The recent parliamentary debate price rise issues and the obvious helplessness shown by people in the chair deserves a serious deliberation, not to criticise the current set-up, rather to come out with innovative ideas to solve the crisis. The general inflation is looming around 9 %, while food inflation is consistently around 17 % level.
Earlier, the food inflation always moved in tandem with general inflation. The difference between general inflation and food inflation used to be in the range of 1-2 % only.
Incidentally, the current price rise is not even supply side constraint, as the Government is holding huge stock of food grains, which is sufficient to feed the nation. The basic issue is that of proper planning, effective coordination, efficient management and distribution of food. Last year, we exported around 65 lakh tonne of Sugar. The government even granted subsidy for export of sugar, while this year we are facing sugar crisis.
Presently, we have adequate stock of wheat. The new procurement season has just started. Hence, we have adequate cushion to fight any contingencies, so far food grain stock is concerned.
But, instead of efficiently maintaining this stock, rumours are floating around regarding grant of export subsidy to promote wheat export. Firstly, some reports indicate that Food Corporation of India (FCI) is holding rotten wheat, as the wheat is lying in the open.
However, the fact is that CAP storage, which implies keeping wheat on wooden crates in open space, covering it with tarpaulin with proper fumigation to prevent pest and rodent attack, is the routine storage method used by FCI since decades and they are able to maintain such stock for a pretty long period.
Secondly, international prices are already down and there is no sign of recovery, as the world is holding sufficient stock of wheat. There is a pressure to grant export subsidy to enable the exporters to export. If the government gives nods to such a move, the export subsidy will be a direct hit the exchequer.
On the other hand, if production of wheat falls next year, there will be a sever crisis again, more severe than the sugar debacle being faced today.
Since Open Market Sale Scheme (OMSS) for wheat has been extended to non-procuring states, there is need to notify another scheme for open sale of wheat, which should continue through out the year where everyone be allowed to buy and in which there should not be any minimum or maximum quantitative restriction. Using Electronic Spot Exchanges, FCI can off load millions of tonne of wheat every month deliverable at various locations, while Spot Exchanges will be able to provide seamless delivery and electronic funds settlement. FCI may also decide to pass on the benefit to domestic users by selling cheap in Indian market, rather than providing export subsidies, which will benefit foreign buyers.