Food Procurement and Distribution – PDS & NFSA, Shanta Kumar Committee, FCI restructuring, Buffer stock, etc.

[op-ed snap]Lifting growth, containing inflation

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3-Issues related to direct and indirect farm subsidies and minimum support prices, Public Distribution System- Objectives, functioning, limitations,revamping, issues of buffer stocks, and food security, Technology missions, economics of animal rearing.

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.
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