Grain stocks low, but enough for welfare plans

ECONOMIC SURVEY 2005-06\ FOOD MANAGEMENT

Huge reserves lead to higher subsidy due to steep carrying costs.

The Economic Survey seeks to dispel concerns over the present low grain stocks in the central pool and asserts that the requirement of the targeted public distribution system (TPDS) and other welfare schemes will be fully met.

It, in fact, builds a case against carrying huge grain reserves which lead to higher food subsidy because of higher inventory carrying cost.

"The buffer stock policy of the government should ensure that the grain stocks do not cross the norms for that year beyond a reasonable margin," the Survey has asserted.

The Survey has pointed out that the actual stocks of wheat and rice have consistently remained higher than the corresponding buffer norms since 2001-02.

At one point of time (June 2002), the Food Corporation of India (FCI) had a stock of 64.7 million tonnes, almost three times the buffer requirement.

In July 2005, for the first time, the actual stocks fell short of the buffer norms by almost 2.4 million tonnes. But the shortfall came down to only 1.1 million tonnes by October 2005.

The Survey attributed the correction in grain stocking to the policy of restricting the hikes in wheat and rice prices to only modest levels in the past four seasons. This policy is also likely to address the problems associated with excessive concentration on the production of two crops "" wheat and rice.

It has criticised the present practice of minimum support price (MSP)-based procurement and has called for its rationalisation.

The MSP helps only the large farmers with high marketable surplus and marginalises the rest of them. It suggests this system be changed in favour of non-price factors like those related to provision of infrastructure needs.

Besides, it calls for examining the scope for improvement in the FCI's functioning to achieve reduction in operational costs.

Moreover, it suggests a re-look at the high state-level levies on procured grain, such as sales tax and market committee fees, as these tend to enhance the economic cost of grain.

However, the Survey reveals that the decentralised procurement scheme has evoked good response from states. Karnataka and Kerala have joined this scheme in 2004-05, thus increasing the number of states participating in it to 11.

These include West Bengal, Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Uttaranchal, Gujarat, Orissa, Tamil Nadu and the Andaman and Nicobar Islands.

There was record grain procurement of 9.36 million tonnes through the decentralised procurement route in 2004-05"" 1.6 million tonnes higher than the previous record of 7.76 million tonnes in kharif 2003-04.