FE Editorial : Food for thought

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The Financial Express: Dec 25 2012, 01:08 IST

Given its likely political impact, it’s not surprising the government is anxious to try and quickly bring in the Food Security Bill (FSB) that promises subsidised foodgrain to 75% of the population—the poor will get a higher subsidy. The government would, however, do well to pay heed to the red flags raised by Ashok Gulati, a person the government thought highly enough of to make the head of the Commission for Agricultural Costs and Prices (CACP). Gulati, and his co-authors, whose paper is hosted on the CACP website, don’t approach the issue from the point of view of whether the subsidies are required or not. They approach it from the point of view of what this will do for the agriculture sector.

There is the element of cost—Gulati and his co-authors point out the costs will be around R6.8 lakh crore over 3 years, or double what the government estimates. Given FCI’s obvious inability to even deal with the current level of procurement—around 18 million tonnes of the 80 million tonnes of grain stock are stored in the open—they say the storage losses will rise dramatically since the FSB requires procurement levels to be hiked 25-30%. They then point to the fact that excessive dependence on wheat and rice has resulted in the water table falling, so when the FSB comes in, farmers will be encouraged to grow more rice and wheat when, in fact, they should be encouraged to diversify away. Ironically, Punjab is trying to diversify away from wheat

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