The word ‘expert’ has a magical connotation. Once an expert has spoken, even assertions are perceived to be the truth. But sometimes experts make unfounded assertions. No matter how reputable the expert, it pays to examine the assertions.

The government has appointed a panel to recommend reforms to India’s public food management system. This step assumes significance in the backdrop of the recent impasse at the World Trade Organization (WTO) caused by India’s refusal to sign the Trade Facilitation Agreement citing food security. But the issue goes beyond our commitment at the WTO. Stockpiling of grains way above the buffer storage norms is in nobody’s interest. It is a colossal drain on our resources. Setting up of this panel, therefore, is a welcome step.

There is, however, one reason for concern. The debate on food grain procurement and stockpiling often gets conflated with food subsidy to consumers. During the recent round of WTO negotiations, this confusion helped the Indian government defend its indefensible stockpiling policy. The pretext was of honouring the National Food Security Act (NFSA). This was despite the fact that WTO imposes no limit on food subsidy to consumers. One important source of the misleading connection between consumer subsidy and subsidy to producers was the Commission for Agricultural Costs and Prices (CACP) itself. CACP is an intrinsic part of India’s food management system and though this confusion offered India some face saving in WTO, it hugely misinformed the policy discourse on food policy reforms.

The recently set up panel also includes past chairman of the CACP, Ashok Gulati, who with other economists published an important report during his chairmanship. This document titled ‘National Food Security Bill: Challenges and Options’, was published when the debate on the food bill was at its peak. The report made a highly contentious connection between procurement of grains for consumers and procurement for assuring Minimum Support Prices (MSPs) for farmers. It is natural, therefore, to expect the policy recommendations the panel makes to be informed by this document. This document deserves scrutiny.

The authors begin with the assumption that the food security bill would lead to ‘massive’ food grain procurement. How ‘massive’ would this procurement be post-NFSA? The authors give a figure of 75 metric tonne (MT). They provide no break-up of this figure. There is no analysis to back this claim. But the actual procurement required by the NFSA is only 62 MT. No justification is offered for why they found it necessary to raise the number over what is specified in the Act. Then they raise an alarm that this additional procurement would require the government to step up food production; otherwise, the government’s huge role would crowd out the private traders. Therefore, they attribute the cost of additional food grain production to the NFSA. Moreover, they also blame the NFSA for making Indian agriculture cereal-centric when the demand for other foods is growing. Thus, in the very first year of its implementation, the cost of NFSA, according to the estimates of CACP, is nearly double the government’s estimate. The main component of this cost is the cost of enhancing food grain production. But all this analysis becomes unfounded when we consider the fact that grain procurement already exceeds what is required by the NFSA (which doesn’t require any extra grain procurement).

CACP is concerned about the cereal-centric nature of Indian agriculture, but it wrongly attributes this effect to the consumer subsidy. Farmers will keep growing cereals as long as it is more profitable for them to do so, and their profitability has been guaranteed by CACP continuing to raise the MSP for cereals. Since 1989, procurement has exceeded PDS sales every year. Obviously, the cereal-centric nature of Indian agriculture has to do with the MSP policy. But CACP has overlooked this fact. If CACP wants farmers to diversify away from cereals, they should stop raising MSPs for cereals though that would make them appear against the interests of farmers. There is no point in blaming the NFSA.

CACP claims that the NFSA would crowd out the private traders. The fact is that the private sector is already crowded out because of the high procurement that results from increased MSPs. Gulati has staunchly defended this increase arguing that international prices of wheat and rice have been higher than the MSPs. This is a strange defence. If international prices have been higher, arguments must be against export bans that the government imposes periodically. What is the point in restricting exports and stockpiling grains by raising MSPs at the same time?

The CACP paper, however, makes one laudable recommendation. It supports cash transfers in place of the leaky PDS. (The NFSA fortunately provides scope for switching to cash transfers). If in-kind transfers are substituted by cash transfers, the issues of consumer support and farmer support could be separated.

The central point in the food policy debate is whether we want farmers to choose their crops depending on the signal of the market or the signal of the MSPs. The issue of consumer subsidy is irrelevant to the debate. Conflating the issue of consumer subsidy with producers’ subsidy muddles the discourse. Let us hope that the newly set up panel is not too influenced by the CACP position.

Milind Murugkar is a policy analyst with Pragati Abhiyan, a development organization.

Comments are welcome at

My Reads Logout