[IMC Bombay] Sabotaging PDS

huright huright at vsnl.com
Fri, 6 Sep 2002 16:11:34 +0530


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=20
SABOTAGING PDS


The High Level Committee goes dangerously astray


Built up painstakingly over the last 3 decades is an incredible =
structure for the maintenance of national food security. It rests on =
three pillars a) a reasonable price paid to farmers so that production =
levels of cereals are kept up; (b) The FCI systems for large scale and =
efficient procurement, storage and transportation of grain and (c) a =
public distribution system (PDS) for the transfer of subsidised grain to =
the poor.=20


The IMF now says stop this subsidy. The High Level Committee falls in =
line. The committee recommends:


    a.. Cutting the price paid to the farmers thus discouraging =
procurement and the cultivation of cereals=20


    b.. Cutting the food subsidy almost entirely by raising the PDS =
grain prices to almost market prices; thus effectively dismantling the =
PDS.=20


    c.. Imports of cereals.=20


Of course lip service is paid to Food for Work (one page of the 200 page =
report) and Antyayodhya Anna Yojana (1/2 page). And yes, self =
sufficiency!


Operating on two presumptions, both wrong, the High Level Committee on =
Long Term Grain Policy has made recommendations which appear in favour =
of the poor in the short term but which are against them in the long =
run. The first presumption is that the surplus stocks is the FCI godowns =
are an indicator of excess procurement. The second is that the food =
subsidy standing at 1% GDP must be reduced to 0.2%. Accordingly, it =
recommends that procurement be discouraged by cutting minimum support =
price to farmers thereby reducing procurement by 12 million tonnes. Then =
it sugests that there be a uniform PDS price virtually at acquisition =
cost, thus allowing the BPL prices to shoot upwards. The poor indeed =
have reason to be very alarmed.


Ironically these suggestions have been made at a time when reports of =
deaths by starvation have come in from Orissa, Jharkhand and Uttar =
Pradesh and elsewhere. Today there are 60 MT of grain in the godowns =
well above the 15 MT buffer.


Food for Work


Procurement every year is 40 MT. Offtake (excluding food for work) is 30 =
MT. Assuming that the food for work programme will remain at their =
present low levels, the Committee concludes that procurement must be =
reduced. This is a fatal error.


Food for work programme during British rule were governed by the Famine =
Codes. These provided an extensive code of conduct for officials for the =
recognition of the onset of famines, the immediate starting of FFW =
programmes available to all irrespective of income, and the payment of =
subsistence amounts to those who cannot work. Studies show that the =
British were able to control deaths by starvation by the effective =
implementation of these Codes. Governments today, in contrast, appear to =
be worse than the British. Food for work programmes began only after =
crops were decimated, cattle migrated and starvation deaths had =
occurred. Moreover, the FFW programmes had ceilings leaving out large =
sections of the population.


Over time these Codes came to be disregarded. As is usual in every Red =
Fort address to the nation, Prime Ministers began to announce schemes. =
The Employment Assurance Scheme (EAY) promised 100 day of FFW to all. =
Prime Minister Vajpayee then announced a new Sampoorna Gramin Rozgar =
Yojana (SGRY). Everyone assumed it was an improvement on EAY. With the =
facts came the shock. It would provide on average of 10 days employment =
! Rs. 5000 crores and 5MT grain was all government could spare.


Chandrababu Naidu demonstrated that 5MT was a pitiable amount for the =
country when he managed to grab 3MT for Andhra alone. A genuine FFW =
implemented nation wide can easily absorb 30 MT. Thus, procurement is =
not 10 MT in excess but about 20 MT less than required. The piling up of =
stocks is therefore not because procurement is too high but because =
there is a deliberate decision not to feed the poor. This brings us to =
the subsidy issue.


Subsidy


To argue that the subsidy should be reduced is to say that food security =
for the poor through the PDS should be done away with. Subsidies were =
reduced in two ways; first by targetting and second by the introduction =
of food stamps.


The High Level Committee concludes, what everyone has known for a decade =
that the shift from universal to targeted PDS was a mistake. Targetting =
restricts the PDS benefits to persons below a particular income level. =
Targetted Public Distribution System (TPDS ), has "excluded a =
considerable part of the poor and undernourished population". The =
classification into BPL and APL was "seriously flawed".=20


If the international standard for the definition of the poor i.e. a =
household that spends more than one third of its income on food, is =
followed in India, 95% of all households would be considered poor. If =
the Chinese standard of a food share of 60% is followed, then 70% of all =
households would be considered poor. However, only 27% are considered =
falling within BPL. This is why angry complaints are coming in from all =
over the country about the wrongful exclusion of the poor from the BPL =
list. Tribals who say they eat meat or drink liquor are out. Tiles on =
the roof or a fan in the room knock the family out of the list. The =
Planning Commission's definition of BPL as a family income less than of =
Rs. 20,000 p.a. is rarely followed.


But was targetting a mere mistake or was it a deliberate attempt to =
sabotage the PDS? And is the Committee using the failure of TPDS to =
dismantle the PDS system altogether in the guise of reforming it?


PDS was sabotaged in five ways. First by targetting, then by increasing =
the APL and BPL prices to such an extent that APL offtake collapsed and =
BPL offtake declined, thirdly by relaxing Fair Average Quality Norms so =
that people were disgusted with the grain they received, then by =
rendering uneconomical the running of ration shops save by the black =
marketeering in grain, and finally, when the APL prices were marginally =
reduced, by not communicating this to the public.


When targetting was introduced in India in 1997 the experiences of =
Mexico, Zambia, Jamaica, Tunisia and Sri Lanka were well known. The =
targetted food stamps in Mexico were aimed at cutting the food subsidy =
and led to an 80% decline of those receiving subsidized food. Sri =
Lanka's effective universal PDS was converted to one based on income in =
order to pander to the IMF direction to cut food subsidies. As a result =
there was a 50% fall in participating households and a significant =
number of low income groups were excluded from the food stamps program. =
Food stamps replaced general price subsidies in Jamaica to reduce the =
subsidy from 1% GNP to 0.23%. The real value of the food stamps fell =
until the cost of the minimum food basket was 3 times the minimum wage. =
The poor were excluded. Similarly in Tunisia there was a dramatic fall =
in the calorie and protein intake after subsidies came under attack. And =
in Columbia targetting was the method by which food subsidies were done =
away with.


The heart of the matter is money. India's food subsidy at 1% GDP is not =
high by International standards. Moreover 66% of this is worthless as it =
is storage cost. The hidden agenda of the committee is to reduce this =
food subsidy to 0.2% i.e. to virtually do away with the subsidy for the =
poor. To disguise this with an offer of price indexed linked coupons for =
the poor and cash transfers to the state in lieu of price subsidies is =
laughable. State governments that cannot pay the salary of their =
employees will put this cash into the general account. Coupons have =
failed worldwide. In India counterfeiting will be an additional problem.


With the largest population of malnourished people in the world and with =
half the nation's women and children malnourished, 'business as usual' =
will not do. Drastic steps are called for. India must consciously =
dedicate a part of its GDP towards subsidising food for the poor. The =
subsidy must go up not down. In the present extreme situation 2% GDP is =
not excessive. Jamaica in the 1970's and Tunisia in the 80's had these =
subsidy levels.


Once the decision is taken for a massive FFW programme the gap between =
procurement and disbursement will disappear, the minimum support prices =
must be maintained to keep up the level of procurement and benefit =
farmers, and the movement of grains from the godowns will reduce that =
part of the food subsidy relating to storage (which is 66% of the total =
food subsidy). A massive FFW programme will reduce hunger, provide =
employment and improve rural infrastructure.


As the grain component of SGRY rises from 5 MT to 30 MT, so too will the =
cash component. But this can be kept in check by enforcing the labour/ =
capital ratio on public works to 70/ 30 and by paying almost the entire =
wage in grain. Additional funds could be raised by the states by the =
imposition of a levy as Maharashtra has done in the case of the =
Employment Guarantee Act. All it needs is the will to act.




PDS Prices

In recommending that BPL and APL prices be increased close to =
acquisition cost (which is today higher than the APL level) the =
Committee goes over the top. Surely it must understand that the current =
BPL/ APL rates are too high for the poor to purchase grain.


Distribution is very low not because PDS is inherently unworkable, but =
because the poor are too poor to buy the grain at the prices fixed. The =
BPL rate has to be fixed at the Antyayodya rate level, and the APL rate =
brought down to the BPL level for there to be any significant increase =
in offtake. Starvation does not just happen. It is caused by high PDS =
prices.


Contractors

Seeking to capitalise on the huge surpluses lying in FCI godowns, =
Reliance and others have moved in. Privatising storage is the catch =
phrase. Once it is understood that the grain should be distributed and =
not stored for years, then the FCI capacity ought to be sufficient. =
There is no need for contractors. Initial calculations show that it =
should be cheaper to give the grain away free rather than pay =
contractors!


Food rots in the FCI godowns not because the FCI is inefficient. FCI =
operations have in fact been efficient given the sheer scale of the =
operations but its hands are tied and it has no say in the release of =
grain for the poor. FCI has been critical in sustaining production =
incentives over thirty years and in maintaining overall national food =
security.


Self Sufficiency


A salient feature of India's cereal situation is that most states are =
deficit. Growth rates of cereals have decelerated. Non food grain yields =
have also declined. Interstate imbalances are expected to widen.


Critical in sustaining the production of cereals is the system of =
procurement now in vogue and the fair prices fixed for procurement. This =
has maintained overall national food security for 30 years.


It is essential to maintain cereal self-sufficiency because the devious =
policies of rich countries and the highly volatile nature of =
International cereal prices makes the import of cereals a very dangerous =
policy. Surplus production of a few advanced countries accounts for 4/5 =
of the global trade in cereals. The US farm subsidy is expected to be =
about a 50 billion dollars a year. Once the US grain exporters get a =
monopoly on the basis of highly subsidized grain exports, prices will be =
pushed up leading to a grave crisis.


India has the world's largest malnourished population. Malnutrition =
among children is higher than sub-Saharan Africa. Since cereals accounts =
for 60% of nutrient intake, decline in production is a serious concern.


I have heard Amartya Sen say on TV that procurement should be curtailed, =
market forces be allowed to prevail and then prices will fall and the =
poor will get food cheap. Quite the contrary. Prices may fall initially. =
Farmers will then move away from cereal productions. Shortages will =
occur. Imports of highly subsidised wheat from the U.S. and elsewhere =
will cause a further collapse of cereal production in India. Prices will =
then be pushed up by grain exporting cartels leading to chaos and =
deprivation.




COLIN GONSALVES


=20


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<DIV><STRONG><U><FONT face=3DArial>&nbsp;</FONT></U></STRONG>
<P align=3Dcenter>SABOTAGING PDS</P>
<P align=3Djustify></P><B><U>
<P align=3Dcenter>The High Level Committee goes dangerously =
astray</P></B></U>
<P align=3Djustify></P>
<P align=3Djustify>Built up painstakingly over the last 3 decades is an =
incredible=20
structure for the maintenance of national food security. It rests on =
three=20
pillars a) a reasonable price paid to farmers so that production levels =
of=20
cereals are kept up; (b) The FCI systems for large scale and efficient=20
procurement, storage and transportation of grain and (c) a public =
distribution=20
system (PDS) for the transfer of subsidised grain to the poor. </P>
<P align=3Djustify></P>
<P align=3Djustify>The IMF now says stop this subsidy. The High Level =
Committee=20
falls in line. The committee recommends:</P>
<UL>
  <UL>
    <P align=3Djustify>
    <LI>Cutting the price paid to the farmers thus discouraging =
procurement and=20
    the cultivation of cereals=20
    <P></P>
    <P align=3Djustify></P>
    <LI>Cutting the food subsidy almost entirely by raising the PDS =
grain prices=20
    to almost market prices; thus effectively dismantling the PDS.=20
    <P></P>
    <P align=3Djustify></P>
    <LI>Imports of cereals.=20
    <P></P></LI></UL></UL>
<P align=3Djustify></P>
<P align=3Djustify>Of course lip service is paid to Food for Work (one =
page of the=20
200 page report) and Antyayodhya Anna Yojana (1/2 page). And yes, self=20
sufficiency!</P>
<P align=3Djustify></P>
<P align=3Djustify>Operating on two presumptions, both wrong, the High =
Level=20
Committee on Long Term Grain Policy has made recommendations which =
appear in=20
favour of the poor in the short term but which are against them in the =
long run.=20
The first presumption is that the surplus stocks is the FCI godowns are =
an=20
indicator of excess procurement. The second is that the food subsidy =
standing at=20
1% GDP must be reduced to 0.2%. Accordingly, it recommends that =
procurement be=20
discouraged by cutting minimum support price to farmers thereby reducing =

procurement by 12 million tonnes. Then it sugests that there be a =
uniform PDS=20
price virtually at acquisition cost, thus allowing the BPL prices to =
shoot=20
upwards. The poor indeed have reason to be very alarmed.</P>
<P align=3Djustify></P>
<P align=3Djustify>Ironically these suggestions have been made at a time =
when=20
reports of deaths by starvation have come in from Orissa, Jharkhand and =
Uttar=20
Pradesh and elsewhere. Today there are 60 MT of grain in the godowns =
well above=20
the 15 MT buffer.</P>
<P align=3Djustify></P><B><U>
<P align=3Djustify>Food for Work</P></B></U>
<P align=3Djustify></P>
<P align=3Djustify>Procurement every year is 40 MT. Offtake =
(<I>excluding food for=20
work</I>) is 30 MT. Assuming that the food for work programme will =
remain at=20
their present low levels, the Committee concludes that procurement must =
be=20
reduced. This is a fatal error.</P>
<P align=3Djustify></P>
<P align=3Djustify>Food for work programme during British rule were =
governed by=20
the Famine Codes. These provided an extensive code of conduct for =
officials for=20
the recognition of the onset of famines, the immediate starting of FFW=20
programmes available to all irrespective of income, and the payment of=20
subsistence amounts to those who cannot work. Studies show that the =
British were=20
able to control deaths by starvation by the effective implementation of =
these=20
Codes. Governments today, in contrast, appear to be worse than the =
British. Food=20
for work programmes began only after crops were decimated, cattle =
migrated and=20
starvation deaths had occurred. Moreover, the FFW programmes had =
ceilings=20
leaving out large sections of the population.</P>
<P align=3Djustify></P>
<P align=3Djustify>Over time these Codes came to be disregarded. As is =
usual in=20
every Red Fort address to the nation, Prime Ministers began to announce =
schemes.=20
The Employment Assurance Scheme (EAY) promised 100 day of FFW to all. =
Prime=20
Minister Vajpayee then announced a new Sampoorna Gramin Rozgar Yojana =
(SGRY).=20
Everyone assumed it was an improvement on EAY. With the facts came the =
shock. It=20
would provide on average of 10 days employment ! Rs. 5000 crores and 5MT =
grain=20
was all government could spare.</P>
<P align=3Djustify></P>
<P align=3Djustify>Chandrababu Naidu demonstrated that 5MT was a =
pitiable amount=20
for the country when he managed to grab 3MT for Andhra alone. A genuine =
FFW=20
implemented nation wide can easily absorb 30 MT. Thus, procurement is =
not 10 MT=20
in excess but about 20 MT less than required. The piling up of stocks is =

therefore not because procurement is too high but because there is a =
deliberate=20
decision not to feed the poor. This brings us to the subsidy issue.</P>
<P align=3Djustify></P><B><U>
<P align=3Djustify>Subsidy</P></B></U>
<P align=3Djustify></P>
<P align=3Djustify>To argue that the subsidy should be reduced is to say =
that food=20
security for the poor through the PDS should be done away with. =
Subsidies were=20
reduced in two ways; first by targetting and second by the introduction =
of food=20
stamps.</P>
<P align=3Djustify></P>
<P align=3Djustify>The High Level Committee concludes, what everyone has =
known for=20
a decade that the shift from universal to targeted PDS was a mistake. =
Targetting=20
restricts the PDS benefits to persons below a particular income level. =
Targetted=20
Public Distribution System (TPDS ), has "excluded a considerable part of =
the=20
poor and undernourished population". The classification into BPL and APL =
was=20
"seriously flawed". </P>
<P align=3Djustify></P>
<P align=3Djustify>If the international standard for the definition of =
the poor=20
i.e. a household that spends more than one third of its income on food, =
is=20
followed in India, 95% of all households would be considered poor. If =
the=20
Chinese standard of a food share of 60% is followed, then 70% of all =
households=20
would be considered poor. However, only 27% are considered falling =
within BPL.=20
This is why angry complaints are coming in from all over the country =
about the=20
wrongful exclusion of the poor from the BPL list. Tribals who say they =
eat meat=20
or drink liquor are out. Tiles on the roof or a fan in the room knock =
the family=20
out of the list. The Planning Commission&#8217;s definition of BPL as a =
family income=20
less than of Rs. 20,000 p.a. is rarely followed.</P>
<P align=3Djustify></P>
<P align=3Djustify>But was targetting a mere mistake or was it a =
deliberate=20
attempt to sabotage the PDS? And is the Committee using the failure of =
TPDS to=20
dismantle the PDS system altogether in the guise of reforming it?</P>
<P align=3Djustify></P>
<P align=3Djustify>PDS was sabotaged in five ways. First by targetting, =
then by=20
increasing the APL and BPL prices to such an extent that APL offtake =
collapsed=20
and BPL offtake declined, thirdly by relaxing Fair Average Quality Norms =
so that=20
people were disgusted with the grain they received, then by rendering=20
uneconomical the running of ration shops save by the black marketeering =
in=20
grain, and finally, when the APL prices were marginally reduced, by not=20
communicating this to the public.</P>
<P align=3Djustify></P>
<P align=3Djustify>When targetting was introduced in India in 1997 the =
experiences=20
of Mexico, Zambia, Jamaica, Tunisia and Sri Lanka were well known. The =
targetted=20
food stamps in Mexico were aimed at cutting the food subsidy and led to =
an 80%=20
decline of those receiving subsidized food. Sri Lanka&#8217;s effective =
universal PDS=20
was converted to one based on income in order to pander to the IMF =
direction to=20
cut food subsidies. As a result there was a 50% fall in participating =
households=20
and a significant number of low income groups were excluded from the =
food stamps=20
program. Food stamps replaced general price subsidies in Jamaica to =
reduce the=20
subsidy from 1% GNP to 0.23%. The real value of the food stamps fell =
until the=20
cost of the minimum food basket was 3 times the minimum wage. The poor =
were=20
excluded. Similarly in Tunisia there was a dramatic fall in the calorie =
and=20
protein intake after subsidies came under attack. And in Columbia =
targetting was=20
the method by which food subsidies were done away with.</P>
<P align=3Djustify></P>
<P align=3Djustify>The heart of the matter is money. India&#8217;s food =
subsidy at 1%=20
GDP is not high by International standards. Moreover 66% of this is =
worthless as=20
it is storage cost. The hidden agenda of the committee is to reduce this =
food=20
subsidy to 0.2% i.e. to virtually do away with the subsidy for the poor. =
To=20
disguise this with an offer of price indexed linked coupons for the poor =
and=20
cash transfers to the state in lieu of price subsidies is laughable. =
State=20
governments that cannot pay the salary of their employees will put this =
cash=20
into the general account. Coupons have failed worldwide. In India =
counterfeiting=20
will be an additional problem.</P>
<P align=3Djustify></P>
<P align=3Djustify>With the largest population of malnourished people in =
the world=20
and with half the nation&#8217;s women and children malnourished, =
&#8216;business as usual&#8217;=20
will not do. Drastic steps are called for. India must consciously =
dedicate a=20
part of its GDP towards subsidising food for the poor. The subsidy must =
go up=20
not down. In the present extreme situation 2% GDP is not excessive. =
Jamaica in=20
the 1970&#8217;s and Tunisia in the 80&#8217;s had these subsidy =
levels.</P>
<P align=3Djustify></P>
<P align=3Djustify>Once the decision is taken for a massive FFW =
programme the gap=20
between procurement and disbursement will disappear, the minimum support =
prices=20
must be maintained to keep up the level of procurement and benefit =
farmers, and=20
the movement of grains from the godowns will reduce that part of the =
food=20
subsidy relating to storage (which is 66% of the total food subsidy). A =
massive=20
FFW programme will reduce hunger, provide employment and improve rural=20
infrastructure.</P>
<P align=3Djustify></P>
<P align=3Djustify>As the grain component of SGRY rises from 5 MT to 30 =
MT, so too=20
will the cash component. But this can be kept in check by enforcing the =
labour/=20
capital ratio on public works to 70/ 30 and by paying almost the entire =
wage in=20
grain. Additional funds could be raised by the states by the imposition =
of a=20
levy as Maharashtra has done in the case of the Employment Guarantee =
Act. All it=20
needs is the will to act.</P>
<P align=3Djustify></P>
<P align=3Djustify>&nbsp;</P><B><U>
<P align=3Djustify>PDS Prices</P></B></U>
<P align=3Djustify>In recommending that BPL and APL prices be increased =
close to=20
acquisition cost (which is today higher than the APL level) the =
Committee goes=20
over the top. Surely it must understand that the current BPL/ APL rates =
are too=20
high for the poor to purchase grain.</P>
<P align=3Djustify></P>
<P align=3Djustify>Distribution is very low not because PDS is =
inherently=20
unworkable, but because the poor are too poor to buy the grain at the =
prices=20
fixed. The BPL rate has to be fixed at the Antyayodya rate level, and =
the APL=20
rate brought down to the BPL level for there to be any significant =
increase in=20
offtake. Starvation does not just happen. It is caused by high PDS =
prices.</P>
<P align=3Djustify></P><B><U>
<P align=3Djustify>Contractors</P></B></U>
<P align=3Djustify>Seeking to capitalise on the huge surpluses lying in =
FCI=20
godowns, Reliance and others have moved in. Privatising storage is the =
catch=20
phrase. Once it is understood that the grain should be distributed and =
not=20
stored for years, then the FCI capacity ought to be sufficient. There is =
no need=20
for contractors. Initial calculations show that it should be cheaper to =
give the=20
grain away free rather than pay contractors!</P>
<P align=3Djustify></P>
<P align=3Djustify>Food rots in the FCI godowns not because the FCI is=20
inefficient. FCI operations have in fact been efficient given the sheer =
scale of=20
the operations but its hands are tied and it has no say in the release =
of grain=20
for the poor. FCI has been critical in sustaining production incentives =
over=20
thirty years and in maintaining overall national food security.</P>
<P align=3Djustify></P><B><U>
<P align=3Djustify>Self Sufficiency</P></B></U>
<P align=3Djustify></P>
<P align=3Djustify>A salient feature of India&#8217;s cereal situation =
is that most=20
states are deficit. Growth rates of cereals have decelerated. Non food =
grain=20
yields have also declined. Interstate imbalances are expected to =
widen.</P>
<P align=3Djustify></P>
<P align=3Djustify>Critical in sustaining the production of cereals is =
the system=20
of procurement now in vogue and the fair prices fixed for procurement. =
This has=20
maintained overall national food security for 30 years.</P>
<P align=3Djustify></P>
<P align=3Djustify>It is essential to maintain cereal self-sufficiency =
because the=20
devious policies of rich countries and the highly volatile nature of=20
International cereal prices makes the import of cereals a very dangerous =
policy.=20
Surplus production of a few advanced countries accounts for 4/5 of the =
global=20
trade in cereals. The US farm subsidy is expected to be about a 50 =
billion=20
dollars a year. Once the US grain exporters get a monopoly on the basis =
of=20
highly subsidized grain exports, prices will be pushed up leading to a =
grave=20
crisis.</P>
<P align=3Djustify></P>
<P align=3Djustify>India has the world&#8217;s largest malnourished =
population.=20
Malnutrition among children is higher than sub-Saharan Africa. Since =
cereals=20
accounts for 60% of nutrient intake, decline in production is a serious=20
concern.</P>
<P align=3Djustify></P>
<P align=3Djustify>I have heard Amartya Sen say on TV that procurement =
should be=20
curtailed, market forces be allowed to prevail and then prices will fall =
and the=20
poor will get food cheap. Quite the contrary. Prices may fall initially. =
Farmers=20
will then move away from cereal productions. Shortages will occur. =
Imports of=20
highly subsidised wheat from the U.S. and elsewhere will cause a further =

collapse of cereal production in India. Prices will then be pushed up by =
grain=20
exporting cartels leading to chaos and deprivation.</P>
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<P align=3Djustify>&nbsp;</P>
<P align=3Djustify>COLIN GONSALVES</P></B>
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