PRAGOTI

                                                       Source: PIB release

In the last few years government has allowed private procurement of wheat, while announcement of MSP was rather late. These resulted in massive private procurement and reduction in government stocks. For three consecutive years government procurements have fallen short of its target. As figure1 suggests, as a result there was continuous decline in procurement, however there is some recovery during 2008-09.  It is to be noted here that for several years the Minimum Support Price of wheat that the government offered was much lower than the procurement price that was offered in open market. Due to an upward revision of the MSP in 2008-09, government procurement has increased significantly. However open market prices have remained higher than the MSP even now.

Since stocks fell short of the requirement, government was forced to import from abroad at a much higher price. Irony of the situation is, while refusing to give Indian farmers adequate MSP, the government did not hesitate to give the importer a higher price. Now a large quantity of wheat is being hoarded by the private sector and there seems to be little that has been done in order to stop such practices. In fact, speculation over bad monsoon has fuelled further hoarding resulting in the present level of inflation.

Figure 2: Production, Procurement and Stock of Wheat (in million tonnes)

                                                     Source: Agricultural Statistics of India

Overflowing Godowns and Rotting Grains:  Recently, both electronic and print media have carried the stories of rotting up grains which were kept in open in FCI godowns. Ironically the bourgeoisie media, which remained silent on the plight of hungry millions for decades came up with apparently touchy headings like this one: “Millions go to bed hungry as millions of tonnes of wheat rot in open in Punjab”. According to figures provided by NDTV the amount of grain kept in the open in Punjab is around 6.5 million metric tonnes and wheat worth of Rs500-800crore are rotting up.

The above incidence not one off affair- for few decades food grains have been wasted. The colossal negligence becomes unbearable in the present context of high levels of inflation. In a situation where excess grains are rotting up, the government could easily universalize the PDS and distribute the grains. With this it could have prevented these grains from rotting up, contained inflation and at the same time fed hungry bellies. Instead government chooses to remain silent on universalisation of PDS. The dogmatic reliance on private sector in food becomes more apparent when the government plans to introduce food coupons and reduced food subsidy. There has been a substantial decline in food subsidy from Union Budget from Rs. 56002 crore in 2008-09 to Rs 55578 crore in 2010-11.

There are several measures taken by the government which undermine the Food Corporation of India. Keeping the MSP low, declaring the procurements with substantial delays, introduction of food coupons, partnering with private sector for storage and above all gradually declining level of public investment on FCI point out to the intention of dismantling of FCI. The needs of the hour, on the other hand, are to strengthening FCI and create better warehousing facilities throughout the country.

Figure 3: Declining Public Investments on Warehousing  

Source: Union Budget, Expenditure Budget, Vol2

As rightly pointed out by the media, government severely lack storage facilities. At present there are about 492 warehouses through out the country. In these warehouses less than two third of the grains can be kept in government’s own constructions, whereas, a sixth of the grains are kept in the open and remaining of the grains are kept in hired facilities. Almost 17 lakh metric tonnes of grains are kept in the open to rotten course of time. In order to create new warehouses government allocated a paltry Rs120crores for XI Five Year Plan. This is highly inadequate. Much greater amount of funds are required to renovate existing warehouses and create new ones.

Source: Central Warehousing Corporation of India website visited on 18^th April, 2010

http://cewacor.nic.in/Docs/list_wh_dec09_160210.pdfin

Subsidizing Alcohol Production:

 Another significant development that has recently come to public notice is the issue of public subsidy provided to distilleries to produce grain based alcohols. Several state governments including Maharashtra, UP, Karnataka have started providing various kinds of public subsidies. Unconfirmed news reports suggest that as of now Maharashtra government alone has provided more than Rs500crores of subsidies to the breweries. According to news reports major beneficiaries of this scheme include powerful ministers and politicians close to the ruling political combination at the state. When a PIL was lodged against the government on this scheme, the Maharashtra High Court rejected it. However, this policy seems to have severe bearing on the availability of food grains for human consumption for future. This is also leading to huge loss of public exchequer in a context where states are starving for funds. The stated goal of incentivising production of coarse cereals would also remain unfulfilled because the beneficiaries seem to be the distillers instead of farmers.

Soaring Profits: The Government of India has allowed duty free import of raw and refined sugar till December 31 2010, extending it from erstwhile deadline of March 31. It may appear to be a rational decision, given the shortfall in production and skyrocketing price of sugar. However, there is a rider. Mr. Sharad Power has assured that government would not import sugar directly. This puts government’s intention to contain prices in doubt. The private importers would import up to a certain point, which would never be sufficient to reduce prices considerably. Further more, the private players would hold the cheap imports only to release at an opportune time, which would maximize their profits. Instead, government could import sugar and distribute through fair price shops to give some respite to the consumers.

A series of deregulation of sugar industry, disinvestment of public sector sugar mills, withdrawal of sugar from APL commodities, subsidising production of ethanol and power and above all the patronage of Union Agriculture and Food Minister, Mr. Sharad Power for mill owners have allowed them to manipulate supply of sugar and garner huge profits. In the last few years profit of leading sugar mill owners have increased many folds (figure 5). Measures to ban future trading in sugar, imposing stockholding and turnover limits, raids of sugar mills in UP and Maharashtra are measures too little and too late. Mr. Pawar was absolutely right when he said that inflation is because of prosperity. Even a novice can understand that he meant to say that it is prosperity of his biggest support base, the sugar mill lobby. In fact, his policies have ensured that the interests of the group he represents are well taken care off, what if millions of Indians suffer!

 Dismal Budget: This year’s Union Budget was expected to come out with measures to contain inflation and providing relief to farmers and common people from soaring prices. Unfortunately, it has failed miserably. Instead of expanding PDS it has reduced food subsidy. Subsidies on fertilizers have been cut back. The promised ‘Food Security Act’ does not find mention in the Budget. Overall share of agriculture in the Union Budget has also decline, thus depicting lowered priority towards agriculture. Share of Central Plan allocation towards agriculture is also on a constant decline over the years. Productivity in agriculture has remained static for last two decades now. This is a major area of concern. Until and unless public investment in agriculture is increased significantly the trend cannot be reversed. The Union government officially recognizes the need for increasing productivity- what it calls a ‘second generation of Green Revolution’. What it ends up doing is a mockery of the issue – a paltry some of Rs700 crores allocated towards this so called ‘second Green Revolution’.

Overall, the food economy in the country is reeling under deep crisis. I have not even attempted to capture the entire gamut of the problem, rather, highlighted few of the relevant issues, basically to draw home the point that the Union Government shows no intention to tackle the situation fundamentally. What it is consistently trying is to do some cosmetic changes to keep its pro-people image intact, without tampering with the business interests.