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Resource centre on India's rural distress
 
 

Poor economics
The embarrassment of riches in grain stocks confronting the government is a problem of its own making. It is the product of ill-conceived policies on grain procurement, storage and distribution and mistimed decisions on opening and shutting of foodgrain exports. The grain stocks that have piled up as a consequence are far more than needed for any rational inventory and public distribution programme. Burgeoning food stocks pose problems of storage and wastage. The ideal time to export wheat was in March-April when international prices ruled firm and demand was high. But the “in-principle” decision to lift embargo on wheat exports was delayed till the global prices eased and the import demand slackened, with major grain importers having already tied up their supplies. The case of non-Basmati rice is no different. Not only has the export ban been lifted too late but it has come with riders that will deter potential exporters. Given relatively low world prices of rice, Indian exports will perforce be relatively low. On the other hand, the government has not been able to find takers through the public distribution system (PDS) for the stocks of wheat and rice it holds.   The overall foodgrain inventories, consequently, have bulged to an unsustainable level of nearly 65 million tonnes, far in excess of the buffer stocking norm of 27 million tonnes and higher than the previous peak stockholding of 64 million tonnes in June 2002. Finding itself in similar predicament in 2002, the then National Democratic Alliance (NDA) government had chosen to export grains at highly subsidised prices, incurring heavy losses.

Far from learning lessons from past mistakes and making amends, the United Progressive Alliance (UPA) government continues to commit mistakes on the food front. Instead of scaling down grain procurement and stockpiling to need-based and manageable levels, the government, on the contrary, intends to augment the storage capacity to hoard even larger quantities. The government also seems confused on the issue of the location of stocks — should they be stored closer to where they are consumed or where they are produced? A private consultant hired to guide government on the issue has, very sensibly, suggested locating new silos in the consuming centres. But the Food Corporation of India (FCI), the government’s main food management agency, insists on locating new grain bins in the producing areas. This, obviously, will allow the FCI to cover up its inability to transport all the procured grains out of these areas. Should the FCI have its way, the food surplus regions would become virtual graveyards of grains. This apart, the outmoded policy of open-ended grain procurement and unnecessary curbs on stockholding by private traders have given the government an implicit monopoly over grain trade, rendering private trade irrelevant. Even if this is intended to serve the implementation of the proposed right to food law, it is an unacceptable restraint on private trade. Bad trade policies in food can only hurt food production without serving the interests of food consumption.