In the global hunger index of the recent report of the Food and Agricultural Organisation, India ranks 66th among 88 countries. In the index, all Indian States are at “serious level of hunger.” Twelve States fall in the “alarming category.”
Since the United Progressive Alliance government took office, one of the major issues of policy difference with the Left parties, before they withdrew support, was on the food policies of the government. The government has now embarked on adding yet another negative dimension to it.
Increased buffer stocks
As part of our food security system, India has worked out quarterly norms for a buffer stock of food grains. From July 2005 onwards, India’s food stocks went below the buffer norm, for the first time in decades. The gap was primarily due to the policy of cutting back on government procurement for wheat and encouraging procurement by big agribusinesses, both foreign and Indian. The government failed to answer questions raised at the time. As is well known, it was wheat not rice that attracted speculative trade in global futures markets in the last three years.
Global prices went up because of the shortages created in India. It was imperative that the Government of India should continue procurement of wheat to stabilise wheat stocks and prices. In a perverse move, it did the opposite. Was it just coincidence that it decided to withdraw from the procurement market only for wheat? Unlikely, since it went in for wheat imports from foreign corporates to meet the shortages that its own low procurement had created in the public distribution system.
In 2006-2007, the government imported six million tonnes of wheat at prices higher than what it had paid the Indian farmer. A farmer in Punjab or Haryana was paid Rs. 7 a kg while the corporate exporting to India was paid Rs. 9.26 a kg. The following year the government imported more than one million tonnes. This time it paid the companies Rs. 14.82 a kg compared with Rs. 8.50 a kg to the Indian farmer. However, this year, perhaps because of the public outcry against expensive wheat imports and especially because a general election is near, the government went in for large-scale procurement of wheat reaching a record figure estimated at over 20 million tonnes.
At present, actual wheat stocks with the government are, at 22 million tonnes, double that of the buffer norm of 11 million tones for the month of October. Taken together, the rice and wheat stocks are 29.8 million tonnes against the minimum combined buffer norm of 16.2 million tonnes, an 84 per cent surplus over the required buffer.
Helping agri-businesses again?
The question now is: what is the government going to do with these food grains? An indication has come from the Food Corporation of India in Punjab. According to officials, because of the increased procurement and the lack of storage space, 4.8 million tonnes of food grains are lying in the open with the risk of being destroyed. The FCI is reported to have “tried to offload its wheat stocks by floating tenders but found few takers owing to the high base rate of 1,021 rupees a quintal fixed by the Government of India.” In other words, the UPA government is selling off its surplus stocks in the market. The current absence of buyers may become an excuse in future to justify sales at much lower prices to offload rotting stocks. It bears recall that the National Democratic Alliance government also sold off surplus stocks to traders at lower prices, inviting widespread criticism. Agribusinesses will once again be the beneficiaries.
The obvious way of using these food stocks is to immediately restore the allocations of food grains to the States. In the last three years, the government used the shortage of wheat as an excuse to eliminate a whole section of beneficiaries from the public distribution system. This was done by a completely arbitrary decision to ‘rationalise’ the system by taking an average of the amount of wheat actually lifted by the consumer from the ration shops during a period when the difference between the market price and the ration shop price was low.
Obviously, more wheat will be lifted when market prices are high. It was precisely at such a time when wheat prices had shot up by 20-30 per cent that the quotas were slashed, thus directly affecting large sections of the Indian population defined wrongly as non-poor or ‘above poverty line’ (APL) families. The household quota itself was slashed from 35 kg per family to 20 kg. Going by the current amount of food grains allocated to the number of APL families in the State, the actual allocation to APL is down to between 5 kg to 15 kg per family.
According to data supplied by the Ministry of Consumer Affairs, Food & Public Distribution, between 2005-2006 and 2007-2008 the average annual allocation for ‘above poverty line’ ration cardholders to the States was cut by 73.36 per cent. The World Hunger Index categorised the States of Madhya Pradesh, Chhattisgarh, Uttar Pradesh, and Bihar as among the “most alarming.” Shockingly, allocations to these States suffered the highest cuts of over 95 per cent.
In the ration system, the central issue price of wheat for APL sections is Rs. 6.10 a kg; for rice it is Rs. 8.30 a kg. In the open market for much of this period, a kg wheat costs between Rs. 13 and Rs. 15 or more, and at least Rs. 1 to Rs. 2 more for flour. The Arjun Sengupta Commission on unorganised workers estimated that 77 per cent of India’s population spends less than Rs. 20 per head a day. The slashes in APL quotas deprived this huge section of the benefit of controlled prices.
Issue of subsidies
The food subsidy has increased this year because of increased procurement at higher minimum support prices to the farmers and also increased storage costs. The utter failure of the government to control the price of farm inputs and the struggles of farmers forced it to raise the MSP. But by cutting allocations, the government shifts the burden of this increase to the consumer.
Recently Food and Agriculture Minister Sharad Pawar said that the “government’s food subsidy bill would exceed the budgeted amount of around Rs. 33,000 crore” (including funds allotted in the supplementary budget) and could reach Rs. 50,000 crore by the end of this financial year. It has become a habit of this government to put out a big scare on ballooning subsidies when it comes to meeting people’s requirements. When huge subsidies are given to corporates as bailouts and non-performing assets, then the costs do not matter. What the Minister did not say was that even at the higher figure he was citing, the food subsidy of the country, which has the highest malnourished population in the world, will be just 1.32 per cent of GDP. The actual subsidy at present is less than that.
In many countries round the world, the food subsidy is between one and two per cent of GDP. A June 2008 report of the International Monetary Fund entitled Food and Fuel Prices-Recent Developments, Macro Economic Impact and Policy Responses showed that 28 countries have food subsidies. Sixteen countries increased their subsidies from close to zero per cent to 2.7 per cent of GDP as a response to higher food prices. Thus if India raises its food subsidy, it will not be exceptional.
Surely the elimination of hunger should be a national priority that should take precedence over all other bailout packages. The ‘India Rising’ image and boasts of high growth rates of the economy matter little when such a pattern of growth is accompanied by an alarming growth in hunger.
(Brinda Karat is a member of the CPI-M Polit Bureau and a Rajya Sabha MP.)