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Food stocks: A problem of plenty

Right through the three decades of the 1960s, the 1970s and the 1980s, there was no dearth of doomsayers who predicted that India would not be able to feed her teeming millions.

Today the nation with over a billion people has surplus food stocks that are proving to be an embarrassment of riches.

There have been many who argued that what the British political economist Thomas Robert Malthus had claimed in 1798 in his Essay on the Principle of Population, would turn out to be correct as far as India was concerned.

Malthus, who was well known for his pessimistic predictions on the future of humanity, had contended that while population would grow in geometric progression food output would increase in arithmetic progression - this imbalance would be rectified only by divine intervention in the form of famine and disasters, he believed.

The manner in which stocks of wheat and rice with the public sector Food Corporation of India have risen in recent years has not merely disproved Malthus' worst apprehensions. The growing mountain of foodgrain has also made the 'ship-to-mouth' days of the 1960s seem like a very distant nightmare. Yet, the situation is far from hunky dory.

The problem simply is that whereas the FCI's stocks of foodgrain now exceed 60 million tonnes - more than three times higher than the minimum 'buffer stock' level of under 17 million tonnes required to ensure food security -- few can deny that malnutrition is not widespread in many parts of the country.

One does not have to believe media reports about starvation deaths in remote areas in Orissa to realise the intensity of the problem.

The annual rate of growth of production of all kinds of foodgrain - wheat, rice, coarse cereals and pulses - stood at 1.67 per cent in the 1990s, a rate that was considerably lower than the rate of growth of population of 1.9 per cent during the decade. Why then have food stocks mounted so rapidly?

The contradiction can be easily explained. First, the rate of growth of production of wheat and rice far outstripped the rate of population growth right through the 1980s after the much-talked-about Green Revolution.

Second, the inclusion of pulses in the overall rate of growth of food output distorts the picture since production of pulses has been stagnant for over three decades resulting in a drop in per capita availability.

Third, coarse grains are being increasingly used to feed cattle and poultry.

That's not all. There has been a distinct shift in consumer preferences towards non-cereal foods. One estimate is that all-India per head consumption of cereals came down from 15.3 kilograms per month in 1972-73 to 13.4 kg twenty years later in 1993-94.

This trend towards a more diversified diet is not confined to the relatively well-off sections of the Indian population as may be commonly believed, but is discernible even among the poorest one-fourth of the population.

While cereals continue to dominate total expenditure on food, their importance has declined - and continues to decline - over time.

Simultaneously, cereals have become less expensive in comparison to other food products.

Finally, the single most important factor that has contributed to rising food stocks is the unusually high levels of procurement by the FCI over the last three years or thereabouts.

(The bulk of the procurement of wheat and rice is from the contiguous region comprising Punjab, Haryana and western Uttar Pradesh.)

The sharp increase in procurement volumes can be directly attributed to the jump in the minimum support prices announced from time to time by the Union government, that have been way above the prices recommended by the Commission on Agricultural Costs and Prices.

The recommendations of the CACP (a body of experts) have been invariably over-ruled by politicians in power, specifically, successive Union Ministers for Agriculture.

In 1998-99, the FCI procured 118.5 million tonnes of rice and 126.5 million tonnes of wheat. Three years later, in 2001-02, the procurement volumes had risen phenomenally to 201.5 million tonnes of rice and 206.3 million tonnes of wheat.

This, in turn, has resulted in the government's annual outgo on food subsidy going up by leaps and bounds. In 1991-92, the total food subsidy was Rs 2,850 crore or 2.56 per cent of the total expenditure of the central government.

Ten years later, in 2001-02, this figure had shot up more than six times to Rs 17,612 crore (4.83 per cent of total government expenditure) against the year's budget estimate of Rs 13,670 crore.

The budget estimate of the food subsidy during the current fiscal year (2002-03) is Rs 21,200 crore (or 5.17 per cent of total government expenditure) and few would be surprised if the actual expenditure far exceeds this amount.

In its official Economic Survey presented in late-February, the government conceded that the high MSPs "applied to wheat and rice and near monopoly procurement by FCI have led to an unsustainable situation where food stocks with FCI have risen to levels that have little probability of being used."

As a matter of fact, in late-2000, a committee of members of Parliament cutting across party lines had gone to the extent to suggesting that some of the rotten and rotting stocks of foodgrain with the FCI (that were unfit even for consumption by animals) be dumped into the sea!

A recent study by a panel headed by former CACP Chairman Abhijit Sen pointed out that each year the government spends more on stocking foodgrain that its entire Plan and non-Plan outlays on agriculture, rural development, irrigation and flood control.

The same study has pointed out that if one assumed that between 1996-97 and 2001-02, the MSP for rice went up at the same rate as the wholesale price index, the price should have been Rs 482 a quintal (100 kg) instead of the actual Rs 530 a quintal. The story is repeated in the case of wheat with the comparable figures being Rs 482 per quintal and Rs 610 a quintal.

Another study conducted by Arvind Virmani and P V Rajeev of the Planning Commission has suggested that the actual/announced MSP should be less than or equal to the MSP recommended by the CACP.

Moreover, it has been recommended that the methodology for calculating MSP by the CACP should be radically altered to make it a truly "minimum" support price by including only variable costs, namely the costs of inputs and wages (including family labour), while calculating the MSP.

It can be stated with complete certainty that if the government implements these recommendations, there would be a huge hue and cry from politicians and so-called representatives of farmers (who, incidentally, do not pay any personal income tax).

In the past as well, a number of official groups and panels had suggested that the CACP's recommendations be made binding on the government.

But like his predecessors, Union Agriculture Minister Ajit Singh - who like his father, former Prime Minister Charan Singh, claims he is a big advocate of farmers' interests - is unlikely to heed such advice.

Given the reality on the ground, it might be more practical to expect the government to try and implement certain other recommendations made by economists and officials like Virmani and Rajeev. These include a movement to a system of food stamps.

Under the existing public distribution system (PDS), owners of "fair price shops" claim they have sold certain quantities of food to the poor at the subsidised rates whereas the food has actually been sold at much higher rates in the open market.

A system of food stamps would certainly reduce the scope of corruption - the retailer would become eligible for subsidy only after obtaining food stamps - but there are two new sets of potential problems that could arise.

One, the food stamps could be forged. Second, the stamps could be traded informally for cash. There are, however, ways of checking such misuse. First, the stamps could be printed with serial numbers that can be matched with the numbers of particular retail outlets.

Another way to check misuse in the form of informal trading of food stamps would be to hand them over only to female "heads" of poor families. Also, a system of "smart" credit/debit cards could be used.

There are many other suggestions that have been made to improve the country's food management system. These include amendments to the Essential Commodities Act that is currently considered outmoded since the legislation was more relevant to a situation of shortages of food.

It has also been recommended that the Union government enact a new law to ban restrictions and control on movements of foodgrain within and among states. There is also talk of privatising FCI's operations that exceed the requirement of maintaining a minimum buffer stock.

Above all, there is a crying need for greater private-public partnership initiatives to set up more modern facilities for procurement, handling, storage, transport and distribution of foodgrain.

There have been recommendations galore but little sign of political will to implement the suggestions made. As the old saying goes in government, when you cannot commit yourself you form a committee. That's the real tragedy behind India's failure to improve the country's decrepit food management systems.

Perhaps all is not lost. This year's drought has literally presented a God-sent opportunity for the government to reduce its burgeoning food stocks. Provided, of course, the wheat and the rice reach those who need these the most. Still, the challenges of improving management of food supplies would remain for some time to come.

The author is Director, School of Convergence @ International Management Institute, New Delhi and a journalist with 25 years of experience in various media - print, Internet, radio and television.

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