Private Sector Foodgrains Storage proposal: Another Enron? The new private sector participation policy in foodgrains storage announced by the centre has all the trappings of another Enron. The private sector, invited to construct foodgrains storages of 2.1 MT on BOO basis, is guaranteed 100% capacity utilisation for a decade and 75% for another decade. Even if this means that the FCI godowns remain empty. In addition, a tax holiday for five years and a partial holiday for another five years. Not to mention heavy incentives for financial institutions putting money into the project. Not surprisingly, 65 companies including big names like Cargill, Reliance, Mitsubishi, L&T, etc have shown interest. Currently, says secretary food and civil supplies, around Rs. 3.5 B worth of foodgrains is lost annually in transit and storage. But the excess payouts to private sector would amount to Rs. 3.57 B per year for two decades! The FCI’s current annual carrying cost is Rs 2300 per tonne and the private sector will get Rs. 4000 per tonne, meaning thereby, Rs 8.4 B windfall for the private sector, exclusive of the tax benefits. Food ministry officials admit that the investment required would be Rs 30 B, roughly Rs 15 000 per tonne. The critics of the scheme rubbish it on two counts: first that it will create a mini Enron situation and second that the solution lies in feeding malnourished millions in stead of storing more and more. The food subsidy bill has gone up essentially because storage costs have gone up to Rs. 50 B per annum as the offtake of wheat from FCI has actually fallen since the introduction of targeted PDS in June 1997. (OUTLOOK 040302)
Leave it to Panchayats Many farmers feel the govt. should leave the business of storing grain to the village panchayats rather than opting for desperate measures like privatisation. This will lead to building of permanent assets in the villages. Farmers from Bhiwani (Haryana), Kalahandi (Orissa), Darbhanga (Bihar) and Banda (UP) believe this will be the best option. This will save transportation costs, and reduce losses, as farmers know how to store without losses.
Community Food Banks M S Swaminathan has suggested that a grid of community food banks should be set up. Green Revolution’s strategy of food security through increased production alone has clearly reached a dead end. (THE ECONOMIC TIMES 270402 (Edit), INDIAN EXPRESS 180402)
Parliamentary committee criticizes foodgrains situation The Parliamentary Committee on Food, Civil Supplies and Public Distribution has said that lack of uniform procurement policy has led to distress sales in States such as Bihar, Gujarat, MP, UP and Orissa. It said NAFED should be asked to procure coarse grains. It is estimated that the transit and storage losses during 2000-01 were Rs 1.72 B and Rs 2.27 B respectively in addition to loss of Rs 2 M as thefts. About 0.2 MT of non-issuable foodgrains stagnating in godowns should be disposed off quickly. The committee has strongly opposed the Planning Commission move to discontinue construction of small godowns of 2000 T capacity and has asked the ministry of food to pursue with the state govts. (THE HINDU 260402)
Court Stay on FCI Tenders FCI had brought out a tender on April 16 for selling “low quality” rice and wheat, to be closed on April 18! This when time required to fullfil the conditions require two days at the least. Smelling corruption, the Mumbai High Court gave a stay on the tender and have directed FCI to give minimum of 15 days time in the tenders. (RASHTRIYA SAHARA 270402)
Foodgrains related restrictions removed Effective from 170302, the central govt. has removed restrictions regarding buying, selling, storage, transportation, etc of wheat, rice/paddy, coarse grains, sugar, edible oilseeds and oils. The govt. adv. claimed: “This decision will facilitate farmers to get better prices for these items and the poor in all parts of the country to get foodgrains at reasonable prices”. (THE TIMES OF INDIA 230302)
Storage Costs are 42% of food subsidy The buffer subsidy as a percentage of food subsidy, a mere 12.5% in 1997-98 (Rs 9.37 B out of a total of Rs 75 B) had reached 35.2% (Rs 42.33 B of a total subsidy bill of Rs 120.10 B) in 2000-01 and then to 41.6% (Rs. 56.8 B out of Rs 136.7 B). Thus, while the food subsidy rose by 82.27% from 1997-8 to 2001-02. The actual distribution subsidy, however grew only by 21.74% in the period as the buffer subsidy rose by an unbelievable 519%. The proposals lying before the finance ministry to reduce APL and BPL issue prices and raise quantum allocated to both groups was not approved.
The food subsidy was Rs 28.5 B in 1991-2. According to estimates, over 30% of the grains allotted for BPL families find their way to the open market. Even through TPDS was started in 1997, some 11 states and four UTs are yet to identify families below the poverty line.
The food subsidy presently includes purchase levies taxed by states on procurement. The amount involved is close to Rs 30 B annually. The centre now plans to make this amount part of MSP so that the states can levy purchase tax only at the expense of farmers and food subsidy comes down to that extent. (THE ECONOMIC TIMES 080302 & 230402, BUSINESS LINE 300302)
India holds 33 % of the world wheat stocks, 25 % of rice The Global stocks of wheat are pegged at 152 MT, while the rice stocks are estimated to be 125.9 MT at the beginning of the new marketing year 2002-03. Wheat stocks held by the FCI are likely to be around 27 MT by March 31 2002 (expected to be 47 MT by May end). Rice stock is expected to reach 30 MT by Oct.
The food subsidy for 2002-03 is billed at Rs. 212.00 B, up from Rs. 136.75 B budgeted for 2001-02 and Rs. 176.12 B as per revised estimates. Removal of restrictions on new mills processing capacity has also been proposed in the budget. (BUSINESS LINE 01/03/02, THE ECONOMIC TIMES-D 06/03/02)
Foodgrains export Just a day after India became the seventh largest wheat exporter (5.025 MT exported between Nov.00 and March 02, the bulk quantity sold for animal feed abroad, though Union govt. advertisements in newspapers on 110402 claimed that India is now removing hunger from the world) in the world, the govt. has removed quantitative restrictions on the export of wheat, pulses and coarse grains to boost exports. The Economic Survey 2001-02 had noted that area under pulses and coarse cereals has fallen in comparison to 1980s. 4.2 MT wheat shipped out till date this year has almost all gone to Cargill as the main trader (Toepfer, also an MNC, being another), through STC, MMTC, Markfed, others. (THE HINDU 080302, BUSINESS STANDARD 050302, BUSINESS LINE 060302, THE ECONOMIC TIMES060302 & 290302)
Scam in Rice Exports? Traders are buying high quality (5% broken) rice from FCI at low price of Rs 5.65 per kg, sell it in open market at high rates and prepare bogus export deals. (THE ECONOMIC TIMES 090402)
Export Subsidy While the support price for wheat is Rs 6100 per tonne, after adding transportation, storage and administrative costs, it becomes Rs 9000 per tonne. The exporters buy wheat from the govt. at Rs 4250 per tonne, which is 53% below the cost price. Exporters get white rice at Rs 5650 per tonne, almost 50% below the cost.
Transport subsidy for exports The Union Commerce Minister has announced transport subsidy on foodgrains moved from FCI godowns to the nearest port for export.
The new exim policy will further widen the gulf between the rich and the poor farmers. Only the recession-hit businesses and industries will be enthused to exploit the subsidies. The policy of the govt. is rendering the agrarian sector vulnerable to cheaper and highly subsidised foodgrain imports. Instead of squandering public money on a section of the exporters, the emphasis must be on benefiting the small and marginal farmers. (THE ECONOMIC TIMES 130302 BUSINESS LINE 010402, 220402)
Foodgrains rot According to the Ministry of Food & Civil Supplies, over 250 000 tonnes of foodgrains have been damaged in FCI godowns due to inefficient procurement last year. The govt. has taken action against 82 officials of FCI in this regard. (RASHTRIYA SAHARA 020402)
PDS Price for APL cut again The Union cabinet announced reduction in the issue price for foodgrains for APL families by Rs 1 per kg for three months to reduce the foodgrains stock. Wheat would now be available at Rs. 5.1 per kg and rice at Rs 7.3 per kg. The scale of issue for the APL, the BPL and the Antyodaya households has been raised from 25 kg to 35 kg per house per month. PDS price for the non-poor consumers have now been reduced twice since July 2001. This two-stage reduction of cereal prices for the non-poor is final acknowledgement that the decision taken in March 2000 to sharply increase these rates was a colossal mistake. That decision, meant to reduce the food subsidy, actually ended up increasing the financial burden on the govt. (TRIBUNE 240302, 290302)
Food insecure population in south Asia on the RiseAccording to FAO, the number of food insecure people in South Asia today is 300 M, up from 288 M in 1991. (BUSINESS STANDARD 290402)
States oppose Central Plan Punjab, Haryana, Kerala and AP have expressed strong opposition to the proposed decentralised procurement system on grounds of bottlenecks in implementation. These states feel that preset system of centralised procurement would work well with some modifications and a proper network of roads and market places should precede a decendralised system. Otherwise farmers would continue to resort to distress sales and only traders would benefit. The procurement of rice from AP by FCI has gone up from 1.081 MT in 1971 to 7.1 MT in 2001-02. Decentralised procurement of foodgrains is now implemented in UP, MP and West Bengal. UP has threatened to withdraw from the scheme due to the problems encountered in its implementation. (THE TRIBUNE 240302, THE HINDU 100302)