The national food security legislation may be well-intentioned but it can turn out to be a logistical nightmare if its delivery system is not designed optimally. Optimal delivery mechanism is the core element which will make or break this ambitious programme with serious fiscal implications over the longer term. There are several dimensions to this debate. Logistical efficiency, in my view, is the most important, and has the potential to somewhat mitigate the fiscal burden as well.
Currently about 52 million tonnes of foodgrains (rice and wheat) are procured every year. The government is somewhat prematurely claiming that only another 10 million tonnes will need to be procured to cover 75 per cent of the rural population and 50 per cent of the urban population for the purpose of delivering foodgrains and coarse cereals at subsidised prices.
To begin with, the government must remember that foodgrain procurement had peaked to an average of 50 million tonnes during the last three years because of reasonably good rainfall and good crop. However, if you take the average of the last seven years, the procurement of foodgrains has been less than 35 million tonnes a year. This is because average production was much lower between 2002 and 2008, and therefore procurement too was much lower. If for some reasons we have a couple of years of bad monsoon and the average procurement is down to about 35-40 million tonnes, the key question is, where will the government get the remaining 25-30 million tonnes of foodgrains to meet its legally mandated distribution of food? Importing foodgrains of that order could drive global prices up and create other kinds of problems. Besides the total procurement meant for distribution, another 10 to 15 million tonnes is normally needed to keep the buffer stock and strategic reserves intact. Global soft commodity speculators must already be salivating over the possible opportunities that such an unprecedented food procurement programme could create for them. In any case, our government agencies are always known to import at peak international prices if one just takes a look at the history of procurement.
The logistics of procurement, both locally and through imports, need to be sound to make the system work. People who handle this part have to facilitate the procurement of about 75 million tonnes of foodgrains annually (including buffer stock and strategic reserves). Does the government have the requisite infrastructure to centrally procure and distribute foodgrains to about 750 million people in rural and urban India? The socio-economic and caste census to identify the poor for the purpose of delivering foodgrains and coarse cereals will be completed only next year. Until then the new legislation can only be implemented on a limited scale. The identification of the larger universe of the poor who should be covered by the food security programme is by itself highly contentious. For instance, as per the Tendulkar committee's estimation of the number of poor, we probably need only 49 million tonnes of grains for distribution. The N.C. Saxena committee puts the required foodgrains for distribution at 66 million tonnes. The proposal of the National Advisory Council (NAC) says we may need 98 million tonnes to cover 17 crore poor households (with five members in each household). So the actual number of the poor to be covered by the programme is a highly contested space and the ongoing socio-economic and caste census is expected to resolve such perennial contestation, hopefully. Only when this question is clearly resolved will we know the real quantum of procurement and distribution that may have to be done.
At present, the government's claim that the total procurement of foodgrains should not exceed 60 million tonnes appears a bit premature. My own sense is that over 70 million tonnes of procurement will be needed to cover roughly 75 per cent of the rural population and 50 per cent of the urban population. The other issue that needs consideration is whether such a massive exercise of procurement and distribution of foodgrains can be handled by a centralised agency like the Food Corporation of India (FCI). I have serious doubts over the FCI's capacity to efficiently manage procurement and distribution on such a large scale. Imagine moving such massive quantities of grains to and from FCI godowns all over the country.
Is this kind of centralised system really desirable, and can it deliver? This is the most critical question concerning logistics and design. Some time ago, the food ministry revealed that in 2002-04 it cost Rs 134 per quintal to procure wheat but the cost of moving the same quintal of wheat was over Rs 289. So would it make sense for the government to incur such massive expenditure for just moving foodgrains to and fro in a centralised system that the government operates? The government had shown some good sense to outsource some of the logistical work to private grain traders in recent years, but when the scale and magnitude of the procurement increases to what is envisaged in the food security bill, things could become unmanageable.
In this regard, one idea the Union food minister, K.V. Thomas, is believed to be looking at is to decentralise substantial portions of all new procurement and distribution to gram panchayats. There is already a constitutional mandate to do this. Small storage capacities can come up faster at the panchayat level. The local community, on behalf of the panchayat, can procure from nearby farmlands and deliver them to the poor at mandated prices.
The panchayat administration could go one step further by creating community-led, labour-intensive food processing enterprises that sell semi-processed items, such as packets of wheat flour fortified with iron and other vitamins under the same subsidised programme. This will meet the needs of nutrition and generate employment. Such decentralisation at the panchayat level will cut logistical costs for the FCI and create new value-added economic activity at the grassroots level.
In fact, such a project, in a somewhat different form, is being implemented by self-help groups run by SEWA in Gujarat. They directly procure foodgrains and pulses from small farmers and create value-added products and market them widely around the same area.
This is the right time to wear a creative hat and use the food security programme to generate a decentralised system. Otherwise the government may just end up running a slothful, inefficient and centralised system of food procurement and distribution that will neither produce the desired social outcome nor be fiscally sustainable.
The writer is managing editor, 'The Financial Express' [email protected]
Courtsey: Financial Express
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