Record Targets for Wheat Procurement Celebrations Or Concern?
Unless immediate steps are taken to liquidate the stocks by finding global opportunities, or setting up an India Food Assistance programme (in conjunction with the Ministry of External Affairs) to support the global campaign against hunger, the public procurement system will not be able to do justice, either to the farmer, or the consumer.
The Government of India has ambitious target of procuring 44 MT (million tonnes) of wheat in the current year, and in many ways, this will be a world record for no other country has ever undertaken such a mammoth logistics exercise. This figure should also be placed in perspective. Thus of the total production or 92 MT, public procurement will be close to fifty per cent, and if the target is achieved to the hilt, the food grain stocks by the end of the procurement season will be in the range of 90-95 MT thus equalling, or perhaps even exceeding the production . Does this call for a celebration, or should it compel us to ask some searching questions about the agriculture and food policy scenario, especially when the capacity to hold such stocks is substantially inadequate, and in the absence of ‘market incentives’, the private sector is not in a position to leverage the global demand of wheat to the advantage of the Indian farmer. For just as we are discussing storage constraints, China is picking up 5 million tonnes of wheat all the way from Australia and Canada.
It is true that if the Right to Food Bill is adopted, about 70 per cent of India’s population will have a legal right to over 5 kgs of food grain at Rs 1-3 per kg, and this will certainly raise the demand for both wheat and rice under the PDS. However even with this ambitious undertaking, the total requirement of wheat should not exceed 40 MT in a particular year. Thus unless immediate steps are taken to liquidate the stocks by finding global opportunities, or setting up an India Food Assistance programme (in conjunction with the Ministry of External Affairs) to support the global campaign against hunger, the public procurement system will not be able to do justice, either to the farmer, or to the consumer. And this is where the centre and the state have to work in conjunction. It should also be recognised that the competencies for public procurement are distinct and different from those of retail distribution. Both are important though it must be admitted that building a distribution network for the PDS is a far more daunting task.
What are the attendant consequences? The first of course is that with such high levels of public commitment to procurement, the private trade is out. And with over seventy per cent of the population getting access to food between Re1 and Rs 3 per kg, the complexities of distribution will increase as never before. However it can work well only with a very high degree of technology interface, and the acceptance of a reasonable margin along the supply chain. In several Mandis, private traders will be forced out, and with that, perhaps the premium on quality. If states start announcing incentives over and above the MSP announced by the CACP, the problem will be aggravated even further.
The second issue is the very high cost of procurement because as things stand, government procurement is quite high in states which impose high market levies. Punjab and Haryana take the cake with 12 per cent on commissions, taxes and cesses on procurement. It’s an official rent seeking by the state government with the centre tagging along. If the costs imposed on the GoI were being transferred to the farmer, there can be a case for higher procurement costs. In fact the Chairman of the CACP, Prof Ashok Gulati has argued that GoI should not undertake procurement in states which impose more than five per cent in levies/taxes. This will also ensure that procurement shifts to the eastern region, which has, so far, played a rather marginal role in the procurement regime.
The third is with regard to infrastructure. We need to invest, rather create a positive environment for investment in silos, air supported moveable warehouses, and for containerised movement to ensure quick turnaround at ports when global prices are favourable. This column has consistently argued that we need to spend our resources on core infrastructure, rather than on fertilizer subsidy which only helps the big fertilizer companies which is what happens if we are obsessed with production and procurement, rather than with access, entitlement, empowerment and efficient PDS.
The fourth issue is with regard to the regional spread of the procurement. The bulk of the procurement will continue to take place from Punjab, Haryana and MP. True, MP has ousted Haryana for the number two slot, and is inching closer to Punjab but the question is: how about strengthening the procurement base in the eastern region where prices are hovering 15-20 per cent below the MSP. Again the issue is not about the announcement of policy, but in its implementation.
Last, but not least, if the country is going to spend close to fifty thousand crore on the Right to Food Bill then should we not spend quality time and resources in devising a system to ensure that leakages are arrested even at the design stage. Fix realistic margins. Ensure grading machines at procurement centres, or better still, get the private sector to invest in grading machines and pay them for certifying quality, give reasonable margins along the supply chain from transporters to wholesalers to retailers and impose strict penalties in case of default. The column sincerely hopes that a robust management system is created to implement the Right to Food, because if the system is weak, it will add more to the woes of the country than we can foretell at this point.
By Sanjeev Chopra
(An IAS Officer, the author is Joint Secretary & Mission Director, National Horticulture Mission, Government of India. The views expressed are personal.)