The government has been justifying the payment of escalating subsidies to the FCI on the following grounds:

1. That it provides support to agriculturists through government purchases of their produce at minimum support prices (MSPs)

2. That it provides relief to the poor

3. And that it helps stabilise prices of foodgrains

However, none of these claims are true.

The fixation of MSPs have no rationale; many a time, these do not even cover the costs of cultivation, as computed by the ministry of agriculture itself. In any case, the MSPs have always been below the levelof prices paid by farmers for purchase of their necessities of life, including farm inputs.

The purchases by the government at MSPs are made according to the convenience of the purchasing agencies, and not according to the needs of the kisans. Coarse grains are not purchased, except nominally; most of the rice is procured as levy from rice mills, which are under no obligation to purchase paddy at the MSPs. Also, more than 80 per cent of the government purchases are made only in three states, viz., Punjab, Haryana and Andhra Pradesh, where production of foodgrains is less than one-fourth of the total of the country. Producers of more than three fourth of foodgrains in the country do not get the benefit of either government purchases, or of free trade.

As regards the claim of providing relief to the poor, an analysis of issues from government godowns during the three years 1994-95 to 1997-98 has revealed that out of the total quantity of foodgrains issued from government godowns, 46.5 per cent wasdistributed from urban ration shops to the poor and the non-poor alike; 28.8 per cent was sold to traders and exporters, and only 24.7 per cent to the targeted poor. One may ask, what social purpose was served by sale of the highly subsidised foodgrains to the non-poor and the traders, whose share in the total issues from government godowns was more than half?

Moreover due to rampant corruption, not even half of what is said to be distributed to the poor in villages ever reaches there.

The claim of stabilising foodgrain prices is also not true. During the period 1990-91 to 1997-98 foodgrain prices have increased at a much faster rate than prices of "all commodities." But very few farmers have benefited from this rise in prices because most of them have to sell their produce in distress soon after the harvest in local markets.

Even the Government of India, in spite of its vast resources, has now found it impossible to sustain the public distribution system (PDS) mainly due to its inefficiency andcorruption. To reduce the subsidies paid to the FCI, the government has recently revised upwards its issue prices of wheat and rice from Rs 450 to Rs 650 and from Rs 550 to Rs 905 per quintal respectively. To these issue prices the retailer's margin of Rs 50 per quintal will also have to be added making wheat and rice available from ration shops at no less than Rs 700 and Rs 955 per quintal respectively. The prices of these in the open markets were no higher at the time of the government announcement of increases in their issue prices. Thus the PDS, instead of restraining private traders from indulging in excessive profiteering, has given them a good opportunity to do so.

As far as families living below the poverty level are concerned, though the increased prices of foodgrains from them have been withdrawn, they will also suffer, because they are provided cheap foodgrain only up to 10 per cent of their requirements; for the remaining 90 per cent of their consumption needs, they will now have to payincreased prices both at the ration shops, as well as in open markets.

It is indeed surprising, that all our politicians - though professing different ideologies - have pursued the same beaten path of providing relief to the poor through the PDS though this has proved to be at an utter failure, not only in India but also in every place that it has been tried. The better and cheaper alternative to help the poor is through food coupons without intervening in the free trade of foodgrains.

It should now be realized, that poverty when it is on such a massive scale as in India, can be reduced only by producing more, and not by subsidised distribution of whatever has already been produced. Food subsidies and trade restrictions ultimately hit the producers, and reduce their capacity to produce more.

The author is a former Union agriculture minister