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Food economy under the UPA government

Brinda Karat

What the PDS needs is a drastic overhaul in order to strengthen it, not destruction through privatisation and a whittling down of the food subsidy.

THE PUBLIC distribution system (PDS) plays an important role in checking price rise by enabling the government to supply essential commodities at affordable prices through fair price shops. Last year, when prices of food articles such as wheat, rice, pulses, sugar, and edible oils were skyrocketing, some State governments attempted to provide relief to the people by strengthening the PDS. The Tamil Nadu government provides rice at Rs.2 a kg to all ration card holders. Recently, limited quantities of pulses and edible oils were added to the PDS. The Kerala government provides BPL (below poverty line) card holders 25 kg of rice at Rs.3 a kg. In addition, about 5,700 fair price shops sell 46 essential commodities ranging from pulses, masalas, and edible oils to salt and soaps at controlled prices. For example urad dal, which is sells at Rs.57 a kg in the open market, is available at Rs.42 a kg; arhar dal is sold Rs.10 cheaper at Rs.28 a kg; and rice which costs Rs.15 to 16 in the open market is available at Rs.11.50 a kg. Besides ensuring that a substantial portion of a family's requirements of foodgrains and proteins can be met through the fair price shops network, such steps had a salutary effect on open market prices. The percentage increase in the index number of consumer prices for agricultural workers for 11 months in 2006-2007 (this index has the highest weightage of foodgrains) is lowest in Tamil Nadu (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 to have fully exempted all foodgrain items from the State level VAT since its introduction in 2005-2006 foregoing substantial revenue.

In contrast, the Central government is eroding the country's food security by dependence on wheat imports while weakening the PDS through a policy of creeping privatisation. The government has already indicated its decision to go in for imports this year, even as it wilfully weakens the procurement system through promotion of private procurement of foodgrains. This year too big companies such as ITC and Reliance and MNCs such as Cargill have cornered the wheat as they did last year. Agriculture Minister Sharad Pawar says such private procurement helps farmers get better prices and therefore must be encouraged. What prevents the Government itself from paying farmers market prices? The Government seems to have learnt no lessons from last year's fiasco. It ended up paying foreign traders and corporates more for imported wheat of poor quality than it paid to Indian farmers.

This year the Government has further lowered its wheat procurement target to just 150 lakh tonnes, but in the face of aggressive buying by corporates, it has procured only a little more than 50 per cent of its target, the lowest procurement ever. Farmers have got slightly better prices from private procurement but they will still be lower than what the Government will ultimately have to shell out for imported wheat. International prices of wheat are high and even shipping companies have reportedly hiked their prices in anticipation of the contract to bring the imported wheat to Indian shores. The FCI itself, under directions from Government, has started outsourcing procurement operations to private companies. It is reported that buffer stock norms are being lowered to match the scaling down of procurement and distribution operations. But such generosity to private trade and corporates has not brought down the prices of wheat.

Even though the buffer stocks of rice are comfortable at present, it is an added concern that the procurement of rice has shown a decrease to 206 lakh tonnes so far in 2006-2007 from 276 lakh tonnes two years ago. Reduced procurement would imply reduced allocations for the PDS as well as for the government schemes meant for the poor such as the Sampoorna Grameen Rozgar Yojana and the mid-day meal scheme, which have substantial foodgrain components. The problem lies in the government's approach towards food subsidy. In the backdrop of over 8 per cent real GDP growth and 6 per cent inflation, food subsidy has registered a decline even in nominal terms. Less funds have meant less foodgrains for the PDS.

The annual allocation for BPL families in 2003-2004 was over 22.5 million tonnes. This was cut by around 3.3 million tonnes in 2005-2006. In the first nine months of 2006-2007 it was just 15 million tonnes. The Antodaya 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 Antodaya scheme. However, the allocation for the Antodaya 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 Antodaya card holders respectively.

The central problem with the PDS is the targeting approach: virtually limiting the entire PDS system to the 6 crore BPL and Antodaya households cutting out the APL (above poverty line) families. According to the official definition of the poverty line, any adult with an income level above Rs.327 a month is not poor. While it is shocking that more than 6 crore families have been identified that 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 Rs.327 a month are not entitled to subsidised foodgrains having been termed APL.

Neo-liberals' plan

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 reportedly decided that the APL allocations of rice should 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 reflects poorly on the Government's stated commitment to combat the price rise of food items.

It is often argued that a substantial portion of foodgrains allocated for the PDS are diverted to the open market, that the food subsidy does not reach the poor, that the PDS system is non-functional in most parts of the country, and that the State governments also have a major responsibility. All this may be true. However, what the PDS needs is a drastic overhaul in order to strengthen it, not destruction through privatisation and a whittling down of the food subsidy — which is currently being done by the Central Government. The demand for universalisation of the PDS, endorsed by several official committees, has gained urgency in the current backdrop of the sharp increase in prices of essential commodities. The recent National Family Health Survey has also shown the deteriorating nutritional status of large sections of our people, especially women and children. The minimum requirement is a substantial increase in the BPL list in order to expand the coverage of the PDS. GDP growth rates have little meaning if they translate into less food for the poor.

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