sustained if the government is willing to subsidise the difference between market price and issue price of commodities. Hopefully increased prices, supported by planned increase in production incentives, will raise output in a short period reducing the supplies bottleneck. But in the immediate future, the government has to be ready to bear the cost of maintaining the PDS.

However, the most important requirement is organisation of the system. That cannot be achieved by market incentives or subsidies. The government has to build up a huge and efficient structure of distribution throughout the country. It has to procure, purchase or import products and reach them to different destinations of the PDS. This can be done only with the help of state governments, first to identify the BPL beneficiaries and then to have fair-price shops supply the products efficiently.

The Centre can share the burden of the cost with the states but the organisation of PDS supplies has to be the responsibility of the states. A national programme of expanding the PDS must be initiated immediately as its efficiency can only be increased through experience.

There are other problems which must be attended to. Vegetables in particular are perishable products and refrigerated storage systems have to be built throughout the country. Dal, rice, also edible oil, may have to be imported in large quantities from wherever we can and the difference between import price and the issue price have to be borne by the government for a sufficiently long period. Also they have to be transported as quickly as possible from the ports and distant markets where purchases are made to the fair-price shops.

The aim of immediate short-term policy is to spread such PDS for the targeted population. Even if finance can be arranged the organisation cannot be built overnight without the concerted planning.

There is a variant of the programme also, which the government may seriously consider, namely to organise such a system through public commercial corporations with the state responsible for financing the operations and investments in infrastructure.

For instance, let the Food Corporation of India (FCI) take the responsibility of organising the supply through market purchases and imports and function as big traders entering into long-term contracts with producers and exporters playing in the market against other traders.

For this FCI should be able to buy and sell in the open market and make profits as a large monopoly player with no restriction on their pricing and operation programmes by the government.

It is only when FCI will be supplying to PDS will it need government subsidies. Corporations can function more efficiently than government motivated by profitable business and developing specialised experience.

National Agricultural Cooperative Marketing Federation of India Limited (Nafed) or similar organisations can be created for vegetable and other such products. They should build up storages and have contract farming both at home and abroad and especially for products like dal which growers produce only when there is an assured market.

It is through increased efficiency of these organisations that they may themselves enter into cross subsidisation for supply of PDS. The trading corporations of the world are very profitable today and if there are no restrictions on the imports and exports of these commodities, our Nafed-like organisations would also become global players.

The time has now come for all kinds of "out-of-the-box" thinking to meet a serious problem of economic management in the country. Indian development, if it has to follow an inclusive path, must reinvent itself so that the poor develop an equal stake in our growth process.

Dr Arjun Sengupta is a Member of Parliament and former Economic Adviser to Prime Minister Indira Gandhi