People's Democracy(Weekly Organ of the Communist Party of India (Marxist)
THERE is little doubt that the food and agriculture situation in the country is in a state of crisis. What is more remarkable is that this is now a crisis of fairly long duration, whereby, for nearly two years now, some of the more disturbing aspects have continued without any abatement. Thus, cultivators have been in distress because of rising costs and inadequate financial returns on sales. Foodgrain stocks held by the public sector, which mounted to several multiples of the desired level of stockholding, have continued to remain high and even increased. Meanwhile, there is continued incidence of chronic absolute poverty and malnutrition among a significant section of the population. Areas of distinct food shortage also remain.
original objectives of India’s public food management system were threefold:
(1) to maintain a reasonable degree of price stability; (2) to provide some
producer incentives to cultivators by ensuring that prices remained above
estimated costs; and (3) to provide a degree of food security to consumers. The
system rested on the twin
pillars of (a) public procurement with minimum support prices provided
at farmgate for a range of major crops, and (b) public distribution organised at
the state level through a network of Fair Price Shops, providing some food items
at subsidised prices.
course it could be argued that the system was never completely successful ---
either in terms of its spread or in terms of fully achieving its basic
objectives. Nevertheless, over the 1970s and 1980s, the network did certainly
expand in physical terms and Indian food and agricultural prices were certainly
more stable than world market prices for such commodities.
However, in the 1990s the system came under increasing pressure, and even under attack. For, various measures aimed first at targeting access to the public distribution system to only those officially defined as “poor,” and then at reducing the subsidy offered to other consumers, undermined the consumer network. These measures, which were supposed to reduce the food subsidy, had precisely the opposite effect of increasing it, because they led to a declining offtake (sales) from the Fair Price Shops.
current level of publicly held food stocks is estimated to be in excess of 65
million tonnes, compared to the buffer norms of 16-24 million tonnes. In
consequence, the revised estimate of food subsidy for 2001-02 is a record Rs
17,612 crore on disbursals basis, and total expenditure is likely to be at least
20 per cent larger when amounts outstanding against stocks held by state
governments are cleared. Of this, the dominant part is the carrying cost of
foodgrain stocks, which exceeds Rs 12,000 crore. This happens to be larger than
the central government’s combined plan and non-plan expenditure on
agriculture, rural development, and irrigation & flood control.
understand the patterns that have created this strange situation, it is
necessary to look first at the patterns of agricultural growth over the recent
past. The decade of the 1990s was disappointing in terms of aggregate growth
performance of agriculture, marking a distinct deterioration from the growth
rates of the earlier decade. There was a decline in rate of output growth for
every single one of the major crop categories. Over the period 1990-91 to
2000-01, the growth rate of foodgrain production dropped to 1.66 per cent per
annum, which was lower than the population growth rate of 1.9 per cent over the
same period. This was not only the lowest average rate since the mid-1950s, but
also amounted to a dramatic drop when compared with the earlier decades.
in the 1990s there was a shift from net imports to net exports in aggregate
foodgrains. While foodgrain exports can be a sign of domestic self-sufficiency
and market saturation, they need not be so: India was a net exporter of
foodgrain even in the late 19th century, when much of its population was denied
access to adequate food. The situation in recent times may not be very
build-up in public stockholding of foodgrains has occurred largely because of
the growing disparity between public procurement (which forms an essential part
of the minimum support price (MSP) operations designed to guarantee cultivators
a floor price that cover costs) and distribution. The gap is of fairly recent
origin: as recently as 1997, public foodstocks were below the buffer norm at 15
million tonnes. However, they have increased continuously thereafter, with the
largest increases in the past two years to reach the present high levels.
imbalance between procurement and offtake reflects wrong administered prices at
both points of the system. Minimum support prices have increased (often due to
political pressure) much more than the general price index or international
prices of these goods. This has caused more output to be sold to the Food
Corporation of India, regardless of public requirements. This is why the share
of public procurement as a share of domestic production has gone up so much,
from 13 per cent in the 1980s to more than 17 per cent in the late 1990s.
process of reduced offtake over time can be explained by the rising issue prices
of foodgrain at Fair Price Shops over the 1990s. The situation was aggravated in
1996-97 by the introduction of the Targeted PDS, which made PDS less attractive
to those above poverty line (APL) and increased the unit subsidy for those below
poverty line (BPL) but on a reduced
initial quota of only 10 kilograms per household per month.
in April 2000, an attempt was made to reduce the food subsidy by increasing all
issue prices for APL households to the full economic cost, charging BPL
households half the economic cost but doubling the monthly quota to 20 kilograms
per household. This led to a collapse in offtake by APL households. Much of this
had in fact been predicted by critics of the policy at the time, but to no
avail. The consequence of this combination was that foodgrain stock with the FCI
continued to be built up, and each successive harvest only added to the
central government has proved to be very resistant to the idea of large-scale
increase in employment schemes (food for work programmes) which would use the
foodstocks productively. Some minor increase in allocation for such schemes has
led to some reduction in stocks but certainly not enough to make much real
impact. Subsequent reductions in the central issue prices of basic foodgrains
have also not really helped to lure APL consumers back to ration shops, because
the PDS network has actually shrunk after 1997. There are concerns about quality
of long-stored grain, and the prices still do not really compare favourably with
open market prices.
this is occurring within the context of declining per capita availability of
foodgrain for the Indian people. In fact, per capita cereals availability in
2001, at 417 grams per day, was the lowest it had been since 1975, which was
itself an outstandingly bad year.
it is abundantly clear that the present mess in the food economy of the system
is the result of policy mistakes of the recent past, rather than the outcome of
any externally driven process. It is equally clear that solutions to the problem
are also well within the scope of domestic policy-making. The current food
crisis of plenty amidst want reflects very basic economic mismanagement by the
government, and each day that it continues is a pointer to the continued
mismanagement that is now reaching criminal proportions.