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VIEWPOINT: KAUTILYA
Taking Stock Of Stocks
Understanding the reasons why India's foodgrain stocks
are now mounting
By Jairam Ramesh
India's granaries are
overflowing. The safe level of buffer stock of foodgrains (that is, rice
and wheat) is about 24 million tonnes as of July 1 every year. Pre-1999,
stock levels were not abnormal. But foodgrain stocks were about 34 million
tonnes on July 1, 1999, around 43 million tonnes on July 1, 2000 and approximately
62 million tonnes on July 1, 2001. Almost half of the foodgrain stocks are
held in Punjab, one-fifth in Haryana, one-tenth in Uttar Pradesh and about
6 per cent in Andhra Pradesh. And what about their vintage? A 1999 World
Bank report placed half the stock as being at least two years old and another
30 per cent being two to four years old.
In the 1970s, procurement of foodgrains by the
Food Corporation of India (FCI) averaged about 10 million tonnes annually.
In the 1980s, it averaged around 18 million tonnes per year. Between 1990-91
and 1998-99, procurement averaged about 23-24 million tonnes annually.
But in the past two years procurement has zoomed: 31 million tonnes in
1999-2000 and 36 million tonnes in 2000-1.
 Punjab,
Andhra Pradesh and Haryana account for over 80 per cent of rice procurement.
Andhra Pradesh's performance has been particularly striking: a half of
the rice output is being procured now as compared to just one thirds five
years back. Punjab, Haryana and Uttar Pradesh account for 90 per cent
of the wheat procurement. Procurement is Punjab's lifeline; here, over
half of the wheat and three-fourths of the rice output is purchased by
the FCI. The Central government pushes the procured foodgrains through
the Public Distribution System (PDS), a network of about 4.6 lakh ration
shops across the country. On an average, in the 1970s about 11 million
tonnes and in the 1980s around 16 million tonnes were pushed through the
PDS annually. Thus, the balance between procurement and PDS supply was
more or less maintained. This balance continued pretty much in the 1990s
also. But in 2000-1, PDS supply fell sharply to 11.7 million tonnes.
Thus, foodgrain stocks are overflowing because
procurement has increased very sharply and the supply to the PDS has plummeted.
The increase in procurement clearly has had a far greater impact. This
raises further questions. Why has procurement skyrocketed and why is the
PDS selling vastly lower quantities of foodgrains?
The NDA allies in Andhra Pradesh, Punjab and
Haryana are pressurising the Vajpayee regime to procure more foodgrains
and to relax quality norms. The 1990s has also seen very liberal increases
in the minimum support price (MSP) taking them higher than in the 1980s
and what would be justified on considerations of inflation. For instance,
the Commission on Agricultural Costs and Prices (CACP) had recommended
an MSP of Rs 465 per quintal of paddy in the 1999-2000 crop year. But
the actual price was Rs 490 a quintal. For wheat, as against the CACP
recommendation of Rs 490 a quintal, the actual procurement was at Rs 550
a quintal. Such a support price policy has also priced Indian rice and
wheat out of international markets.
On PDS, the H.D. Deve Gowda government in February
1997 introduced the Targeted PDS (TPDS) that distinguishes two categories
of consumers to be identified by the states: below poverty line (BPL)
and above poverty line (APL). This was done to introduce a pro-poor bias
into a PDS that had hitherto been universal in coverage and had been benefitting
mainly the better-off peninsular India and West Bengal. In the TPDS, Uttar
Pradesh and Bihar have received significantly higher allocations of foodgrain
as they must. But the BPL/APL distinction has proved to be unworkable,
specially since it is the same retail outlet that sells to both categories.
In any case, dual pricing always leads to leakages. The Vajpayee Government
worsened the situation by introducing new schemes and by increasing APL
prices to a level where they are now higher than even the market prices.
As a result, PDS consumers are now buying better quality foodgrain from
the market.
A massive food-for-work programme is certainly
needed in the ecologically vulnerable regions to provide both employment
guarantee and food security. But this will absorb at most five million
tonnes of foodgrains. The problem of mounting stocks can be addressed
only when we muster up the courage to (i) diversify Punjab's agriculture
out of the wheat-paddy cycle; (ii) introduce a more realistic MSP policy;
(iii) reform the entire foodgrain marketing system presently built around
a high-cost and inefficient FCI; (iv) remove policy-induced inefficiencies
in private-sector storage, milling, marketing and transport operations;
and (v) simplify the PDS by doing away with dual pricing but keeping the
pro-poor state bias in allocations. If this is not done, we will continue
to confront a crisis of plenty while our mindset is still tuned to managing
a crisis of shortages.
(The author is with the Congress party. These
are his personal views.)
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