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$adminprix = 'admin' $rn = object(App\Model\Entity\Article) { 'id' => (int) 2419, 'title' => 'A universe of problems by T Nandakumar', 'subheading' => '', 'description' => '<p align="justify"> <font face="arial,helvetica,sans-serif" size="3"></font> </p> <p align="justify"> <br /> <font face="arial,helvetica,sans-serif" size="3">A demand to reintroduce a universal Public Distribution System (PDS) in the country appears every now and then. Its proponents argue that universal access is necessary for ensuring food security, for better control on prices and for eliminating (at least partially) the evils of exclusion errors in the targeted PDS.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">The question is: what are the operational implications of access for all citizens to subsidised foodgrain? They are currently allocated as follows: 10 million tonnes for Antyodaya households; 17 million tonnes for households below the poverty line (BPL); and 20 million tonnes for those above (APL), adding up to 47 million tonnes. Welfare schemes including the mid-day meal programme requires another 5 million tonnes.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">The highest procurement of wheat and rice has been in the year 2008-09 (56 million tonnes), the best production year for these crops. It will be difficult to repeat the 2008-09 performance in procurement. The best assumption for procurement every year will be in the region of 20 million tonnes of wheat and 30 million tonnes of rice. Given the vagaries of the monsoon and the volatility in the market, any programme of public distribution of foodgrain in excess of 40-42 million tonnes (excluding welfare schemes) is not practical.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">Now, let’s look at the foodgrain requirements for a universal PDS. Assuming a total population of 116 crore and an average family size of 5.4, the total number of families works out to 21.5 crore. At 35 kg per family per month, this requires 92-93 million tonnes of wheat and rice. Assuming a 3:2 ratio between rice and wheat, the requirement will be 55 million tonnes of rice and 38 million tonnes of wheat every year. Is it possible to procure these quantities every year? The task of procuring, storing and moving this grain will almost certainly be impossible.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">The bigger question, however, will be: where do we get an additional 25 million tonnes of rice and 18 million tonnes of wheat from? The larger part from high production-low procurement states like UP, Bihar and West Bengal. How much more can these states do? Ninety-two million tonnes cannot be procured in a year.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">And what happens to the open market if such large procurements are made? The total market arrivals may be of the order of 65 million tonnes of rice and about 50 million tonnes of wheat. If the central pool takes 55 million tonnes of rice and 38 million tonnes of wheat, the net available surplus in the private market will be very small and speculative traders could have a field day.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">Let us now take a look at the financial implications: First, what will be the issue price for universal PDS? Theorists would argue that this should be marginally lower than market price. The best alternative could be to fix the issue price as the minimum support price plus freight. However such a proposal would place an additional financial burden on the poor (BPL families get wheat and rice at highly subsidised rates). All citizens getting wheat and rice at BPL rates is not practical; the subsidies involved would be huge, like the distortions that may be created. Thus universal PDS in effect will mean providing foodgrains at APL rates for all non-BPL families. This is no change from the existing arrangement — except for the restoration of APL quotas, which existed prior to 2006-07.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">So how much will the exchequer shell out? The net financial burden on the exchequer on account of consumer subsidy alone (inventory costs apart) could be as much as Rs 120,000 crore, depending on the wheat rice ratio. There could then be severe implications on other social and infrastructure development programs apart from the moral hazard of subsidising the rich at the cost of the farmers</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">Remember, there is no guarantee that all APL cardholders will withdraw their rations every month. In fact many will probably not, even while insisting on a ration card as a proof of identity. In effect, allocating additional grain to APL card-holders will most likely add to the leakages in the system, and provide further opportunities to ration shop keepers for black marketing.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">Thus, whatever the compelling arguments in favour of a universal PDS, the scheme is not feasible. It is not possible to procure the quantities of rice and wheat required every year; and a very high level of procurement will distort the open market and trigger a price spiral leading to demands for off-loading FCI stocks at a concessional rate. Financially, the subsidy burden at current prices is not sustainable. And operationally, much larger allocation in a system which is known for leakages and corruption poses a moral hazard. Such leakages into the market and the squeezing of private trade could adversely affect farmers’ incomes and agricultural growth.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3"><em>The writer is a former agriculture secretary. Views are personal</em></font> </p> ', 'credit_writer' => 'The Indian Express, 7 July, 2010, http://www.indianexpress.com/news/a-universe-of-problems/643286/0', 'article_img' => '', 'article_img_thumb' => '', 'status' => (int) 1, 'show_on_home' => (int) 1, 'lang' => 'EN', 'category_id' => (int) 16, 'tag_keyword' => '', 'seo_url' => 'a-universe-of-problems-by-t-nandakumar-2503', 'meta_title' => null, 'meta_keywords' => null, 'meta_description' => null, 'noindex' => (int) 0, 'publish_date' => object(Cake\I18n\FrozenDate) {}, 'most_visit_section_id' => null, 'article_big_img' => null, 'liveid' => (int) 2503, 'created' => object(Cake\I18n\FrozenTime) {}, 'modified' => object(Cake\I18n\FrozenTime) {}, 'edate' => '', 'category' => object(App\Model\Entity\Category) {}, '[new]' => false, '[accessible]' => [ '*' => true, 'id' => false ], '[dirty]' => [], '[original]' => [], '[virtual]' => [], '[hasErrors]' => false, '[errors]' => [], '[invalid]' => [], '[repository]' => 'Articles' } $imgtag = false $imgURL = 'The Indian Express, 7 July, 2010, http://www.indianexpress.com/news/a-universe-of-problems/643286/0' $titleText = 'A universe of problems by T Nandakumar' $descText = ' A demand to reintroduce a universal Public Distribution System (PDS) in the country appears every now and then. 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$adminprix = 'admin' $rn = object(App\Model\Entity\Article) { 'id' => (int) 2419, 'title' => 'A universe of problems by T Nandakumar', 'subheading' => '', 'description' => '<p align="justify"> <font face="arial,helvetica,sans-serif" size="3"></font> </p> <p align="justify"> <br /> <font face="arial,helvetica,sans-serif" size="3">A demand to reintroduce a universal Public Distribution System (PDS) in the country appears every now and then. Its proponents argue that universal access is necessary for ensuring food security, for better control on prices and for eliminating (at least partially) the evils of exclusion errors in the targeted PDS.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">The question is: what are the operational implications of access for all citizens to subsidised foodgrain? They are currently allocated as follows: 10 million tonnes for Antyodaya households; 17 million tonnes for households below the poverty line (BPL); and 20 million tonnes for those above (APL), adding up to 47 million tonnes. Welfare schemes including the mid-day meal programme requires another 5 million tonnes.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">The highest procurement of wheat and rice has been in the year 2008-09 (56 million tonnes), the best production year for these crops. It will be difficult to repeat the 2008-09 performance in procurement. The best assumption for procurement every year will be in the region of 20 million tonnes of wheat and 30 million tonnes of rice. Given the vagaries of the monsoon and the volatility in the market, any programme of public distribution of foodgrain in excess of 40-42 million tonnes (excluding welfare schemes) is not practical.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">Now, let’s look at the foodgrain requirements for a universal PDS. Assuming a total population of 116 crore and an average family size of 5.4, the total number of families works out to 21.5 crore. At 35 kg per family per month, this requires 92-93 million tonnes of wheat and rice. Assuming a 3:2 ratio between rice and wheat, the requirement will be 55 million tonnes of rice and 38 million tonnes of wheat every year. Is it possible to procure these quantities every year? The task of procuring, storing and moving this grain will almost certainly be impossible.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">The bigger question, however, will be: where do we get an additional 25 million tonnes of rice and 18 million tonnes of wheat from? The larger part from high production-low procurement states like UP, Bihar and West Bengal. How much more can these states do? Ninety-two million tonnes cannot be procured in a year.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">And what happens to the open market if such large procurements are made? The total market arrivals may be of the order of 65 million tonnes of rice and about 50 million tonnes of wheat. If the central pool takes 55 million tonnes of rice and 38 million tonnes of wheat, the net available surplus in the private market will be very small and speculative traders could have a field day.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">Let us now take a look at the financial implications: First, what will be the issue price for universal PDS? Theorists would argue that this should be marginally lower than market price. The best alternative could be to fix the issue price as the minimum support price plus freight. However such a proposal would place an additional financial burden on the poor (BPL families get wheat and rice at highly subsidised rates). All citizens getting wheat and rice at BPL rates is not practical; the subsidies involved would be huge, like the distortions that may be created. Thus universal PDS in effect will mean providing foodgrains at APL rates for all non-BPL families. This is no change from the existing arrangement — except for the restoration of APL quotas, which existed prior to 2006-07.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">So how much will the exchequer shell out? The net financial burden on the exchequer on account of consumer subsidy alone (inventory costs apart) could be as much as Rs 120,000 crore, depending on the wheat rice ratio. There could then be severe implications on other social and infrastructure development programs apart from the moral hazard of subsidising the rich at the cost of the farmers</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">Remember, there is no guarantee that all APL cardholders will withdraw their rations every month. In fact many will probably not, even while insisting on a ration card as a proof of identity. In effect, allocating additional grain to APL card-holders will most likely add to the leakages in the system, and provide further opportunities to ration shop keepers for black marketing.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3">Thus, whatever the compelling arguments in favour of a universal PDS, the scheme is not feasible. It is not possible to procure the quantities of rice and wheat required every year; and a very high level of procurement will distort the open market and trigger a price spiral leading to demands for off-loading FCI stocks at a concessional rate. Financially, the subsidy burden at current prices is not sustainable. And operationally, much larger allocation in a system which is known for leakages and corruption poses a moral hazard. Such leakages into the market and the squeezing of private trade could adversely affect farmers’ incomes and agricultural growth.</font> </p> <p align="justify"> <font face="arial,helvetica,sans-serif" size="3"><em>The writer is a former agriculture secretary. Views are personal</em></font> </p> ', 'credit_writer' => 'The Indian Express, 7 July, 2010, http://www.indianexpress.com/news/a-universe-of-problems/643286/0', 'article_img' => '', 'article_img_thumb' => '', 'status' => (int) 1, 'show_on_home' => (int) 1, 'lang' => 'EN', 'category_id' => (int) 16, 'tag_keyword' => '', 'seo_url' => 'a-universe-of-problems-by-t-nandakumar-2503', 'meta_title' => null, 'meta_keywords' => null, 'meta_description' => null, 'noindex' => (int) 0, 'publish_date' => object(Cake\I18n\FrozenDate) {}, 'most_visit_section_id' => null, 'article_big_img' => null, 'liveid' => (int) 2503, 'created' => object(Cake\I18n\FrozenTime) {}, 'modified' => object(Cake\I18n\FrozenTime) {}, 'edate' => '', 'category' => object(App\Model\Entity\Category) {}, '[new]' => false, '[accessible]' => [ '*' => true, 'id' => false ], '[dirty]' => [], '[original]' => [], '[virtual]' => [], '[hasErrors]' => false, '[errors]' => [], '[invalid]' => [], '[repository]' => 'Articles' } $imgtag = false $imgURL = 'The Indian Express, 7 July, 2010, http://www.indianexpress.com/news/a-universe-of-problems/643286/0' $titleText = null $descText = ' A demand to reintroduce a universal Public Distribution System (PDS) in the country appears every now and then. 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