Context

There is a large scope for  the improvement in the efficiency of grain management system under the National Food Security Act (NFSA).

Declining Agri-sector growth rate

• India’s growth rate plummeted to 4.5 per cent in the second quarter of this fiscal.
• The quarterly growth in GDPA (agri-GDP) is hovering at around 2 percent, it is a cause for great concern.
• Agriculture still engages about 44 per cent of India’s workforce, which has serious consequences for the overall economy of the country.

The bleak picture of the economy

• Recently inflation has started to surge after a long time.
• Inflation is led by the different components of the food segment- cereals, pulses, and vegetables.
• There is a challenge of containing inflation and increasing the demand at the same time.
• At the same time, there is also the challenge of maintaining the fiscal deficit by 3.3 %.
• Recently Finance minister has launched an investment package of 102 lakh crores.
• So, there is a need to take a look at the inefficiencies in food grain management.

Inefficiencies in NFSA

• It supplies a certain quantity of wheat and rice to 67 percent population.
• It gives wheat at Rs. 2/kg and rice at Rs. 3/kg.
• While the cost of these grains to FCI is at Rs. 25/kg and Rs. 35/kg respectively.
• This led to the provision of Rs 1.84 lakh crores for food subsidy.
• The buffer stocks with the FCI is far more than double the buffer stock norms as on January 1 every year.
• This excess stock is the result of an inefficient strategy for food management.
• The strategy where the procurement of these grains is open-ended while the disbursement is restricted.
• The money locked in these excess stock is about 1 lakh crores.
• If the rabi season procurement is good FCI may run out of storage space to accommodate.

Suggestions for improvement

• The open market operation should be increased.
• Even if the government liquidate half of the excess stock it would fetch Rs.50,000 crores.
• The Shanta Kumar panel had submitted the blueprint for the improvement in the grain management system.
• Only three reiterations are needed.
• First-while the Antyodaya category should keep getting the maximum food subsidy, the issue price should be fixed at 50% of the procurement for the rest.
• Second- restrict the percentage of population covered under the scheme to 40 % from the present 67%
• Third-stop the procurement of rice in the north-western states of Punjab and Haryana where the water table is depleting.

Conclusion

• If the government implements these three points it can save the country another Rs. 50,000 crores annually. On top of this, it will help the government to reduce its fiscal deficit.