Covid-19 shouldn't be used as an argument to raise buffer stocking norms

The controversial overflowing granaries have come in handy to feed the poor during the Covid-19 lockdown. But should that be used as an argument to raise buffer stocking norms?

Yesterday’s headache has inadvertently become today’s boon. The overflowing granaries that were, before the outbreak of the Covid-19 pandemic, a source of controversy for years, have enabled the Centre to ensure that a large chunk of the population, with livelihoods hit by the enforced lockdown, does not go hungry. 

So much so, if Centre should wish to, it can distribute more than a year’s ration in advance to the 800 million beneficiaries of the National Food Security Act (NFSA).  So far, it has decided to give three months’ ration in advance free, plus one kg of pulses per family (the choice of pulses varies according to regional taste).

According to the Food Corporation of India (FCI), India’s wheat and rice stocks in the central pool as on March 10 is estimated at 77.72 million tonnes (including 19.24 million tonnes of un-milled paddy). The total annual requirement of grains to run the NFSA smoothly based on the last three years’ average is around 54 million tonnes. This is the position even before the country has started its annual wheat procurement for the 2020-21 season, which begins April 1.

As on date, all NFSA beneficiaries get 5 kg of wheat or rice per month at highly subsidised rates of Rs 3 per kg for rice, Rs 2 per kg for wheat and Rs 1 per kg for coarse cereals. After the latest announcement by Finance Minister Nirmala Si­tha­raman, all of them will get an additional 10 kg of wheat or rice each for the next three months. 
 

Though unintentional, this could create the much-needed space for the new wheat harvest (which could, however, be delayed because of a Covid-19-related labour shortage). 

 

 

Assuming that the food grain offtake through the Public Distribution System (PDS) in April through June remain at the February 2020 levels, a back-of-the-envelope calculation shows that in normal course, around 9.3 million tonnes of wheat and rice would have been drawn out from public granaries. After the government’s decision to double the allocation, almost 19 million tonnes is expected to move out.

The healthy stock position and the ease with which not only the central government but the states, too, have been able to announce free dry rations for the poor has rekindled the long-standing debate as to whether India needs to raise its quarterly grain stocking norms to face crises such as Covid-19. The opinion has long been divided between the cost of maintaining a hefty buffer stock, way above prescribed norms, and the wastage that occurs because of the excessive amounts that are procured owing to India’s open-ended procurement policy. This is a real concern for the government that is badly strapped for cash — FCI has already made the unprecedented step of borrowing from the small savings pool to keep its operations going. 

The Centre revises the buffer stocking norms for food grains every five years, and the last such revision occurred before the National Food Security Act was implemented in the country in 2013 (see chart).   Accordingly, the government is required to have roughly 4.5 months of PDS requirement on April 1 of each year (based on the average offtake of the last three financial years). The July 1 buffer amounts to 9.2 months of PDS, October 1 seven months and January 1 around five months. The current stock position of grains, however, is much higher than the buffer norms, mainly on account of the open-ended procurement policy, which has become too politically sensitive to reverse.

Much of the argument in the past decade or so has focused on the merits or otherwise of the Direct Benefit Tra­nsfer (DBT) route of cash delivery ena­bled by the Aadhaar identification system.  

“The last time the government decided against raising the buffer norm was on grounds that gradually there will be a shift towards cash transfers for PDS in place of grain,” NITI Aayog member Ramesh Chand told Business Standard. But, as he pointed out, since the shift towards DBT has not been substantial, raising the buffer stocking norms may be the only solution on the table. 

Chand headed a panel in 2013 which had recommended raising the quarterly buffer from current levels.

Former chairman of the Commission of Agriculture Cost and Prices and current Infosys Chair Professor for Agriculture at ICRIER Ashok Gulati suggests that a cash payout would still have been a better option. As he points out, the buffer norms were fixed keeping in mind the annual offtake of food grains through the PDS under the NFSA. The offtake figures for the past three years under NFSA show that it has been much less than planned. “So where is the need to revise or increase it?” he asks.

“The buffer norms of 2013 were devised taking into account the Centre’s annual food grain requirement under NFSA which was around 61.2 million tonnes. But, last three year’s offtake number has been 53-55 million tonnes. So, from that perspective there is no need to change the norms,” Gulati said.

He said even in the current situation if someone had cash instead of dry rations, he or she might have bought food from somewhere to feed himself. “In any case, what will you do with wheat when chakkis (flour mills) aren’t operational,” Gulati said.

Indeed, access to food remains the key. That is why former food and agriculture secretary Shiraj Hussain advocated emphasis on building more community kitchens in cities for labourers and daily wagers and unclogging the distribution channels for smooth movement of processed food for urban consumers. 

“Covid-19 is a once-in-a-lifetime crisis. So planning based on this might not be sustainable in the long-run, what we need is smooth supply chains to distribute the existing stocks not building on the inventories,” Hussain says. 

In short, raising the buffer stocking norms on the basis of Covid-19 would not be a good idea in the long run.