Shyamal Banerjee/Mint

Shyamal Banerjee/Mint

Ourviews | A food policy failure

Ourviews | A food policy failure

Blame it on policy mismanagement. What deserves to be good news has turned into a disturbingly embarrassing development. The country is estimated to have touched a record level of foodgrain output in fiscal 2012. The total food stock with government agencies is expected to cross 75 million tonnes (mt) by the end of the current procurement season. However, these agencies only have covered storage capacity for just about 50 mt, resulting, once again in the danger of foodgrains wasted away to the elements.

Shyamal Banerjee/Mint

Thus, the government remains the dominant operator in the grain market. So whenever there is a gap between output estimates and actual output, problems ranging from storage to transportation to distribution emerge with a vengeance. Something similar is panning out now: a blame game is on between the Union government and different states on the issue of inadequate supply of bags to store wheat reaching the mandis.

Not allowing a free play of markets always leads to mismatches in demand and supply. Reliance on an administrative system where price signals play only a marginal role leads to balancing of demand and supply in a physical (quantities) manner. This is always inefficient. For example, keeping price fluctuations and inflation in check, especially for all segments of grain consumers, requires that food purchases be carried out in bulk when there is a bumper harvest (as is the case this year) and grains should be released when there is a poor crop. The food management system is devoid of this flexibility due to political reasons. The result is that it is never free of problems and bottlenecks.

The absence of an all-India foodgrain market and the necessary infrastructure around it has also resulted in the lost opportunities for exports in the past. It is important that roadblocks be cleared for private participants, who, with adequate incentives, will also bring in investment in storage and logistics solutions.

Should government continue its monopolistic behaviour in the food market? Tell us at views@livemint.com

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