Budget 2015 – Will it address food shortage?

Will Budget 2015 provide incentives, plans and programs for individual states to become self-sufficient in food production?

To understand the enormity of the challenge India faces on issue of food shortage, security and depravation, let me at the outset quote some statistics. The net per capita food availability in India in 1971 was 394 gm per day. This was just after the onset of Green Revolution in India.

Exactly 30 years later, in 2001, the net per capita of food grains availability was 396 gm per day: a princely rise of 2 gm! [Source: Economic Survey published by the Government of India]. And by 2015 things have not improved significantly.

Naturally, India ranks very high in the global Hunger Index published by the International Food Policy Research Institute even as several sub-Saharan and out neighbours in South Asia fare far better than us. Ranked 55 out of 76 countries, India for instance, ranks below Nepal [Ranked 44] and Sri Lanka [Ranked 39].

Needless to emphasise a comparison with other countries is central to understanding the extent of food shortage prevailing in India. Advanced countries, on a per capita basis, consume anywhere between 600 gm to 700 gm per day. Such healthy consumption in these countries is supplementary to the substantial quantity of meat, fruits, vegetables and milk.

It is at this point a reference to China is unavoidable. China it may be noted, is a country with approximately 1.2 times our population, produces approximately 500 MT of food grain every year - more than double that of India. Does this comparison with China not blow the myth of food self-sufficiency in India?

On this score, our consumption on a per capita level is far below the world average and significantly below the average of the developed countries. It would seem that, we as a nation, seem to have declared food self-sufficiency on virtually half-empty stomachs.

What is appalling is the fact that even after the British took over the reins of India, they constituted a Commission to look into the quantity of food required in India, should India were to be hit by a famine. That was way back in late nineteenth century when British had succeeded in setting a Government in India.

For this purpose, the per capita food consumption was held to be 500 gm - yes 500 gm - per day by the said Commission. It has to be noted that the British fixed this norm for a subjugated population and during a famine! It would seem that our colonial oppressors had a more charitable view than our own democratically elected governments. No wonder we have declared food sufficiency at 400 gm per day per capita. [Source Annam Bahukurmita - Centre for Policy Studies]

It is in this connection it has to be noted the National Institute of Nutrition is reported to have prescribed a minimum of 2,400 calories per day per Indian. What is galling to note is that significant sections of our population do not have access to even this minimal nutritional requirement. By the way, the average calorie intake available to an inmate at the dreaded Guantanamo Bay daily is well in excess of 4,000 calories!

In effect, for over five decades our farm growth during the much celebrated Green Revolution has barely kept pace with our population growth.

Obviously, [given the statistics quoted above] we are not producing enough food grains or pulses on a per capita level. Yet, for the past four decades or so we have been under the mistaken belief that distribution, not production, to be the key to the issue on hand.

More to the point - economists within our establishment are ignorant of the massive levels of malnutrition and food deprivation. They presume that India has a distributional problem, not one of production.

In the process most policies laid out by the Government aim to set right the distribution angle when the challenge lies mostly at the production stage itself. That explains why we created a monstrous public distribution system in the first place.

Will Budget 2015 first acknowledge this distortion and remedy the same forthwith?

A callous approach

This issue is not merely of agriculture or hunger index; it is much more. It concerns food security, livelihood of farmers and of course food inflation. Agriculture is far too central to the Indian economy than can be imagined by many of us. It is our route to food security [access to food grains], economic well-being, poverty alleviation and crucially, national security.

But like all other things in India, the seriousness of the issue is inversely proportional to the attention it gets.

India produces approximately 250 MT of food grains annually. Of this, one-half i.e. 120 - 140 MT is estimated to be consumed by farmers and theoretically does not enter the national grain markets.

Of the balance 110-130 MT that enters the national grain markets, Government procures approximately half of this for public distribution. That makes the Government a dominant player. The balance - a small portion say 60 MT - enters our grain markets.

All these have profound implications on the policy formulations by the government of India. Thanks to our misunderstanding of the problem as one of distribution we have an open-ended purchase policy, we continue to endlessly purchase over and above our buffer stock requirements.

The Government, thanks to its inefficiency, is unable to distribute what it procures. In the process, little do we realise that endless food procurement by Food Corporation of India [FCI] turns out ultimately to be public hoarding by Government. This in turn robs the common man of stocks while artificially inflating grain prices. This hoarding by the State is at the root of the extant chronic food inflation and shortage in India.

Will Budget 2015 cognise and address this issue?

Interestingly, the economic cost of FCI for acquiring, storing and distributing food grains is about 40 per cent of the procurement price. FCI must be a unique organisation that suffers from diseconomies of scale! But who cares? The more it procures, stores or distributes, the more it leaks.

What is galling is the fact that the National Sample Survey [NSS] studies reveals massive leakage of food grains in the Targeted PDS mechanism that aims to deliver food grains for BPL families. This is simply because PDS has virtually collapsed in several states in India due to weak governance and lack of accountability.

In fact, this document by the Ministry of Agriculture demonstrates the dismal performance of this scheme for 2004-05 and 2009-10, the two years for which NSS data on consumption from PDS are available.

In 2004-05, compared to an off-take of 29 million tonnes of rice and wheat by States, only 13 million tonnes were actually lifted by households for consumption - suggesting a massive leakage of 54 per cent. In 2009-10, 25 million tonnes was received by the people under PDS while the off-take by states was 42 million tonnes - indicating a leakage in excess of 40 per cent.

Further, the FCI storage facilities are still primitive. For instance, the FCI is facing an acute storage crisis with covered capacity estimated at around 45 million tonnes and covered and plinth storage of 17 million tonnes against the stocks crossing 80 million tonnes.

This once again adds to the wastage and consequently adds to inflation.

So what needs to be done?

Simply put, we need to produce food grains in excess of 350 MT. In such a scenario with massive production of food we do not require state intervention. Should we produce less than 350 MT and seek an intervention of the state, it will be a futile exercise.

Ideally Budget 2015 must fix an overall production target of 350 MT by 2018-19. Once that is fixed all that needs to be done is mere detailing by various departments or ministries - agricultural credit policy; fertilizer policy; government procurement policy; export-import policies; water policy et all are subsets of the larger agricultural policy of producing enough food grains for the country.

But there is yet another dimension to this problem. More than eighty percent of our grains [wheat and rice] procurement by FCI comes from Punjab, Haryana and Uttar Pradesh. This creates a logistic nightmare for distributing such grains to distant states like Kerala or TN. Given our archaic logistic systems, poor storage facilities and bad transport mechanisms, storage and transportation costs add significantly to procurement costs.

That in turn adds to food subsidy but is meaningless expenditure. This too needs to be addressed. States like TN and Kerala have all but virtually given up on agriculture. This asymmetry in national farm production means we are burdening our already fragile logistics while depending on Punjab and Haryana for grain production.

That implies larger states have to necessarily address food self-sufficiency and in the least not burden the other states for feeding their population. Will Budget 2015 unleash competitiveness in farm sector amongst states? How about procuring 50 percent of the state requirement from within a state by 2020?

A country of a billion plus has been kept on a starvation mode for too long. At a global scale our food consumption is far too less. Will Budget 2015 provide incentives, plans and programs for individual states to become self-sufficient in food production? Will it have plans for producing 350 MT of food grains? Will it compel states to be competitive in farm production?