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The Problem Of Plenty

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[One would imagine that a bumper crop would be good news for a country struggling with food inflation. But for the government, a good harvest promised by a monsoon at 95 per cent strength will only add to the host of food grain-related problems. Production is just the first step in the long supply chain that has many weak links — the most glaring being that of storage. The UPA government, despite its many attempts and resolutions, is no closer to finding a solution to store a bumper crop, or ensure a smooth supply chain for it. The crisis in food management has been underlined again and again. The latest warning comes from the Food and Agriculture Organization. In its May 2011 report, ‘Global Food Losses and Food Waste', it said the food losses during harvest and in storage translate into lost income for small farmers and into higher prices for consumers. The bureaucratic processes are in place. The Union agriculture ministry holds a regular meeting to track food production and distribution. But these confabulations have not translated into better food management. Storage is the weakest link in the supply chain. And the situation is grave. The combined grain storage capacity of Food Corporation of India (FCI), Central Warehousing Corporation and the various State Warehousing Corporation, adds up to 63.36 million tonnes. — that is even less than the 65.60 mt grain stock listed in the central pool on 1 June 2011. There have been some innovative proposals. An internal study by the Food and Consumer Affairs Ministry suggested that sports stadiums across the country can be used to store food. A more long-term solution proposed is that 25 per cent of the amount disbursed under Member of Parliament Local Area Development (MPLAD) scheme be compulsorily used for construction of warehouses in each constituency. However, both these suggestions have seen no action. Neither have the proposals of the committee of chief ministers that looked into the problem. The problem of storage is compounded as the prices are not determined by the demand and supply in the market. The government fixes a minimum support price (MSP) for key crops that is usually much higher than the open market price. For instance, in 2010-11 the open market price for wheat was less than Rs 1,000 per quintal, while the MSP was Rs 1,180 per quintal. This, of course, results in huge pile up of stocks with the government, which it finds difficult to store and manage. The inefficient public distribution system and its many leakages add to the problem.  The fixed price causes problems in the export market too. According to officials in the Food and Consumer Affairs ministry, the wheat India exports is used as cattle feed abroad. Not because it is of poor quality, but because it was made available at a low cost. The situation arose as the government could not come up with alternative storage spaces. There was a proposal during the 2008 slowdown that with countries with weak foreign currencies, India could barter surplus food for cereals. But like many other suggestions, it was an option not explored. All these options would need political will and commitment to implement. That unfortunately is in short supply. (This story was published in Businessworld Issue Dated 04-07-2011)