The NAC’s Pipedream

There simply isn’t enough foodgrain for the State to feed everyone

Food for all is a noble idea. But the recent exchange between the Government of India and National Advisory Council (NAC) highlights the fact that the path taken to achieve the goal cannot be dictated by the advisory body. The Ministry of Consumer Affairs, Food and Public Distribution has rejected two proposals on food security suggested by the NAC. Practical constraints and poor management could turn the idea into a disastrous scheme. But the NAC has got its arithmetic wrong at the very start.

Current procurement statistics point out that the Government and its agencies are not procuring enough grain to meet the demand that will be generated by the programme. The financial burden that implementing the proposals will impose too is ‘unsustainable’, the ministry contends. 

The first proposal suggests universalising the Public Distribution System (PDS) for India’s 150 poorest districts to begin with. That would include doling out 35 kg rice or wheat at Rs 3 per kg for 80 per cent of the families in rural areas and one-third of the families in urban areas in these districts. The second one suggests extending the PDS across India—to 42 per cent rural families and one-third of all urban families, but reducing the monthly quota to 25 kg of cereals at either Rs 5 or Rs 7.50 per kg to families above the poverty line living in rural areas. The NAC estimates about 70 million tonnes (MT) of grain would be required to implement either proposal. The first proposal would require a subsidy of Rs 90,000 crore, while the second one would require Rs 85,000 crore if foodgrains are doled out at Rs 5 a kg and Rs 80,000 crore if the PDS price for the monthly quota of 25 kg per family is fixed at Rs 7.50 a kg. 

To begin with, the ministry estimates that NAC has underestimated both the quantity of grain required and the costs involved. The ministry estimates that the first proposal would need around 77 MT of grain and it would more than double the current food subsidy bill of Rs 55,000 crore. The second proposal, it estimates, will need less grain than what the NAC has calculated, but still cost nearly Rs 87,000 crore. Since 2002, India’s annual procurement has averaged below 40 MT annually. It cannot be improved substantially. The shortfall will have to be met through imports. International food prices are much higher than what the Government’s procurement agencies pay Indian farmers. The NAC has also failed to take into account the food stock requirements of 12 MT for maintaining strategic reserves and for market intervention (at the time of price spikes, the Government releases stocks into the open market to contain prices). Even if the NAC’s figures are taken to be correct, there is not enough grain produced in the country to meet the requirements of the programme and our reserves. 

To make either proposal work, the Government will have to look at importing foodgrains. This, at a time when foodgrain production the world over will decline or at best hit a plateau due to various factors. The United Nations Food and Agricultural Organisation (FAO) warned of this impending global crisis at the 2008 World Food Summit in Rome. Climate change, higher consumption of milk and meat and the diversion of food to produce biofuels will eat into the same basket that humans eat from. Preceding the summit, Lennart Bage (the then president of the International Fund for Agricultural Development, or Ifad) in late 2007 cautioned the Indian Government and agricultural experts that by 2020 the world’s agricultural production could fall by as much as 20 per cent. In a nutshell, while consumption is rising, agricultural production is falling.  Past experience shows that whenever India enters the world food market as a buyer, global prices rise. In 2007, India imported barely 0.8 MT of wheat from the international market and it ended up paying Rs 16,000 for every tonne, as opposed to the Rs 8,500 it had paid its own farmers that year. The following year, when India announced it would not be importing wheat, international prices fell. So, imports are not a clever option. But, improving agriculture is. Ifad estimates show that agricultural growth is four times more powerful in reducing poverty than growth in any other sector.

There are differences within the NAC too on which approach to follow. In its last avatar, the NAC did well by spearheading legislations like the Right to Information Act and National Rural Employment Guarantee Act. Both programmes rely on the principle of participatory development rather than doles, and that’s what makes them work.

foodgrainimportsNAC