India is poised to harvest close to 250 million-plus tons of foodgrain this year, thanks to a bountiful monsoon, and not necessarily because of any spectacular breakthrough in agricultural research. If we had something worthy to speak about on the latter, we Indians would not have groaned under a severe drought in 2008.
But that is not the theme of this article. Despite the huge impending kharif harvest, principally of food crops like rice, certainly to be followed by a record rabi wheat crop thanks to the generous grace of God Varun that helped raise groundwater level very perceptibly, why should an ordinary Indian buy the cheapest rice or atta in the open market at close to `45-50 a kilogram?
There seems to be something fundamentally wrong with our food supply system. Forget about the Food Security Bill passed recently, my reckoning is that retail food inflation will continue to persist at 10 per cent-plus, while that of cereal (principally rice and wheat, the staple diet of the vast majority of Indians) will hover around 15 to 18 per cent. This should be something everyone, starting from the prime minister at the top down to the watchman at the Food Corporation of India (FCI) ought to worry about. The prime minister and his household will not or need not have to worry about the high food inflation, but, the meagerly salaried watchman at the FCI godown certainly has to. Let us look at the ground reality.
Wheat constitutes about 45 per cent-plus of the total foodgrain consumed in India as wheat flour. The wheat farmers are paid a minimum support price (MSP) of `1,350 a quintal (100kg), which is again a flip-flop vote bank politics combined gimmick of New Delhi, not necessarily to genuinely help Indian farmers grow more wheat, what with the ever increasing costs of external inputs like fertilisers, pesticides, et al — you will understand what I say here if you go to France, basically an agricultural country which pampers its farmers with unimaginably huge subsidies — and when I speak for the farmers here saying that they do not get the government support they truly deserve, the industry lobby is bound to howl saying that the farmers are “over pampered”, while the reality is the other way round.
While the MSP for the farmer is Rs 1,350 a quintal, it shoots up to Rs 1800 in the wholesale market, a clean 33 per cent plus higher, in most of the non-wheat producing states like Tamil Nadu, Andhra Pradesh, Karnataka, etc. The irony is that more than 24 million tonnes of procured wheat, in excess of the buffer stock needed, is lying idle in FCI godowns or rotting in poorly stored open spaces, which does not require great intelligence to see that it is such an absurd state of affairs in this country. And, I would venture to add that the blame should squarely be laid at the doorstep of the food ministry, and not of those involved in processing wheat grain into atta and distributing the flour.
Ironically, the food minister at the recent AGM of the Roller Flour Millers Federation said that the public distribution system (PDS) suffers a big leakage, close to 35 per cent-plus and he also admonished millers from grinding grain diverted from the FCI godowns. He went on to add that the rise in food inflation is on account of the higher MSP paid to farmers (I wish he went to France and spent some weeks there studying the subsidy structure of that country for the farmers) and the problem of high food prices can be resolved by easing the norms for tender sale of about 9 million tonnes of wheat to bulk buyers and one million tonne to small private traders, without tenders directly from FCI depots.
I would venture to suggest that the food minister’s sermon is based on totally false or misplaced expectations. The leakages are a result of the arbitrage possibilities between the open market sale price of FCI and prices under the Food Security Act (FSA), recently endorsed by the parliament.
It is most likely that some unscrupulous traders will resort to hoarding of foodgrain, just as the other bona fide users will tap into the so-called diverted grain. If one critically looks at the problem, it will be clear that the fault lies with the system that creates dual prices, and not with the users of the diverted grain. A governmental open-ended policy of procurement up to 45 per cent of marketable surplus and 98 per cent of market arrivals has crowded out the private grain trade. Instead of picking on those who corner the diverted grain, it is more important to examine critically, and very stringently, the system of procurement and filling of FCI godowns. This, simply, is not the case in India, ever since the FCI came into being.
The seepages, which now account for 40 per cent according to the agricultural commodity prices central agency, will swell due to greater arbitrage possibilities between open market sales scheme, which is now at `17.50 per kg for non-wheat producing southern states mentioned above, as against `1-2-3 per kg under the newly enacted FSA. The primary motivation for leakage arises from the flawed subsidy system of 90 per cent for wheat, which works to `15 per kg.
The grain diversion starts right from the gates of the FCI (someone jokingly said it should be re-christened as Full Corruption of India, not Food Corporation of India), outlets of Fair Price Shops (FPS) and finally when the grain reaches the market for conversion into flour. Since FCI is the single largest buyer and hoarder of procured wheat, its market releases can push the price of wheat up or down.
If the food ministry is genuinely concerned about reigning in food inflation, it would be prudent to fix wheat prices for the southern states at about Rs 1,500-plus a quintal, which must include transport cost as well, and this would put an end to large-scale wheat despatches from states like Uttar Pradesh. The setting of prices for millers is possible, but, the most important is to keep a very vigilant eye on FCI, and, unlike in politics (following the just concluded “Lalu ordinance” drama), thieves must really know what it means to steal wheat from FCI, beforehand, and not after.
The author is an international agricultural scientist and can be reached at drkppnair@gmail.com