The government first banned wheat exports to keep the domestic prices well below the prevailing international prices, and then to augment its stock for the public distribution system (PDS), it has imported wheat at nearly double the price of what it offers to the wheat growers in the country.
Farmers thus took a double hit: first through the export ban and then through state-sponsored dumping. Producers of no other commodity in the country have faced such ill treatment.
The problem is systemic and two aspects of the PDS are responsible for this. First, the necessity of largescale procurement of grains by the state makes anti-farmer policies inevitable. The enormous inefficiencies in the operation of the Food Corporation of India (FCI) compel the government to suppress domestic prices so that FCI’s procurement cost is affordable. Government does it through a ban on exports or state-sponsored dumping.
Second, the nature of government involvement makes the PDS inevitably corrupt, leaving the majority of the poor deprived of any food security cover. What more expedient way is there to appear to be working in the interests of the poor than to lower the prices that farmers receive?
As a major portion of a poor family’s income is spent on food grains, an increase in its purchasing power translates itself into increased demand for food grains. This benefits the producers through increased prices. Thus a food security system that transfers purchasing power to the poor has to be in the interest of farmers. If the PDS is replaced by a system of food stamps (or food coupons) or smart cards, this is precisely what will happen.
Food stamps are cash vouchers given to the poor. The poor can exchange it for foodgrain through any registeredkiranastores. Shopkeepers can redeem the coupons in banks or post offices. There being no separate delivery mechanism for the subsidised food, the question of illegal diversion to the open market does not arise. Competition among the kirana stores would ensure the quality of the foodgrain. Some might argue about the possibility of counterfeiting of coupons under the proposed scheme. But such a prob lem has technological solutions.
Electronic redemption and monitoring will allow for early detection of abnormal patterns. Smart cards are debit cards which will work exactly like credit cards. Government will transfer the subsidy amount electronically to the smart cards.
This system could end the artificially created antagonism between producers and consumers and the unfair taxation of those participating in agriculture. Improved efficiency provides tremendous scope to increase the subsidy rate and also to bring more population under food security cover. The system will also end the dumping on local coarse cereal producers in many states of the country. The poorest of the producers are always denied the market prices as the PDS supplies only wheat and rice at subsidised rates distorting the market prices.
Food coupons would expand the consumers’ choice. The poor will always prefer cheaper foodgrain. In Maharashtra, for example, nearly half of the foodgrain demand of the poor is met by locally produced coarse cereals, benefiting the poorest class of farmers.
But food stamps threaten the vested interests in the present system. Arguments made by the Left against the idea of food coupons are knee-jerk reactions rather than based on sound reasoning. The demand for universal PDS is trotted out as if it were an alternative to the food stamps scheme.
Food stamps provide an alternative to the delivery mechanism of the food subsidy. It is a simple and practical idea that will help poor farmers as well as poor consumers while reducing the tremendous waste of government resources under the PDS.
The writer is a policy analyst associated with Pragati Abhiyan, a devel opmental NGO based in Nashik milind.murugkar@gmail.com
URL: http://epaper.indianexpress.com/artMailDisp.aspx?article=21_03_2008_011_003&typ=1&pub=320