Dismantling Food Security in India


Smita Gupta


A High Level Committee (HLC) chaired by senior BJP leader Shanta Kumar has given a series of recommendations for destroying the food security edifice in India. This will be welcomed by private grain traders, big farmer and the corporate sector, as also by the US and other Western governments hankering for dilution of India’s food subsidy system, so that their grain and food monopolies can get a bite of the Indian market. Being sacrificed in this whole process are millions of Indians, both farmers and consumers, who are already weighed down by declining nutritional levels and rampant hunger.


There is much that is wrong with the entire system of food security in India – procurement is far too focused on a few crops (rice and wheat) and regions (alluvial irrigated valleys) to the neglect and detriment of the rain-fed areas, pulses and oilseeds. Thus, large sections of producers are excluded from the advantages of MSP and government procurement. Even though the Committee’s own estimate of 6% is shown to be based on the inaccurate NSSO (70th round) data for 2012-13 (Brinda Karat, Hindu op-ed dated Jan 31st, 2015), it is true that only farmers in selected areas have benefited from FCI’s procurement policy and MSP operations. It is also true that a vast number of consumers pay high prices and remain excluded since the adoption of the targeted public distribution system. So both the producers and the consumers have not fully benefited from the FCI operations. The solution lies in expansion, not contraction, of both procurement to new areas and crops and distribution to all households. It would have been good had the HCL made these recommendations.


The recommendations of the HLC, in sync with the Modi government’s aggressively pro-business and anti-people economic stance, call for massive cutbacks and narrowing of FCI operation, and undoing the architecture of food security in India. The “hugely surplus grain stocks, much above the buffer stock norms, even when cereal inflation was hovering between 8-12 percent in the last few years… even after exporting more than 42 MMT of cereals during 2012-13 and 2013-14 combined, which India has presumably never done in its recorded history” is the result of perverse and callous refusal to distribute affordable food to our own millions of hungry and malnourished people


Withdrawing from procurement in surplus areas

HLC recommends the narrowing down of FCI operations – retreating from procurement operations of wheat, paddy and rice in the high-procurement states that contribute to much of FCI stocks of AP, Chhattisgarh, Haryana, MP, Odisha and Punjab. FCI will accept only the surplus (after deducting the needs of the states under NFSA) from these state governments (not millers) to be moved to deficit states. In effect this implies the retreat of FCI from its critical role in maintaining national food security – procuring from surplus areas to distribute to deficit areas. What incentive would the surplus states, from where much of the procurement is done, have in using their scarce resources in procuring any surpluses?


The suggestion that “FCI should move on to help those states where farmers suffer from distress sales at prices much below MSP, and which are dominated by small holdings, like Eastern UP, Bihar, W. Bengal, Assam etc.” is based on the false premise that FCI can’t do both – procure from surplus areas for food security in the deficit areas as well as offer MSP to small holders in the distress areas. It can and must do both – offer remunerative prices in deficit areas to small holders and create a buffer against shortages.


Privatization of Procurement and Storage

In the name of bringing “rationality in procurement operations” but primarily to increase private sector’s role in grain procurement, the HLC further recommends that the Centre strictly not accept surplus grains under the central pool from states that give a bonus on top of MSP, thus penalizing farmer-friendly states and ultimately the farmers themselves.


Under the Negotiable Warehouse Receipt (NWR) system, farmers cannot sell their produce but store it in registered warehouses, against an 80 per cent advance from banks. They can sell later when they feel prices are good for them. This will bring back the private sector, reduce massively the costs of storage to the government, and be more compatible with a market economy. FCI and Warehousing Development Regulatory Authority (WDRA) can build these warehouses with private sector participation, the euphemism for concessions and incentives to the private sector. The ultimate aim is to stop any physical stocking of grain at all with the government simply compensating farmers with the difference when market prices falling below MSP.


Hunger and malnutrition are universal, PDS is not

It is always a matter of great regret that despite the government’s own undisputed data on widespread hunger and malnutrition being repeated over and over again, it leaves policy makers cold. Who is unaware, for example, that the International Food Policy Research Institute categorizes hunger in India as ‘alarming’? Or that in the 2013 UNDP Human Development Index, India ranks 94th out of 199 countries in the Global Hunger Index?


And yet, the HLC recommends lowering of the proposed coverage of 67 percent of population to around 40 percent, with an increase from 5 kg grain per person to 7kg/person. This is an obvious contradiction, because even as the HLC repeats the tired old argument of a supposed trade-off between coverage and quantity, it does so after bemoaning at length the existence of huge foodstocks in excess of buffer norms. FCI carries buffer stocks way in excess of buffer stocking norms – the last 5 year average is more than double the buffer stocking norms. The reason of course is that the central government is blind to the widespread hunger and refuses to distribute it cheap to our people, but the HLC claims the reason lies in export bans, open ended and distorted procurement (through bonuses and high statutory levies). Instead of recommending a more generous PDS, it suggests a business-oriented and “pro-active liquidation policy” through open market sales and exports. If so concerned about the inadequacy of 5kgs/person, why not recommend 7 kgs per person to even the low 67 per cent instead of the 42 MMT exports (which is well-known to be used as cattle fodder in the rich countries of the North)?


Concessions for the rich, empty coffers for the hungry

In gross disregard of affordability, the HLC also recommends that pricing for priority households be linked to MSP, “say 50 percent of MSP” to avoid “undue financial burden on the exchequer”. However, food security has two aspects, production and consumption. Farmers or producers need to cover their cost of production and assured procurement is a method of ensuring their viability. Consumers need affordable prices. If consumer affordability and producer profitability both have to be ensured for food security, the two prices cannot be the same. This rather devious attempt to link consumer subsidy to farmer subsidy will open the gate to political conflicts between the two and in many cases where the farmer is also a net purchaser of foodgrain, giving MSP with one hand and taking away through higher food prices with the other.


The actual motivation behind targeting and high price of food in the PDS is to cut costs and reduce the fiscal deficit. Even if we were to accept the ridiculous notion that there is some sacred threshold level of fiscal deficit, there are obviously two ways of doing this, namely, mobilizing more resources through increased taxation and reduced tax concessions to finance crucial expenditures. But this strategy is inconceivable for Government hell bent on giving so called incentives to investors, particularly foreign investors, rather than to mobilising resources for meeting the basic needs of the masses. Compared to many advanced countries, India’s tax-GDP ratio is very low (around 15% compared to 26% for South Africa,  23 % Russia, 25.4% Brazil , 18.9% China, 28% USA and around 45-50% for Scandinavian countries). To hide their utter failure to mobilise required resources the government cites absolute numbers of the subsidies in current price terms without accounting for inflation. It also ignores the need to refer to the GDP growth rate.


The fact is that in most years subsidies have remained below 1 % of GDP except a single year. Moreover, during the 2000s, when corporate profits and taxable incomes were soaring, tax concessions were many multiples of this.  Tax concessions to corporate profits alone have exceeded the food subsidy bill in most years. The tax sops have totaled between Rs.4 to 6 lakh crores or 5-8% of the GDP. Thus the sum estimated to support a universal PDS that is affordable and adequate is about one-third of the taxes foregone. The problem is not the availability of money, but warped social priorities and no will to mobilise the surplus and allocate it to where it is needed most.


Cash transfers to replace grain

HLC recommends gradual introduction of cash transfers “indexed with overall price level…in the name of lady of the house” in PDS, routed through Prime Minister’s Jan-Dhan Yojana (PMJDY) and dovetailing Aadhaar and Unique Identification (UID) in a phased manner. It similarly recommends replacement of all input subsidies like fertilizer subsidy with direct cash subsidy to farmers which will have disastrous consequences for food production.


The proposed solution of continuing with flawed identification criteria and lists, but substituting grain with cash cannot address the problem of exclusion due to targeting. Once cash transfer scheme is introduced, the prices of food and other commodities and services would be deregulated and left entirely to the market forces. Without the countervailing pressure of the PDS foodgrains, supply side problems will get aggravated. There is no guarantee that Direct Cash Transfers will actually be used for buying the commodity for which the cash is given. In a situation where patriarchy dominates, it is likely that the money may be used for other purposes, as women do not enjoy much control over expenditure. There is no guarantee that cash transfer is free from leakages and pilferage and linking food to UID/ ‘Aadhar’ number along with bank accounts is only likely to increase procedural and other problems, compounded by the fact that the technology is itself dubious and infrastructure weak. The middlemen or “business correspondents” and “micro ATMs” will interface creating new avenues for leakages.


The HLC, in short, will dismantle food security both at the national and household level, and in the name of private sector participation and efficiency; it will harm the interests of both producers and consumers, while seriously threatening food sovereignty in the country.