Recent
weeks have seen rather contradictory statements on the
challenge of ensuring food security and the set of feasible
initiatives for managing the food economy. To start
with, the National Advisory Council (NAC), which recognises
the need for universal public distribution system (PDS)
and was expected to push for a transition from the currently
prevalent targeted system to a universal one with expanded
commodity coverage, decided to recommend the staggered
implementation of the proposal on the grounds that the
country was faced with a supply constraint on the foodgrains
front. In its view, since there is not enough food to
distribute, attempting to offer every household 35 kgs
of food at Rs. 3 a kg would take demands to levels where
supply would be short of demand. Hence, argues the NAC,
the shift out of the system of targeted distribution
to a universal one should be initially restricted to
150 ''most disadvantaged districts''.
Even ignoring for the moment the correctness of the
view that it would be difficult to match supply with
potential demand, this position does leave a couple
of issues unresolved. It is known that the growth and
development of the public distribution system in India
has been extremely uneven across geographical space.
Some states in the Northeast and Union Territories,
as well as states such as Andhra Pradesh, Kerala and
Tamil Nadu have more extensive systems in which the
PDS has covered a wider section of the population, and
therefore been more effective for the poor as well.
But there are also many states where the public distribution
is poorly developed and where offtake in general and
by the poor in particular has been extremely low in
the past. It would be reasonable to expect that it is
in states with a larger number of ''most disadvantaged
districts'' that the spread and reach to the poor of
the PDS would be more limited and would be less efficient
as a mechanism of delivery. Therefore, ''targeting universalisation''
at these districts would not only deprive those residing
in states that are more ''developed'' of the benefits
of universalisation, but would defeat the purpose of
universalisation by focusing it in areas where the means
to effectively implement the scheme do not exist. As
a result, restricting universalisation in the 150 most
disadvantaged districts may not increase offtake by
the Above the Poverty Line population by the estimated
20 million tonnes. In the event, the flow of food through
the PDS would be smaller than expected, and the fears
of a demand-supply imbalance turn out to be exaggerated.
Rather, the attempt to match demand with estimated supply
may just severely limit the impact of the PDS.
What is likely to happen is that food meant to be provided
to all sections in the most backward districts but cannot
be reached to most of them because of the inadequacies
of the PDS, may still be acquired by speculators at
subsidised prices and diverted to the open market either
in these districts or elsewhere. In fact, there is a
real danger of the ''universalisation'' scheme being discredited
however it performs. If offtake of subsidised food is
low, the evidence would be used to argue that the belief
that government can run a universal public distribution
systems in a country as large as India is wrong. If
offtake of subsidised food is found to be high it would
be argued that subsidies are not reaching the poor but
leaking out to those at whom it is not targeted. It
must be said, therefore, that the scheme of using geographical
backwardness to target universalisation lays itself
open to criticism.
Interestingly, when a confused policy of ''targeted universalisation''
is being proposed on the grounds that stocks adequate
to support a universal PDS do not exist, the actual
picture on the supply side seems to be one of excess
stockholding by the government. Not only is the size
of the government's foodgrain stock much higher than
the buffer stocking norm, but the judiciary, parliament
and the media seems to be obsessed with the problem
of inadequate storage leading to the rotting of food
when the poor go hungry. Even though last year's poor
monsoon resulted in lower procurement of rice, the stocks
of rice and wheat with the government are placed at
60 million tonnes. With covered storage available for
around 45 million tonnes, a substantial part of these
stocks has to be stored in the open, leading to losses.
Unless the NAC believes that targeted universalisation
is actually going to increase demand for food substantially,
this problem of foodgrain rot in a country with hunger
is likely to persist.
This embarrassing accumulation of food stocks seems
to have changed the government's views on how to manage
the food economy, with opinion shifting (even if temporarily)
in favour of an expanded PDS, at a time when the NAC
has decided to go against the demand for complete universalisation
because of constrained supply. The government has implicitly
accepted that uneven spread of the PDS has meant that
targeted distribution results in underachievement of
the objective of distributing food stocks procured using
the Minimum Support Price (MSP). Implementing the targeted
PDS scheme in the context of uneven development of the
PDS has had two consequences. First, allocations to
states with a better developed distribution system providing
access to Above the Poverty Line (APL) sections were
far short of demand. Second, states in which the PDS
is poorly developed and which were eligible for allocations
under the Below Poverty Line household scheme, could
not lift their quotas in full since they would not be
able to reach it to the poor, or for that matter to
large sections of the non-poor.
This has led to two recent changes in food policy. To
start with, the Planning Commission has decided to accept
the revised Tendulkar estimates on the proportion of
population below the poverty line, that have significantly
(even if not adequately) raised the poverty head count.
This would require increasing the number of households
to be covered by the BPL scheme, which would increase
demand from the PDS wherever it is available. Second,
the government has all of a sudden decided to increase
allocations for APL users of the PDS, after having penalised
states that were providing access to these sections
in the past by limiting central allocations.
These developments are of significance because the recognition
of the need to raise the MSP to improve the returns
to foodgrain production is likely to lead to further
increases in procurement in normal or good monsoon years.
Clearly then, the direction of movement in the country
is towards an enlarged and more universal PDS. This
is not because of the government's concern about food
security but because of the logic of enhancing production
and managing supplies in the food economy.
The NAC's failure to exploit this trend and push for
true universalisation possibly stems from a mistaken
assumption that agricultural production and productivity
are determined separately and not influenced by policies
aimed at ensuring food security. This ignores the fact
that it was the decision to raise food production through
the Green Revolution that necessitated the food distribution
system that we currently have. An essential component
of the Green Revolution strategy was the decision to
incentivise production by setting a ''remunerative'' cost-plus
floor to certain agricultural prices, in the form of
procurement prices at which the government would acquire
any volume of foodgrains sold by the peasantry. This
obviously resulted in the accumulation of stocks with
the government in excess of buffer stocking norms, especially
in normal or good monsoon years. To boot, uneven agricultural
growth, engendered by historically given inter-regional
variations, on the one hand, and the nature of the Green
Revolution strategy, on the other, resulted in yield
increases and food surpluses being concentrated in a
few states in the country. The challenge this set the
government was that of moving food from surplus to deficit
(and often poor) regions and ensuring the effective
demand required to absorb these surpluses. This necessitated
the sale of a part of that stock at lower and affordable
prices through the PDS to sustain demand. As a result,
the government had to provide a subsidy to cover the
difference between the cost of acquiring these foodgrains,
carrying them, and transporting them to urban areas
and deficit states and the lower price at which it offered
this food through the PDS to ensure offtake. Thus, the
PDS was part of a strategy of enhancing agricultural
production and the food subsidy on the government's
budget was substantially explained by the nature of
the agricultural growth strategy and the cost of stockholding
it involves. Thus, the assumption that policies to enhance
food production are independent of the food distribution
and pricing policy, which seems to underlie the NAC's
recommendations, seem unwarranted.
Not surprisingly, those interested in reducing the food
subsidy bill have pushed not for reduced procurement
or even lower procurement prices but for a reduction
in the quantum of stocks held by the FCI and the sale
of much of procured volumes at prices that cover the
economic cost. This has in the past sought to be achieved
in two ways. First, ''excess stocks'' accumulated in periods
when open markets prices are depressed and ''procurement''
high were disposed off in true marketist fashion by
resorting to sale in the open market through the private
trade and through allocations to exporters; second,
attempts were made to 'target' the PDS only at the ''needy'',
and reduce allocations to a system which distributes
government stocks at prices below economic cost.
As against this trend, it has been argued for long by
those concerned with the need to ensure food security
that excess food stocks offer an opportunity to increase
the spread of the public distribution system so as to
reach a minimum quantity of reasonably priced food to
a majority of the population and incentivise food production
in the process. In addition, the government can launch
food-for-work programmes that build productive and social
infrastructure that can help enhance agricultural productivity.
Through such a strategy, the government can utilise
surplus stocks to ensure access to food as well as widen
and deepen the productive base in the agricultural sector.
It is to this kind of logic, rather than one based on
a simplistic assumption about limited availability of
food, that the government must turn.
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