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G. Chandrashekhar

Mumbai, June 9

The Sensex may be going up and dollar inflows may have revived; but that hardly cheers the common man who has voted the new government to power. The aam aadmi wants food at affordable prices. Food inflation is still too high to provide any real relief to consumers.

Will New Delhi be able to contain food inflation, increase access to food and make it affordable? Importantly, will the forthcoming Budget, on which many have placed great hopes, focus on inflation control and food management? We have to wait and watch.

In the last five years, growth in agricultural output has been modest, if anything. Annual average growth rate has been below three per cent. The farm sector continues to starve of investment, especially public investment. On the other hand, demand increases seem to rapidly outpace output increases, resulting in shortage and rising prices. Failure to check flow of speculative capital in sensitive and essential food products has also pushed market prices higher.

One of the political decisions taken by the last government months before general elections related to a sharp hike in minimum support price (MSP) for a number of crops such as foodgrains, oilseeds, cotton and so on.

High international price of agricultural commodities (until July 2008) was cited as the reason for granting a hefty increase in MSP domestically. Now that the global commodity boom has ended and the world market has returned perhaps to more realistic levels, the Government in its new avatar has to take a more objective and dispassionate view about MSP and open market prices of foods.

For many crops, there has to be either a freeze or a very nominal hike. But, a sharp hike in MSP last year has now raised expectations among farmers. Support prices are already perceived to be at levels not sustainable under current domestic and international market conditions.

There are other issues too. The government currently carries unconscionable levels of buffer stocks far in excess of normal needs. In 2008-09, it procured 28 million tonnes of rice and 23 mt of wheat.

Huge carrying costs that are associated with such excessive inventory build-up are wasteful and deserve to be rationalised.

If the Government is serious about its credibility, control of food inflation and ensuring access to food at affordable prices must gain top priority in policymaking.

Foodgrains management deserves priority. The stocks must be effectively deployed to not only fight price rise, but also strengthen and expand welfare schemes and food-for-work programmes. Contrary to general belief, overflowing government granaries are no guarantee that people are food secure. Foodgrains must reach consumers at rates they can afford.

This is best achieved by expanding the reach of the public distribution system and strengthening the delivery system. It is imperative edible oil and pulses become an integral part of PDS supplies. It is perhaps the only sensible way to deliver nutrition (protein and calorie) to poor people.

Reports that the Government may add pulses in PDS are heartening. Despite being the world’s largest producer and consumer, India is also the world’s largest importer (2.5 million to 3.0 million tonnes a year). And yet, the per capita availability of pulses is rather low.

No doubt, PDS has its limitations, but they need to be addressed. Without loss of time, New Delhi must set-off a dialogue with State governments to make PDS more effective.

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