Half-measures on PDS

THE CENTRAL GOVERNMENT has finally taken a decision to facilitate a lowering of the mountain of grain with the Food Corporation of India, but the question is whether the package that has been announced is one that does too little too late. The reduction by 30 per cent in the prices of wheat and rice sold through the public distribution system (PDS) for families above the poverty line (APL) and the increase by 25 per cent in the monthly allocation for the poor are only two of many proposals made last month by the Ministry of Food and Consumer Affairs. The other proposals included a lowering of prices for the poor as well as a cut in the prices of cereals allocated for food-for-work programmes.

Even before the rabi procurement season began in April, it was known that a crisis was in the making in stocks. The FCI's holdings then were 45 million tonnes, today they are over 60 million tonnes. This has been the result of higher procurement prices adding to stocks even as PDS prices, because of short- sighted fiscal policies, have become unattractive for consumers. In a few months from now, the kharif procurement operations will begin and that will bring more grain that will have to be stored. The sheer impossibility of finding more space for storing cereals calls for immediate action. More important is the callousness that is implied in stocking over 60 million tonnes of food even as over 25 per cent of the population, by the more optimistic estimates, suffers from chronic under-nutrition. One, but only one, reason why the situation has developed to such a pass is that the offtake by the APL consumers has all but come down to zero because the open market prices for better quality grain have been lower than APL prices. This trend may be reversed by the latest decision to cut APL prices. However, there may be a continued reluctance to buy PDS cereals because a good proportion of the stocks are as old as two years. The Government's own projections are of its package of measures leading to a reduction in the FCI's stocks by 6 million tonnes, which is clearly too small a decline considering their current size. It is possible that the Government has decided against slashing prices for the poor as well because it fears that reversing the decision later will be difficult. That may be so. But a crisis situation calls for drastic solutions and the hike in PDS prices for the poor in April 2000 was one of the original reasons for the build-up in stocks over the past 15 months.

Many more steps need to be taken if the FCI's stocks are to be brought down to manageable levels that are also sufficient to meet food security concerns. Larger price reductions, an increase in allocations and, in the extreme, even a free distribution of grain have to be considered over the next couple of years, which is as long as it will take to reduce stocks in an orderly fashion without causing a collapse in market prices. All this will involve a higher outlay on subsidies. But the cost of inaction will be larger. Besides, the rise in the food subsidy is a direct outcome of the tendency year after year to keep increasing procurement prices so as to placate the farmers' groups in Punjab, Haryana and western Uttar Pradesh. The relentless rise in procurement prices has also taken domestic prices far above world prices, which is why exports are not an option - assuming that cereals of minimum quality can be found for sale abroad. In the long-run, no solution to this peculiar problem of ever-growing stocks can be found without addressing the procurement price problem. The first test of the Government's seriousness in tackling this issue will come when it takes a decision on the procurement prices for the kharif harvest in October.

Send this article to Friends by E-Mail

Section  : Opinion
Next     : Ubiquitous killers