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"The question arises why are we continuously producing and procuring food stock, when we are not using it efficiently for the welfare of the poor?"

Oct 01, 2012

In an exclusive column for OneWorld South Asia, P K Joshi, Director- South Asia of the International Food Policy Research Institute, India; talks about how growing food stock and major mis-management in India has led to many problems, the most problematic being the poor going hungry despite surplus food stock. He asks for immediate action, especially in terms of a change in trade policy.

P. K. Joshi

Mounting food grain stocks, especially of rice and wheat, has raised several questions on central government’s grain management policy. The total food grain stock as on 1 April 2012, was as high as 53.30 million tonnes; 70 per cent higher than the norms set by the government. As wheat procurement will be completed, the stocks will further swell. The Food Corporation of India has warned that ‘FCI and the state agencies will face unprecedented problems of shortage of storage capacity resulting in large stock of wheat in CAP. It is likely that nearly 23.18 million tonnes of wheat would not have required storage facility. It is projected that after wheat procurement the buffer stock will exceed 70 million tonnes. Unfortunately, nothing concrete has been initiated to manage burgeoning food stocks.

The stocks have been slowly rising since 2008, when the global food prices were rising sharply. The stocks of rice and wheat increased from 36.16 million tonnes in July 2008 to 57.85 million tonnes in 2010 and 64.06 million tonnes in 2011 respectively. After a serious setback on procurement of wheat in 2006-07 and 2007-08, export of wheat and of rice were banned. On the supply side, concerted efforts were geared to increase the production of rice and wheat by launching National Food Security Mission (NFSM) and the Rashtriya Krishi Vikas Yojana (RKVY).  Minimum support prices were consistently raised and credit flow was increased. These programs contributed significantly and food grain production increased from 217 million tonnes in 2006-07 to 245 million tonnes in 2010-11; and a record production of 250 million tonnes in 2011-12, all that mainly came from rice and wheat. On the demand side, per capita demand for rice and wheat has been slowly declining and demand for high-value food commodities (such as horticulture, livestock, and fish) is rising fast. The evidence clearly shows that during last the five years, the supply of rice and wheat increased faster than their demand, and led to mounting stocks.

The question arises why are we continuously producing and procuring, when we are not using it efficiently for the welfare of the poor? Also why are we not taking advantage of export opportunities available to us? And why are we not utilizing the growing stocks for value addition to strengthen our food processing sector. These questions are puzzling and quite troubling.

Growing food stocks have serious implications on the economy. It affects financial management, when fiscal deficit has far exceeded the targets. This also restricts investment in agriculture, which creates inefficiencies in the agriculture sector. Increasing minimum support prices, rising economic cost, unchanged issue prices of rice and wheat for PDS and higher procurement and stocks are all leading to a growing food subsidy bill for the government. Food subsidy has reached to Rs 62,929.56 crores in 2010-11, which was Rs 23,827.59 crores in 2005-06 and 17,494.00 crores in 2001-02. During the last few years, the economic costs, which consists of procurement, stocking, and distribution has significantly increased for both rice and wheat.

Growing stocks without appropriate storage and utilization has no meaning. This becomes more serious when a sizeable number of poor are not getting sufficient food and facing undernourishment; more than 20 per cent of the population in India is undernourished and about 45 per cent of children below the age of 5 are underweight.

The question arises why are we continuously producing and procuring, when we are not using it efficiently for the welfare of the poor? Also why are we not taking advantage of export opportunities available to us? And why are we not utilizing the growing stocks for value addition to strengthen our food processing sector. These questions are puzzling and quite troubling.

Growing stocks need early action on the part of the government. Immediate action should be complete lifting of the ban on exports and also releasing sizeable amounts of food stock for poor in poverty-ridden and backward areas. A part may also be released for the open market and processing sector. A medium-term and long-term food management policy is urgently needed for enhancing efficiency and facing future challenges in the food sector. A comprehensive food management policy should consist of meeting future demands for grains as well as high-value food commodities. It should also evolve our trade policy as India would be an important player in the global food market to influence the prices. Failing to act will lead to a huge wastage of food and big losses to the government exchequer.

The author is Director- South Asia of the International Food Policy Research Institute, India.

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