Rotting Food Grains & Flawed Policies

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Presentation on India's flawed food grain policies prepared by Gopal and Shantanu Bhagwat

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Rotting Food Grains & Flawed Policies

  1. 1. Dumb Policies & Rotting Grains Anatomy of a Crisis* Shantanu Bhagwat http://Satyameva-Jayate.org @SatyamevaJayate This presentation was prepared by Gopal as his contribution in our fight to “Reclaim India” N.B. All rights (including copyright)of images rests with the original author and/or publisher. These have only been reproduced for educational purposes and creating awareness. Satyameva-Jayate.org
  2. 2. Contents Production and procurement Grain trade and food security Storage and Distribution Solution Questions Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 2
  3. 3. The right time to eat for a rich man is when he is hungry; for a poor man when he has something to eat. Mexican proverb Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 3
  4. 4. Grain production and procurement Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 4
  5. 5. Favourable monsoon results in phenomenal increase in food production Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 5
  6. 6. Procurement Leads to phenomenal increase in wheat procurement Year 2010-11 225.25 2011-12 283.35 2012-13 Satyameva-Jayate.org Lakh tonnes 381.48 Not to be distributed without prior consent © Shantanu Bhagwat 6
  7. 7. And we are not even talking about other grains….. Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 7
  8. 8. Agriculture success built on sand Mindless subsidies (fertiliser, food and oil) huge transfer of resources from the taxpayers and the exchequer to the farmer Agriculture ministry Vs Finance ministry CACP Vs CCEA disconnect Wheat MSP increased from Rs 1285 to Rs 1350 (June 2013) CACP advocating reduction in wheat production due to excess stocks against domestic demand Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 8
  9. 9. Situation made worse by “Bonus” Bonus on wheat procurement uncalled for Bonus of Rs 150/quintal announced by Madhya Pradesh govt for wheat procurement for 2013-14 crop over and above Rs 1350/quintal • 40% increase (wheat) in 2012 when compared to 2011 Bonuses justified if crops are inadequate carry-in stocks insufficient buffer tonnage in deficit These three situations do not exist Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 9
  10. 10. Impact of bonus Other states may adopt populist approach Leads to budgetary exhaustion Strain on current and fiscal deficits weakening its parity in export markets Quality let down in favor of quantity Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 10
  11. 11. Grain trade and food security Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 11
  12. 12. Who controls the grain trade? High statutory levies on marketing of wheat and rice 14.5% in Punjab and 12.5% in Haryana This has displaced private traders from the market and has led to ‘state takeover in grain trade’ Result: • Sellers are not interested as its not financially viable • buyers are not able to get fresh grains Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 12
  13. 13. Crazy agro-economics National Food Security Bill: promises to supply 7 kg of foodgrains to each Indian, every month, at subsidised prices Procure from small and marginal farmer and supply it back to them ! Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 13
  14. 14. Crazy agro-economics Vote bank! Its Catch 22 situation as it would be politically suicidal for the opposition to talk against the bill Torpedo the budget: 25 times the extra provision of Rs 5,000 crore made in the Budget for 2013-14, if the Bill is passed in the current Budget session Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 14
  15. 15. Storage Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 15
  16. 16. Storage types Godowns Covered and Plinth (CAP) Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 16
  17. 17. Grain stock quantities FCI / Govt agencies: (Rice & Wheat) Jan 2013 Available: 66 million tonnes Required: 25 million tonnes Current Storage capacity April 2012 63.8 million tonnes April 2013 71.7 million tonnes Source: FCI website Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 17
  18. 18. Food grain stock – Feb 2013 India's grain mountain grows despite push for exports India will be unable to consume or export enough wheat and rice to rein in a record stockpile after another bumper harvest Source: Reuters Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 18
  19. 19. 30.52 million tonnes Satyameva-Jayate.org
  20. 20. CAP mismatch Satyameva-Jayate.org
  21. 21. Organisation in siloes “…FCI has 30.52 million tonnes (owned & hired) of storage capacity in over 1820 godowns all over India…” Storage type Covered Cover and Plinth Total 1 April 2012 1 April 2013 30.22 33.99 3.38 3.74 33.60 37.73 mismatch in data ! Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 21
  22. 22. Storage info Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 22
  23. 23. Procurement info Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 23
  24. 24. Inconsistent numbers Storage reported in million tonnes but Procurement reported in Lakh tonnes Disconnect between 2 wings of the same organisation Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 24
  25. 25. Cost of storage 750 billion rupees Procurement and storage costs for a year almost 1 percent of India’s GDP ! Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 25
  26. 26. Wastage Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 26
  27. 27. Wastage Covered and Plinth (CAP) storage protection inadequate Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 27
  28. 28. Wastage Tonnes of toor lemon daal from Myanmar are gathering mould in Navi Mumbai Rotten sacks of rice stored in the open in Ranwan Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 28
  29. 29. National shame In the words of Tavleen Singh “…One of the things that make me very angry is the sight of bags of food grain rotting in the open. It reminds me every time that 45 per cent of India’s children are malnourished….” In a country of billion people it’s a shame that food grain is allowed to rot Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 29
  30. 30. “..Ordinary people do not get to buy the grain not because rats get at it but because of flaws in our food grains policy..” Kaushik Basu Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 30
  31. 31. Distribution Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 31
  32. 32. Distribution methods / routes Public Distribution System Open Market Sale Scheme (OMSS – Domestic) Exports / aid State monopoly …well almost Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 32
  33. 33. PDS - 1 Network of 4.78 lakh Fair Price Shops Largest retail system in the world Operational system varies from State to State Private Entrepreneurs Guarantee (PEG) scheme of FCI Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 33
  34. 34. PDS - 2 Leaky distribution “..Only 41 percent of the grains released by the government reach households..” World Bank UP food grain scam 2002-2010 Grain worth 35,000 crore diverted to open market Upto Nepal and Bangladesh borders Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 34
  35. 35. PDS - 3 Govt controls the grain trade – badly Pilferage, rot/decay, inedible Of the 64.2L tonners of grains in Apr ‘09, 95% procured by FCI + 5 State Governments In ‘08, the % picked up by private traders was less than 2% (0.5L vs 27.43L) 67% of wheat meant for poor misses the target For 1 kg we end up directing 3 kg at them Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 35
  36. 36. Open Market Sale Scheme Objectives enhance supply of food-grains during the lean season offload the excess stocks and to reduce the carrying cost of foodgrains save from deterioration Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 36
  37. 37. Worsening crisis India wastes 21 million tons of wheat each year more than the annual production in Australia. Global Agency of International Mechanical Engineers The Supreme Court of India once said, “In a country where admittedly people are starving, it is a crime to waste even a single grain.” Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 37
  38. 38. Solution Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 38
  39. 39. Redesign food-grains policy Price stabilisation: Govt should maintain a buffer with the aim of using it to hold down prices during times of food shortage Food Security Govt must make sure that the poor and the vulnerable have access to food at all times Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 39
  40. 40. Drop bad policies / practices 1 Abolish special cabinet committees to take decisions To commit to holding a certain minimum reserve at all times is a meaningless policy It is exactly equivalent to holding no reserves Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 40
  41. 41. Drop bad policies / practices 2 Stop doling out bonuses for grain procurement Instead divert wheat to other states Enforce a cap on procurement in excess of storage capacity + 15-20% Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 41
  42. 42. Framework Buy when prices are low and sell when prices are high • Good market intervention Form rules how and when to release foodgrain • Kind of standard operating procedures Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 42
  43. 43. Change strategy To be a net buyer and seller under all circumstances is a wrong strategy Stop controlling the grain trade instead regulate it ! “Government is obliged to buy all the wheat, whatever the quality, that comes to the mandis in traditional states where purchase is made” The FCI Act Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 43
  44. 44. Modify approach Be prepared to switch the MSP window on and off Method of fixing bundle size ask for tender calls from traders needs to be reevaluated Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 44
  45. 45. Actions / steps: 1 Resort to ‘distress sale/ exports’ of foodgrains to dispose excess stock additional allocations to the public distribution system (PDS) to both APL(above the poverty line) and BPL (below the poverty line) families Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 45
  46. 46. Actions / steps: 2 Good policy consists of exploiting the laws of the market, not denying that they exist Release in small quantities • To avoid the pitfall of “revolving door strategy” • To limit the profits of the traders Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 46
  47. 47. Actions / steps 3 Foodgrains could also be used as part of MNREGS workers’ wages. At least, grains will reach the hungry before they rot. Assuming they are edible • Grain storage houses are very expensive to build and maintain • PPP (public-private partnership) model is the way forward Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 47
  48. 48. Case study Gujarat helps farmers through • check-dams • Drip-irrigation • agri-extension No bonus and hardly any procurement ! and yet Its agriculture sector has been growing at 10% per annum for the last 10 years! Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 48
  49. 49. Questions? Comments? Jai Hind, Jai Bharat! Shantanu @ Satyameva-Jayate.org Satyameva-Jayate.org Not to be distributed without prior consent © Shantanu Bhagwat 49

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