February 22, 2015

Dismantling National & Household Food Security

Smita Gupta

THERE is much that is wrong with the entire system of food security in India – procurement is far too focused on a few crops (rice and wheat) and regions (alluvial irrigated valleys) to the neglect and detriment of the rain-fed dry undulating areas, pulses and oilseeds. Thus, large sections of producers are excluded from the advantages of MSP and government procurement. Even though the Committee’s own estimate of 6 per cent is shown to be based on the inaccurate NSSO (70th round) data for 2012-13 (Brinda Karat, People’s Democracy dated February 2-8, 2015), it is correct that only producers/farmers in selected areas have benefited from FCI’s procurement policy and MSP operations. It is also true that a vast number of consumers pay high prices and remain excluded since the adoption of the targeted public distribution system. So both the producers and the consumers have not fully benefited from the FCI operations. The solution lies in expansion, not contraction, of both procurement to new areas and crops and distribution to all households. It would have been good had the recently released High Level Committee (HCL) on restructuring of Food Corporation of India (FCI) chaired by Shanta Kumar made these recommendations. The recommendations of the HLC, on the contrary, in sync with the Modi government’s aggressively pro-business and anti-people economic stance, call for massive cutbacks and narrowing of FCI operation, and taken together undo the edifice and architecture of national food security in India. The “hugely surplus grain stocks, much above the buffer stock norms, even when cereal inflation was hovering between 8-12 per cent in the last few years… even after exporting more than 42 MMT of cereals during 2012-13 and 2013-14 combined, which India has presumably never done in its recorded history” is the result of perverse and callous refusal to distribute affordable food to our own teeming millions of hungry and malnourished people WITHDRAWING FROM PROCUREMENT IN SURPLUS AREAS HLC recommends the narrowing down of FCI operations- retreating from procurement operations of wheat, paddy and rice in the high-procurement states that contribute to much of FCI stocks of Andhra Pradesh, Chhattisgarh, Haryana, Madhya Pradesh, Odisha and Punjab. FCI will accept only the surplus (after deducting the needs of the states under NFSA) from these state governments (not millers) to be moved to deficit states. In effect this implies the retreat of FCI from its critical role in maintaining national food security – procuring from surplus areas to distribute to deficit areas. What incentive would the surplus states, from where much of the procurement is done, have in using their scarce resources in procuring any surpluses? The suggestion that “FCI should move on to help those states where farmers suffer from distress sales at prices much below MSP, and which are dominated by small holdings, like Eastern Uttar Pradesh, Bihar, West Bengal, Assam etc.” is based on the false premise that FCI can’t do both – procure from surplus areas for food security in the deficit areas as well as offer MSP to small holders in the distress areas. It can and must do both – offer remunerative prices in deficit areas to small holders and create a buffer against shortages. In the name of bringing “rationality in procurement operations” but primarily (and self confessedly) to increase private sector’s role in grain procurement, the report further recommends that the centre strictly not accept surplus grains under the central pool from states that give a bonus on top of MSP, thus penalising farmer-friendly states and ultimately the farmers themselves. Under the Negotiable Warehouse Receipt system (NWRs), farmers cannot sell their produce but store it in registered warehouses, against an 80 per cent advance from banks. They can sell later when they feel prices are good for them. This will bring back the private sector, reduce massively the costs of storage to the government, and be more compatible with a market economy. FCI and Warehousing Development Regulatory Authority (WDRA) can build these warehouses with private sector participation, the euphemism for concessions and incentives to the private sector. The ultimate aim is to stop any physical stocking of grain at all with the government simply compensating farmers with the difference when market prices fall below MSP. HUNGER AND MALNUTRITION It is always a matter of great regret that despite the government’s own undisputed data on widespread hunger and malnutrition being repeated over and over again, it leaves policy makers cold. Who is unaware, for example, that the International Food Policy Research Institute categorizes hunger in India as ‘alarming’? Or that in the 2013 UNDP Human Development Index, India ranks 94th out of 199 countries in the Global Hunger Index? Or that the World Food Programme counts that each minute, five Indians die of hunger which makes 7000 each day and 2.5 million people dying of hunger in India every year? The latest NSS data shows continuing endemic and widespread hunger. Eighty per cent rural and 64 per cent of all urban households consume less than the recommended calorie norm, 54 per cent rural and 75 per cent of all urban households consume less proteins than recommended. The average consumption of calories has come down from 2246 per capita per day in rural areas in 1972-73 to 2020 in 2009-10. The corresponding figures for urban areas are 2107 and 1946, respectively. Children have relatively high levels of undernutrition and poor health according to all three measures, namely height-for-age (stunting), weight-for-height (wasting) and weight-for-age (underweight). Infant mortality rate is 48.9 and the under-five mortality rate is 59.2. Almost half of India’s children under age five years (48 per cent) are chronically malnourished and are too short for their age or stunted. One out of every five children in India under age five years is wasted ie, the child is too thin for his or her height. Forty-three per cent of children under age five years are underweight for their age. Seven out of every 10 children age six month to under five years in India are anaemic. Thirty-six per cent of women and 34 per cent of men are undernourished, with a BMI less than 18.5, indicating a high prevalence of nutritional deficiency. Over half of women (55 per cent) and almost one-quarter of men (24 per cent) are anaemic. And yet, the HLC recommends a second look at NFSA, and deferment of its implementation in some states. It suggests lowering of the proposed coverage of 67 per cent of population to around 40 per cent, with an increase from 5 kg grain per person to 7 kg per person. This is an obvious contradiction, because even as the HLC repeats the tired old argument of a supposed trade-off between coverage and quantity, it does so after bemoaning at length the existence of huge foodstocks in excess of buffer norms. FCI carries buffer stocks way in excess of buffer stocking norms – the last 5 year average is more than double the buffer stocking norms. The reason of course is that the central government is blind to the widespread hunger and refuses to distribute it cheap to our people, but the HLC claims the reason lies in export bans, open ended and distorted procurement (through bonuses and high statutory levies). Instead of recommending a more generous PDS, it suggests a business-oriented and “pro-active liquidation policy” through open market sales and exports. If so concerned about the inadequacy of 5kgs per person, why not recommend 7 kgs per person to even the low 67 per cent instead of the 42 MMT exports (which is well-known to be used as cattle fodder in the rich countries of the North)? In gross disregard of affordability, the Shanta Kumar HLC also recommends that pricing for priority households be linked to MSP, “say 50 per cent of MSP” to avoid “undue financial burden on the exchequer”. However, food security has two aspects, production and consumption. Farmers or producers need to cover their cost of production and if farming is to once again become a viable activity, profitability has to be maintained through assured procurement. Consumers on the other hand are constrained by their ability to pay, and prices for them have to meet the yardstick of affordability. If consumer affordability and producer profitability both have to be ensured for food security, the two prices cannot be the same. This rather devious attempt to link consumer subsidy to farmer subsidy will open the gate to political conflicts between the two and in many cases where the farmer is also a net purchaser of foodgrain, giving MSP with one hand and taking away through higher food prices with the other. The actual motivation behind targeting and high price of food in the PDS is to cut costs and reduce the fiscal deficit. Even if we were to accept the ridiculous notion that there is some sacred threshold level of fiscal deficit, there are obviously two ways of doing this, namely, mobilising more resources through increased taxation and reduced tax concessions to finance crucial expenditures. But this strategy is inconceivable for government hell bent on giving so called incentives to investors, particularly foreign investors, rather than to mobilising resources for meeting the basic needs of the masses. Compared to many advanced countries, India’s tax-GDP ratio is very low (around 15 per cent compared to 26 per cent for South Africa, 23 per cent Russia, 25.4 per cent Brazil , 18.9 per cent China, 28 per cent USA and around 45-50 per cent for Scandinavian countries). To hide their utter failure to mobilise required resources the government cites absolute numbers of the subsidies in current price terms without accounting for inflation. It also ignores the need to refer to the GDP growth rate. The fact is that in most years subsidies have remained below 1 per cent of GDP except a single year. Moreover, during the 2000s, when corporate profits and taxable incomes were soaring, tax concessions were many multiples of this. Tax concessions to corporate profits alone have exceeded the food subsidy bill in most years. The tax sops have totaled between 4 to 6 lakh crores or between 5 and 8 per cent of the GDP. Thus the sum estimated to support a universal PDS that is affordable and adequate is about one-third of the taxes foregone. The problem is not the availability of money, but warped social priorities and no will to mobilise the surplus and allocate it to where it is needed most. CASH TRANSFERS TO REPLACE GRAIN HLC recommends gradual introduction of cash transfers “indexed with overall price level…in the name of lady of the house” in PDS, routed through prime minister's Jan-Dhan Yojana (PMJDY) and dovetailing Aadhaar and Unique Identification (UID) number, starting with large cities with more than one million population; extending it to grain surplus states, and then giving option to deficit states to opt for cash or physical grain distribution. HLC claims this will save the exchequer more than Rs 30,000 crores annually. It similarly recommends replacement of all input subsidies like fertilizer subsidy with direct cash subsidy to farmers which will have disastrous consequences for food production. The proposed solution of continuing with flawed identification criteria and lists, but substituting grain with cash cannot address the problem of exclusion due to targeting. Once cash transfer scheme is introduced, the prices of food and other commodities and services would be deregulated and left entirely to the market forces. Without the countervailing pressure of the PDS foodgrains, supply side problems will get aggravated. There is no guarantee that Direct Cash Transfers will actually be used for buying the commodity for which the cash is given. In a situation where patriarchy dominates, it is likely that the money may be used for other purposes, as women do not enjoy much control over expenditure. There is no guarantee that cash transfer is free from leakages and pilferage and linking food to UID/ ‘Aadhar’ number along with bank accounts is only likely to increase procedural and other problems, compounded by the fact that the technology is itself dubious and infrastructure weak. The middlemen or “business correspondents” and “micro ATMs” would create new avenues for leakages. The HLC, in short, will dismantle food security both at the national and household level, and in the name of private sector participation and efficiency it will harm the interests of both producers and consumers, while seriously threatening food sovereignty in the country. With the Modi government in juggernaut mode in undertaking anti-people policy measures in a dictatorial manner, the fear is that the current regime will push through these recommendations, which are like music to their ears.