The wastage of millions of tonnes of food grain due to lack of storage facilities may have rocked parliament and prompted the Supreme Court to direct the government to distribute grains free of cost to the poor, but Kaushik Basu, chief economic advisor in the finance ministry, believes lack of warehouses is only part of the problem and is in no way responsible for the rising food prices.
In ‘The economics of food grain management in India’, a working paper of the finance ministry, Basu says, “The simultaneous occurrence of high food inflation and large food grain stocks in our granaries has been a matter of widespread concern in India. Inspired by the sight of food grain going waste, it is often made out that our central problem is that of poor food grain storage. “[But] this paper disagrees with this popular view.”
The chief economic advisor says the problem is India does not have a comprehensive food policy.“In creating a better food grain policy, it is imperative that we look at the entire system of food production, procurement and release and distribution. Trying to correct one segment of this complicated system is likely to end up in failure or, at best, have limited success,” he says.
The paper says storage facilities should improve, but “it is important to be clear that this in itself will not lower the price of food”. Basu advocates redesigning the mechanics of how we acquire and release food into the market.
On the demand that food grain that could rot due to lack of storage facilities should be distributed among the poor, he says, “If the grain is just given away at a low price to whoever comes to buy, it is likely that a part of this food will get picked up by traders and resold to the government through the procurement window.”
Therefore, Basu recommends a holistic view of the system of food grain management.Terming it a “pervasive weakness” in the country’s food grain policy, he complains that “in the name of helping the farmer and the consumer”, India has “ended up creating a food grain policy framework that has not got high marks on either count”.
Another point Basu makes is that the current system is holding back large segments of the population in agriculture, which actually deserves to move to industry and manufacturing. “In the name of helping our farming regions, we have intervened and created special incentives which hold back large segments of the population in agriculture,” he says.