Day 33 – Q 1.What are the main objectives of maintaining a buffer stock of food grains? Discuss. What are the key issues and challenges associated with the storage of buffer stock? Examine.
1. What are the main objectives of maintaining a buffer stock of food grains? Discuss. What are the key issues and challenges associated with the storage of buffer stock? Examine.
खाद्यान्न के बफर स्टॉक को बनाए रखने के मुख्य उद्देश्य क्या हैं? चर्चा करें। बफर स्टॉक के भंडारण से जुड़े प्रमुख मुद्दे और चुनौतियां क्या हैं? जांच करें।
The Buffer norms are the minimum food grains the Centre should have in the Central pool at the beginning of each quarter to meet requirement of public distribution system and other government schemes related to food grains. FCI is the nodal agency to hold buffer and operational stocks of food grains.
Objectives of maintaining buffer stock:
- Government schemes: Procurement of food grains and ensuring its availability for effective implementation of public distribution system and other nutrition schemes for economically weaker sections.
- Price level: To maintain price stability arising out of year to year fluctuations in output or any other exigency.
- MSP: To provide space for effective implementation of minimum support price for rice and wheat through procurement mechanism.
- Food security: Ensuring food security during the periods when production is short of normal demand during bad agricultural years.
Issues and challenges:
- Excess of buffer stocks: Open ended grain procurement has increased food grain stockpiles beyond the needs of food security. E.g. By June 2019, FCI and state agencies stockpiled 76.1 million tonnes of staples (wheat and rice) against the requirement of 61 million tonnes. This is due to reasons like
- Oversupply of food grains due to skewed cropping pattern. Excess production of food grains due to higher MSPs, additional bonuses offered on food crops by the states and no viable export outlets.
- Lack of coordination between FCI and Consumer Ministry which decides buffer norms.
- Open ended procurement i.e. procures all food grains supplied to it by farmers, state agencies etc.
- No automatic liquidation rule: Ideally, FCI should sell all grains above buffer stocks in open markets. But there is no such rule and offtake happen only on the directive of the ministry
- Lack of storage: Due to inadequate number of godowns for storage, a part of procured grains is maintained as outdoor stacks (‘Cover-and-Plinth’ system), which face high risk of rain damage and pilferage.
- Poor quality of food grains & high wastage: Due to insect infestation, microbiological contamination, physiological changes due to sprouting and ripening etc., the shelf life of food grains remain poor. Lack of irradiation facilities also impedes long term storage.
- High costs for government: Fiscal load of procuring, carrying & maintaining excess stock is over ₹1 trillion and adds to the food subsidy bill.
- Countercyclical procurement policy: In drought years, when the production is low, Government increases MSP and stock uptake from farmers. This reduces the supply of grains in open market and pushes the prices high.
- Marginalization of private trade: Existing system of food grain management in India is dominated by the Government, right from production (as cropping pattern is influenced by MSPs) to stocking (FCI) and marketing (APMCs).
- Even in traditionally high producing states like Punjab and Haryana, private trade been marginalized due to open ended procurement by FCI.
- Further, limitations on private stock holding and additional state levies make private participation unviable.
- Economic Burden on FCI: FCI incurs the cost of around Rs. 23 per kg for wheat, which then gets sold at Rs. 2/kg under the National Food Security Act. However, Ministry of Finance constantly underpays FCI to keep in check food subsidy numbers and as a result, it has to borrow money commercially leading to an extra interest burden (Rs. 35,700 cr between 2011-16).
- Government subsidy to farmers may encourage inefficiency amongst farmers. There may be less incentive to cut costs and respond to market pressures.
- Some goods cannot be stored in buffer stocks, e.g. fresh milk, meat etc.
- The present mechanism of buffer stocks is skewed towards farmers aimed at minimum support price than on reducing inflation (counter cyclical policy).
Amartya Sen observed that, in India poor die not because of lack of food, but because of lack of entitlement to food. The issues vis a vis policies regarding storage of buffer stock are main reasons. Buffer stocks being integral part of food security needs reforms to make it both practical and viable for government as well as beneficial to consumers and farmers. Shanta Kumar and Ashok Dalwai committee recommendations like FCI reforms, technological upgradation, using metal containers(reduce wastage) etc., needs to be implemented.