People's Democracy

Fight To Change Food Policies Of UPA Government

Brinda Karat

THE Planning Commission in its Annual Plan 2006-2007 stated “Public distribution system (PDS) is the most significant instrument of government policy to moderate open market prices and to ensure food security at assured prices.” Yet today the government is willfully weakening a central pillar of the PDS through its promotion of private procurement at the cost of adequate foodgrains for the PDS. It is reported that the government has already taken the decision to import 10 lakh tonnes of wheat this year in a repeat of last year’s disastrous food policies. It seems the government has learnt no lessons.

Official procurement plays two roles. One is the role it plays in support of the farmer. A minimum support price is fixed and official procurement is at this price which ensures that smaller farmers who cannot hold back their stock waiting for better prices are not exploited by big traders and agribusinesses and forced to go in for distress sales. This system is required to protect farmers from market manipulations and fluctuations. At a time when market prices are high, some would say artificially pushed up, MSP acts only as a fallback. The other important role – and more relevant and necessary for us at present – is that official procurement ensures adequate foodgrains for the public distribution system. Instead of these two roles being complementary to each other, the privatisation agenda of the government has led to a situation where government seems to be pitting the interests of one section against the other, that is, the farmer against the consumer.

Last year the consequences of this policy were reflected in the failure to meet the wheat procurement target of 160 lakh tonnes as only 92 lakh tonnes was procured. This year, according to latest reports even the lower target of 150 lakh tonnes – the lowest target incidentally in many years – is far from being met. Only 78 lakh tonnes have been procured till April 30. In Uttar Pradesh the target was brought down from 25 lakh tonnes to 15 lakh tonnes. Till April 27, only 19,047 tonnes have been procured. Farmers are not getting a price much higher than 850 rupees which is the official procurement price including the bonus. However the widespread perception is that prices will go up and therefore those sections of farmers who can wait for a better price are doing so. Private companies who are going in for aggressive procurement have many advantages over State agencies. They procure from the doorstep while official agencies have to go through the nearest mandi (grain market); they make all payments in cash, official agencies pay by cheques which are often delayed. FCI and other agencies also have to pay purchase-tax for grains they buy from farmers at the rate of 4 per cent of the value of the goods purchased. FCI and other State agencies also have to pay at least 2.5 per cent as tax to the mandis. Private companies do not pay these taxes so they can sabotage the official procurement by just paying a few rupees extra to the farmer.

SERVE OUR FARMERS, NOT FOREIGN TRADERS

The government must ensure a level-playing field for official procurement agencies instead of giving concessions to private companies. At the same time, FCI procurement will be possible only if farmers’ interests are protected. It must be ensured that the FCI and official agencies can offer the farmer competitive prices and conditions so as to be able to procure adequate foodgrains for the PDS. Last year, the total mismanagement of the food economy led to a situation where the government had to meet the huge gaps in procurement of wheat through expensive imports, which meant paying foreign traders more than the price paid to Indian farmers. Looking at market trends, it is essential for the FCI and government agencies to aggressively go in for procurement with better terms so as to protect farmers’ interests and prevent cornering of stocks by private companies.

It is reported in the newspapers that central government spokespersons have threatened some of the state governments that central supplies to the PDS in their states would be cut if they fail to procure enough wheat from their states for the central pool. It is the central government which has initiated the changes in the relevant law to encourage private procurement and has asked state governments to follow suit, now to resort to this kind of blackmail only shows up the utter bankruptcy of the policy itself. In fact the FCI under instructions from the ministry has started outsourcing its own task of procurement to private companies. It is absolutely essential for the central government to reverse these policies and check the trend of low official procurement while protecting farmers’ interests.

Apart from the political importance of protecting self-reliance in the food economy, it makes economic sense to procure wheat at better prices from our own farmers than serve the interests of foreign traders and agribusinesses. Lat year the imports were made in five spaced out tenders. Each tender was more expensive than the other and by the last tender which was 229-230 dollars per tonne, it was around 400 hundred rupees more per tonne than what was paid to the Indian farmer. India could not make a proper assessment of its needs when it went in for the first lot of imports but the US trade sources had stated a year earlier that India would require 5 million tonnes of wheat. Do we conclude that the US trade knew more than our financial managers of our own needs? In any case the consequence was that the main benefits of the policy were reaped by foreign traders and agribusinesses. This year too with India coming into the market it can be expected that wheat prices will shoot up. Already there are reports that shipping companies who are expecting orders to bring the imported wheat to India are hiking their charges. The government has to assert its political will against privatisation agendas in the procurement of foodgrains which are proving disastrous for the food economy.

HOARDING WHEAT

The other instrument of largesse shown to private procurers is regarding stock limits and the virtual shelving of the Essential Commodities Act, 1955. After pressure from the Left, the notifications made by the NDA in 2002 and 2003 lifting all limits on stocks, removal of licencing procedures etc was partially reversed in September 2006. State governments were given the authority to impose such stock limits. A question that needs to be answered is where is the wheat which has been privately procured? How much wheat was imported by private traders at zero per cent duty? Why has that wheat not come into the market? Reliance on private trade by giving them concessions has not helped to bring prices of wheat down in the open market, on the contrary it has helped hoarders.

In March this year the government issued a notification in the nature of a wheat stock declaration, asking all related companies or individuals to report any purchases of wheat beyond 50,000 tonnes during 2007-2008. Reportedly only two corporates – ITC and Cargil India – have filed reports so far. The first has a Hyderabad address. The second is registered in Gurgaon. Let the central government take the appropriate steps to initiate dehoarding measures. Since these and other companies involved in procurement operate in different states where they have their own storage facilities what is required is a central stock limit to be fixed by the centre, which must be implemented by state governments. This is an essential measure to bring the wheat into the market and to bring down prices.

The finance minister explains the rise in the prices of wheat, which in fact was the trigger for price rises of other commodities, as a supply and demand mismatch. People have more money and therefore more wheat is being consumed. This is not borne out by per capita consumption figures for cereals. Earlier the neo-liberals made the most outrageous justification for the official figures showing a lower per capita consumption of cereals. It was not a sign of distress they said but a welcome development of changing food habits, of healthy eating since people were buying more exotic items instead of cereals. Today when wheat prices are high they speak a different language which actually conceals the crime of hoarding.

REDUCTION OF SUBSIDY

The policies of private procurement being promoted by the concerned ministry led by Sharad Pawar in the name of protecting farmers’ interests meshes totally with the agenda of the finance minister as well as the deputy chairman of the Planning Commission, both of whom are committed to slashing the food subsidy. Subsidy comprises the difference between the cost of procurement, storage, distribution and related expenses on the one hand to the central issue price of foodgrains on the other. It will be recalled that with the concurrence of all the three related authorities the central issue prices of foodgrains were sought to be hiked last January. The strong protest of the Left and also reportedly the Congress leadership led to a “postponement” of the price hike. However to compensate the inability to cut subsidy by raising prices, another route has been found through reducing procurement. This basically means that the volume of foodgrains required to ensure a minimum food security through the PDS gets reduced. In fact the government is actually reducing the norms of the buffer stock requirement so even on that account expenditure on stocks can be lowered.

Thus even though the minimum support price is 40 per cent higher today than two years ago, the government has lowered the food subsidy in 2007-2008 by Rs 600 crore precisely because less procurement is factored into the policy. GDP has grown at 8.5 per cent but the subsidies for food have actually reduced as a percentage of GDP from 0.83 per cent in 2005-2006 to 0.66 per cent the following year and even lower this year.

Food Subsidy in Union Budgets

(Rs. Crore)

The cuts in food subsidy have had a direct impact on the allocations of foodgrains for the PDS and for other foodgrain-based central government schemes like the Sampoorna Grameen Rojgar Yojana (SGRY) and the mid-day meal scheme. It is argued by some that allocations to the PDS are only notional since they represent the total entitlement for ration card holders, not what they actually buy. Since the volume of foodgrains actually lifted from the ration shops is much lower than the entitlement, calculating the cuts in allocations is meaningless. This is an entirely specious argument since it means then that the government has also a specific interest in maintaining the conditions which lead to poor offtake which in turn can be conveniently reflected in lower allocations and thus lower procurement needs and targets.

CUTS IN ALLOCATION

The annual allocation for BPL families in 2003-2004 was over 22.5 million tonnes. This was cut by around 3.3 million tones in 2005-2006. In the first nine months of 2006-2007 it was just 15 million tonnes. The Antyodaya scheme is meant for those who are at the bottom of the BPL, which now covers 2.5 crore families. If each family is to get their entitlement of 35 kg of foodgrains it would amount to a total allocation of at least 10.5 million tonnes for the Antyodaya scheme. However, the allocation for the Antyodaya scheme was only around 8.5 million tonnes in 2005-2006 and 7.7 million tonnes from April 2006 to January 2007. Thus even for the section defined as the “poorest of the poor”, the foodgrain allocation is not adequate. This is happening at a time when the PDS offtake is as high as 80 per cent and 93 per cent for BPL and Antyodaya cardholders respectively.

The central problem with the PDS is the targeting approach. Now another policy shift is virtually limiting the entire PDS system to the 6 crore BPL and Antyodaya households cutting out the APL (above poverty line) families. According to the official definition of the poverty line, any adult above an income level of 327 rupees a month is not poor. While it is shocking that over 6 crore families have been identified which have even lower per capita income than such a destitution level, the poverty line itself is derived from an outdated and flawed methodology which does not reflect the actual levels of poverty in the country today. It is therefore cruel and unjust that those earning more than this destitution level of 327 rupees a month are not entitled to subsidised foodgrains, having been termed APL category.

The neo-liberals in the government are hell bent on pushing the entire APL population out of the PDS. In June 2006, a decision was made, that allocations of wheat to states would be based on the average offtake of the last three years or the last year whichever was lower. Thus APL card holders were punished for low offtake by cutting the allocation itself whereas the actual reason for low offtake was the poor quality of the grain and the delay in stock arrivals. The average of the offtake was taken when the prices of APL grain were only slightly lower than the open market prices which also contributed to a lower offtake. The allocation of foodgrains for APL fell sharply from 44 million tonnes in 2004-2005 to just above 25 million tonnes till January 2007. In April 2007, even though rice stocks were comfortable, the government has reportedly decided that the APL allocations of rice are to be “rationalised” on the basis of the maximum monthly offtake for the last three years. This will almost certainly lead to a cut in allocations of rice. In the last six months, because of the rising prices and the marked difference between APL prices and the open market, the APL offtake has increased from around 18 per cent to over 27 per cent. But precisely at a time when larger sections need protection from the high market prices, entitlements are being cut. This makes a mockery of the government’s stated commitment to combat the price rise of food items.

TAMILNADU AND KERALA EXAMPLES

In contrast to these policies that severely erode food security, within the limited resources that they have, the state governments of Tamilnadu and Kerala have taken important measures to protect the peoples right to food.

The Tamilnadu government has the distinction of ensuring the only universal public distribution system in the country with the provision of rice at two rupees a kilo to all ration card holders. Recently to bring relief against high prices, certain quantities of pulses and edible oils have also been added to the distribution system. In Kerala, the government is giving ration card holders 25 kilos of rice at three rupees a kilo. In addition approximately 5,700 fair price shops are selling 46 essential commodities ranging from pulses, masalas, edible oils to salt and soaps at controlled prices. For example urad dal which is selling at 57 rupees a kilo in the open market is available in these shops at 42 rupees, arhar dal is sold ten rupees cheaper at 28 rupees a kilo, rice which costs 15 to 16 rupees in the open market is available at 11.50 rupees. Besides ensuring that a substantial portion of a family’s requirements in foodgrains and proteins can be met through the fair price shops network, such steps have a salutary effect on controlling open market prices. The percentage change in the index number of consumer prices for agricultural workers for eleven months in 2006-2007 (this index has the highest weightage of foodgrains) shows that the percentage price rise in the country is lowest in Tamilnadu (4.29) and Kerala (4.53), followed by West Bengal (5.29), all three being lower than the national average (7.67). The West Bengal government is one of the few major state governments which has fully exempted all foodgrain items from the state-level VAT since its introduction in 2005-2006 foregoing substantial revenue.

STRENGTHEN PDS

The need for a nationwide struggle to strengthen the public distribution system is essential. This includes taking the necessary measures for ensuring adequate procurement to serve the needs of the PDS. The examples of Tamilnadu and Kerala show that the more universal the system the lower the leakage. The central government justifies its anti-PDS policies on grounds that 40 per cent of the foodgrains are diverted, that the subsidy does not reach the poor, that the PDS system is non-functional in most parts of the country, that state governments have a major responsibility and so on. It is true that the public distribution system does need a drastic overhauling but to strengthen it, not to destroy it. The demand for universalisation of the system, endorsed by the recommendations of official committees, gains an added urgency in the light of the increase in prices of essential commodities. At least as an interim measure the number of those eligible for foodgrains at BPL prices must be increased.

The alarming data on nutritional status, particularly of women and children, revealed in the NFHS-3 (National Family Health Survey 2005-2006) underlines the legitimacy and urgency for such a measure. Since the last such survey was conducted in 1998-1999 the nutritional status of rural women has actually worsened. Shockingly, 56.2 per cent of all women and 58.2 per cent of rural women suffer from anaemia. The number of pregnant women who are anaemic has increased by 8 percentage points to 57.9 per cent. When pregnant and lactating mothers suffer from high anemia, it is not surprising that the number of infants underweight between 6 to 35 months is a whopping 79.2 per cent, up five percentage points since the last survey. Thus an increasing number of people, particularly in rural India, are malnourished and hungry. Rising prices of essential commodities will make the situation that much worse. This is the context in which urgent steps are required for the struggle to force a reversal of the gross mismanagement and wrong direction of food policies of the central government. Growth rates have little meaning if they translate into less food for the poor.