Tuesday, March 23, 2010

Monday, March 15, 2010

Run down food stocks

We Need Low Prices, Not Food Mountains

AS MUCH as 10 million tonnes (MT) of wheat, half of the Food Corporation of India’s (FCI) stock of the grain, is stored in the open and runs the risk of getting spoilt. The government is expected to procure another 24 MT of a record estimated 82 MT wheat output that will start arriving in the markets in April. Mountains of grain will be built and rot, even as food prices stay stubbornly up. An article by Mr Ashok Khemka in this newspaper (ET, March 11) highlighted the problem and urged the government to liquidate the 10 MT of wheat stored in the open, before fresh procurement begins. We strongly endorse the recommendation. The buffer stocks of cereals are way too large — for wheat, five times the norm, and for rice, at 24 MT, twice the requirement. The Economic Survey 2009-10 had suggested grain should be released in small batches to a large number of traders at prices significantly below the market price, but sufficiently above the procurement price. If the selling price is close to the procurement price, traders might just buy from the FCI and sell it back to the FCI, pushing grain off the market so that retail prices would stay high. It is high time the government revamped its entire system of food management. Private trade must be permitted and encouraged to play a much larger role in the procurement, storage and distribution of grain. The government must distinguish between the minimum support price and the procurement price, and stop blanket procurement of whatever is offered. It must procure only to meet its buffer stocking norm. And it must keep retail prices in check, selling directly to consumers through the 4.5 lakh outlets of the public distribution system, and offloading a series of frequent, unpredictable and geographically-dispersed quantities to the retail and wholesale trade at below-market prices.
In the meantime, the government must start revamping the distribution of consumption subsidy. Food coupons or cash transfers to women members of the target households, as discussed in the Survey, could be explored. At any rate, we must quickly put an end to food mountains that rot or feed the rodents even as food prices soar.