Editorial: Food insecurity action

Sep 12 2013, 01:40 IST
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SummaryGovt misses wheat export bus, leaves more for rats

While the government readies for the Food Security Bill, it would do well to ponder over the havoc its lethargy is causing. While Food Corporation of India (FCI) doesn’t have enough warehouses to store more than half the grain it has, government lethargy has ensured FCI’s godowns have 59 million tonnes of wheat and rice against the buffer and strategic reserve requirements of 21 million tonnes. It was due to this that Commission for Agricultural Costs and Prices (CACP) had been recommending the government liquidate 10-15 million tonnes of grain. Had the government moved on this a few months ago, when global prices were around $300 per tonne, it could have netted $3-4.5 billion. Since this required the government to allow private sector firms to buy wheat from it at a discounted price—FCI’s huge inefficiencies mean the price of grain with the government is substantially higher than that available in the market—a quick decision needed to be taken on this. Since this was, however, not done, the off-take was low. Since, by July, Russian and Ukranian wheat hit the markets, prices have collapsed since, and the latest global trades are taking place at between $250-260 per tonne.

Which means the government will have to take a decision to lower prices even further if it wishes to catch exports at even these prices. While the lack of a quick decision on this is certain to have hurt the finance minister who is busy drumming up ways to get precious forex, the only category that is truly happy is the rats—since FCI doesn’t have enough warehouses, large quantities are stored under tarpaulins in the open fields, giving rats a field day. The interesting part, as the CACP points out, is that even under the Food Security Bill, FCI doesn’t need anywhere near the stocks it normally procures. So unless it comes out with a strategy to quickly liquidate stocks, this is going to be a perennial problem.

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