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| Another bumper harvest | | Better to export excess food stocks than make them rot |
| Business Standard / New Delhi Sep 08, 2010, 00:25 IST |
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Prime Minister Manmohan Singh was right when he maintained in his meeting with the media that the judiciary should not stray into the realm of policy formulation for food management. But the same plea cannot apply to the media which brought the issue of rotting of foodgrain to public attention and virtually put the government in the dock for criminal wastage of grains in its warehouses. Policy deficiencies are clearly in evidence for the mess on the food front which has led to amassing more grains than the government can manage. This, predictably, has resulted in rotting of substantial quantities of precious food, which the Supreme Court has objected to. More worrisome is the likelihood of further accumulation of grain surpluses, thanks to an anticipated bumper harvest from the current kharif season. In a few weeks from now, the government will have to again buy and stock foodgrain under its open-ended procurement policy. It is almost certain that there will be shortage of shelter for fresh grain accruals. But then, the country does not have to stock more than the existing storage capacity of around 42.5 million tonnes. This amounts to a full year’s grain requirement for the public distribution system (PDS).
Excess capacity creation and storage may make the government feel more secure, but this is likely to keep food prices needlessly high. Foodgrain procurement is essential to ensure remunerative prices for farmers but in the absence of adequate government outlets for distribution, the case for mere accumulation of stock is weak. It only results in wastage and rotting stocks, which provoked the Supreme Court to make its remarks last week. As the government’s chief economic advisor, Kaushik Basu, correctly noted last week, the practice of mopping up most of the market arrivals of grains amounts to “creeping nationalisation of grain trade”. He is also right in suggesting that it was better to export grains rather than let them rot due to shortage of storage space and inadequacy of distribution channels. His proposal of selling extra grains through swap deals with other countries, with provision for return of the grains after two to three years, sounds good in theory. It may not always be possible to find such buyers today who may be willing to bail India out tomorrow, if there is a global shortage. The export option is presently attractive with international wheat prices ruling high, due to the poor outlook for global grain output and the supply constraints imposed by the exit of two major wheat exporters, Russia and Ukraine, from the export market. Furthermore, it may be a better idea to offload foodgrain in the open market rather than through the inefficient and highly porous PDS. That will have a salutary impact on foodgrain prices, bringing some respite to hard-pressed consumers. But the government has to act on this front without much delay.
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