CHAPTER-6 FOOD SECURITY AND PROCUREMENT OF RICE IN INDIA

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1 CHAPTER-6 FOOD SECURITY AND PROCUREMENT OF RICE IN INDIA 6.1. INTRODUCTION: Rice holds a unique place in Indian Economy as it contributes 70 per cent to the total production of food grains in India. It is noteworthy that in recent times, most of the rice growing areas have received very good rainfall except in the states of Punjab, Haryana, and West Bengal, UP where 95 per cent of the lands are irrigated. Hence, quantum of rainfall does not influence much, the production of rice and its prices. But, prices of rice are increasing due to increased cost of production occurring through increased demand of energy for operating water lifting devices in irrigated areas. Added to this, violent fluctuations in yield per acre and cost per unit of output are noticed. In this context, to safeguard the interests of rice growers, the government started adopting the measure of procurement of rice from the farmers. Hence, in this chapter, an attempt is made to examine the level of procurement at the all India level and across the major producing states of India. Procurement of rice has been made to ensure adequate stock of rice for public distribution system. The PDS is the channel through which rice and other grains are supplied to the BPL and other beneficiaries under the food security scheme at subsidised rates. The aim of food security scheme is to provide for food and nutrition security, in human life cycle approach by ensuring access to adequate quantity and quality of food at affordable prices for people to live a life with dignity Basu, Kaushik (2011). This scheme of food security assumes greater significance since rice is consumed by majority of people in the country. The paradox of high economic growth and slow reduction in the number of food insecure persons needs to be understood in proper perspective. As such, in this study, an analysis of consumption pattern of rice, determinants of minimum support price and food security have been made. At the end of the paper, suggestions to improve the scheme of PDS in respect of rice are given. It would therefore be interesting to see any relationship between the movement of food security, procurement, consumption and prices. In doing so, a pre-green 163

2 revolution from to and after-green-revolution from to and reform period of to has been taken into consideration. This chapter aims to examine the above aspects as a background. Section I of this chapter is devoted to determinants of procurement of rice in major producing states in India. Section II is devoted to investigate and relate the food security and minimum support prices in rice sector. Section III relates to the consumption pattern of rice. The last part is devoted to suggesting perspective fruitful rice policies BACKGROUND OF THE STUDY: The green revolution transformed the traditional cropping in favour of rice at the cost of coarse cereals. The green revolution in India started in the late 1960s and with its success India attained food self-sufficiency within a decade. On the contrary, the agricultural growth in the 1980s (the second wave of the Green Revolution) involved almost all the crops including rice and covered the whole country, it enabled to raise rural income and alleviate rural poverty substantially (which is a very important stable food in eastern and southern India) (Koichi Fujita, 2007). The next phase of free market in food was under the Food Minister, Rafi Ahmed Kidwai, beginning from Improved food grains production in 1953 and 1954 led to declining prices and a temporary break from chronic shortages. Government procurement of food grains was stopped and restrictions on the movement of grains were removed. Paradoxically, even as farmers faced deflationary conditions, there were shortages and price rise in various parts of the country. The instability in prices, combined with adverse weather in the autumn of 1955, has a dampening effect on production. In 1957, the Ashok Mehta-led Food Grains Enquiry Committee concluded that an expended money supply, growing industrialisation and urbanisation and increased investment led to enhanced purchasing power. On the other hand, hoarding by traders, producers and consumers as well as speculative activities in anticipation of public investment by the government led to a rise in prices. 164

3 Additionally, it found that prices were allowed to fall too low in 1955 and that there was no coordinated policy combating inflation shortages that began in The government had to reintroduce controls and carry-out price support operations to curb the fall in prices. It opened an additional 10,000 ration shops between October 1956 and September 1957, and released its stock to combat price rise. This episode underscored the need for the government to intervene in the market to influence prices and output. The food-grains enquiry committee recommended the setting up of institutions like the FCI and the CACP for this purpose. The government s decision to promote cash transfer in the National Security Bill presented in the recently concluded session of parliament ignores these lessons from India s past. Since the 1950s India has made major strides in agricultural production as evidence by the large government-held stocks of wheat and rice. However, problems of inadequate nutrition, starvation and double digit food price inflation remain. Strengthening of the PDS, as seen in Chhattisgarh and Tamil Nadu, would serve the purpose of ensuring food security for the nation through stabilising prices, production and consumption. As seen in the past, government withdrawal from the food sector can lead to a decline in production and an increase in hoarding and speculative activity. Unlike the PDS, cash transfers cannot counter the resultant shortages and price rise. In a growing economy like India with constantly increasing demand, the government needs to intervene on both the demand and supply sides to ensure food security for all its citizens. To understand the importance of a broad food policy, we only have to look at India s brief experiments with decontrol. The government s policy reaction to the Bengal famine of 1943, which led to the death 1.5 million people, provides us with a primer of what not to do in famine situation. At first, there was a complete laissezfaire policy towards food grain trade, which led to hoarding by traders, farmers and consumers. Subsequently, the provincial governments introduced a policy of procurement and distribution of food grains, which failed miserably as they did not have the requisite infrastructure to implement the policy. For example, grains were rotting in Calcutta, the centre of distribution in the eastern region, as the 165

4 government has not made arrangements to handle in coming stock. To avoid what was called a tragedy in unpreparedness, the government took steps towards setting up a comprehensive food administration, including procurement by the government, the building of buffer stocks and the introduction of rationing (Madhavi Cherin, the Hindu News Paper, May ). According to feminist poem titled Mother (Aai, in Marathi) connects with many a child raised with dignity and pride amidst hunger and self-denial (by Lanjewar 1981): I have seen you turning back the tide of tears trying to ignore your stomach s growl Suffering parched throat and lips Building a dam on a lake I have seen you sitting in front of the stove burning your very bones to make coarse bread and a little something to feed everybody, but half-feed yourself so there d be a bit in the morning I have seen you washing clothes and cleaning pots in different households rejecting the scraps of food offered with pride Distribution of subsidized rice and wheat is an important instrument of food security policy in India. During the 1960s and 1970s, as the dependence on imports was high, the quantity distributed was around 10 million tonnes per year. During the 1980s and 1990s, the average quantity hovered around 15 million tonnes per year. However, during the last 10 years, the volume of subsidized grains distributed in the country has considerably gone up. It varied between 36 and 50 million tonnes during to It is expected to have exceeded 60 million tonnes during , when food inflation was at very high level. The food grain, mainly rice is supplied at subsidized prices under a large number of schemes covering around 50 per cent of the total population. These include (a) targeted public distribution system (TDPS), (b) supplementary nutrition program, (c) mid day meals for school children, (d) food for work or employment-linked programmes; and (e) other welfare programmes. The TPDS is the major programme and includes 20 million poorest of the poor households (Antodaya), 65.2 million below poverty line families (BPL), and other vulnerable households that are otherwise above the poverty line (APL). 166

5 Procurement of food-grains, in particular, wheat and rice, is an open-ended operation. The Food Corporation of India (FCI) procures food-grains at the MSP, which are based on the recommendations of the Commission for Agricultural Costs and Prices (CACP). In addition, in recent years, a number of states have opted for Decentralised Procurement Scheme introduced in 1997, under which food-grains are procured and distributed by the State governments themselves. Between and , MSP of rice and wheat were hiked at an average annual rate of 14.1 per cent and 14.6 per cent, respectively. On an average, agricultural price policy has provided a margin of around 20 per cent over total costs to both rice and wheat farmers (Dev and Rao, 2007). In order to achieve goals such as inter-year price stability against a bumper harvest or below-normal production, guaranteed prices to producers, reasonable prices for consumers and food supply at subsidised rates to vulnerable sections, the government has been carrying out procurement and storage (buffer stock) of foodgrains (rice and wheat) since the mid-1960s. These measures have been implemented through two important institutions, namely, the Commission on Agricultural Costs and Prices (CACP), which is entrusted with the task of suggesting MSP, and the Food Corporation of India, which carries out the task of procurement to ensure that producers do not get a price below MSP and that foodgrains required for maintaining a reasonable level of buffer stock and for the public distribution system are in place. (Chand Ramesh, 2005). Historically, after the Jha Committee report of mid-sixties, the first detailed statement of price policy came in the form of a booklet from the Agricultural Costs and Prices Commission in This has induced us to have a fresh look at the major instruments of price policy, viz., Minimum Support Price, Procurement and Public Distribution System. The Commission was headed by Prof M. L. Dantwala and in its final report the Commission suggested the Minimum Support Prices for Paddy (Deshpande.R.S, 2002). 167

6 The commission for agricultural costs and prices (CACP), makes price recommendations to the over time, support prices have become a guaranteed income support rather than a price-risk hedge. Is procurement evenly distributed over rice growing states? No, the main beneficiaries of procurement are Punjab, Haryana and Andhra Pradesh. For example last year, for paddy, out of 19 million tonnes, Andhra Pradesh accounted for more than 7 million tonnes and nearly the same amount from Punjab. How is the price policy responsible for huge stocks of food grain? Over the '1990s, misuse of the price policy has created a huge food management problem. Procurement prices for paddy have been continuously rising each year, creating a distorted incentive for farmers to switch to rice cultivation. Price policy has an impact on the cost of procurement operations and ultimately on distribution costs, both on the open market and on the PDS (Gulati A. and Pradeep K.Sharma, 2011). The production of food grains during the season about 70 per cent is accounted by rice alone. It is noteworthy that most of the rice areas have received very good rainfall so far except Punjab, Haryana and West U.P. which is more than 95per cent irrigated, hence rainfall intensity and distribution so far may not impact the rice production, though the cost of production is likely to increase due to more demand of energy for operating water lifting devices in irrigated areas.what is the level of procurement of paddy at the national and across the major producing states in India. Food security in Asia has traditionally focused on rice its consumption procurement, and minimum support prices. The technological change of the mid sixties was a step towards meeting the food crisis that threatened food security of the country during those years. At that time it was suggested that the technological change alone might not bring the required dynamism in the growth of agricultural sector and it needed to be supported with proper institutional backup. The new Food Security Bill, which is under the consideration of Parliament, envisages guaranteeing pre-defined quantity of staple grains to 75 per cent of rural and 50 percent of urban population, with an overall coverage of 63.5 per cent of the 168

7 total population. Out of these, 46 per cent of rural and 28 per cent of urban population is categorized as priority households, which will be entitled for 7 kg of rice or wheat per capita per month. The remaining households, which include APL, will be covered on as and when available basis. On the other hand, there is an allocation of Rs. 10,000/- crore to the Food Security Bill, a project that will most certainly destroy the nation s financial security. This shows that the central government will continue to indulge in populist schemes regardless of their financial consequences. It is unwise to be happy with a fiscal deficit that is less than six per cent. The problem is that no attempt has been made to stop or reduce this hemorrhaging of the economy. And the states are not far behind in ever increasing expenditure on free power rice at Re.1 per kg and so on. The nation will slowly but surely spend itself to economic failure, (Union Budget, ). It would therefore be interesting to see any relationship between the movement of food security, procurement, consumption and prices. In doing so, a pre-green revolution of to and after-green-revolution of to and reform period of to has been taken into consideration. This chapter aims to examine the above aspects as a background. The overarching purpose of this study is to consider the food security, procurement and prices of rice in India DETERMINANTS OF PROCUREMENT IN RICE Procurement and support price acts basically as an insurance cover to cultivators against the possibility of post-harvest crash in market prices. More positively, it provides incentive, to farmers and stimulates higher production by encouraging the use of modern inputs and by inducing investment in cost-reducing technology. It also influences their choice of selling marketable surplus to government agencies or in open market. But how is this crucial procurement price determined? This question has been a matter of debate and controversy in India 169

8 [Krishna and Raychaudhuri.1980; Subbarao, 1981; Krishna and Chhibber, 1983; Gulati, 1987]. Some earlier works like Krishna and Raychaudhuri (1980) tend to suggest that procurement prices simply follow the trend of wholesale prices. However, in our formulation we have included cost of production along-with past trends in wholesale prices of wheat and paddy (as derived by us) as determinants of procurement prices. The Food Corporation of India (FCI) is the central nodal agency designated for purchase of rice and wheat at pre-announced support prices. The FCI establishes its own purchase centres but largely depends on the state agencies, which operate on behalf of the FCI. Some state governments also make purchases to meet the needs of their own initiated public distribution programmes, but the quantum of such procurement is a small proportion of total procurement at the national level. As rice is grown in three seasons, the harvest and market arrivals of paddy/rice are spread throughout the year. The rice produced in the kharif season accounts for more than half of the total market arrivals and consequent government purchases. Month-wise pattern of procurement of rice reveals that around 50 per cent is procured during October-December, 30 per cent during January-March, 15 per cent during April-June, and remaining 5 per cent during July-September. If we see trend in procurement of rice and wheat during the last 16 years there is considerable inter-year variation in the scale of procurement of rice and wheat. However, there is an increasing trend. The average annual procurement of rice during the triennium ending for (TE) was at 31 million tonnes which was considerably higher than that during TE (17.4 million tonnes). Similarly, for wheat, the annual procurement during TE was 25.4 million tonnes as compared to 14.9 million tonnes during TE The procurement during the 170

9 current marketing season ( ) is already at record level for wheat at 28.3 million tonnes and for rice it is expected to reach around 35 million tonnes. During , out of the total rice procurement of 33.7 million tonnes, 52.3 percent was contributed by Punjab and Andhra Pradesh, and 27.8 per cent by UP, Chhattisgarh and Orissa. These five states together accounted for around 80 per cent of total procurement of rice in India. Prior to the launch of a decentralized procurement scheme in 1997, the degree of concentration of procurement was very high. In recent years several non-traditional states have started contributing to the price support purchases of rice. Table-6.1 Share of Procurement of rice of major producing states of India States/Year Punjab Haryana U P A P Orissa TN WB Chhattisgarh India to CAGR to CAGR to CAGR to CV to CV to CV Source: Ministry of Agriculture, Government of India. Note: in 000 tonnes, Data for are based on Advance Estimates. Note: Punjab, Haryana, UP-Uttar Pradesh, AP-Andhra Pradesh, Orissa, TN- Tamil Nadu, WB- West Bengal, Chhattisgarh, India. Table-6.1 Show the state-wise procurement of rice from major rice producing states in India Punjab has topped the list of 8 rice producing states in India with regard to procurement which rose from per cent in to per cent in

10 10 with the highest procurement of per cent in Andhra Pradesh is another major rice producing state where procurement of rice varied between minimum of per cent in to a maximum of per cent of rice in The other states accounted for less than 10 per cent of rice procurement. The Compound annual growth rate of procurement of rice at all India level was per cent between and during which the compound annual growth rates (CAGR) of rice procurement of Punjab, Haryana and UP were lower than the national compound annual growth rates (CAGR). During to the compound annual growth rates (CAGRs) of rice procurement of Punjab, Haryana, were lower than the national level compound annual growth rates (CAGR) 5.71 of rice procurement. The compound annual growth rates (CAGR) of other states of rice procurement were higher than national level compound annual growth rates (CAGR) during the corresponding period between and Co-efficient of variance (CV) of rice procurement at all India level during to was higher than the CV of UP but lower than the co-efficient of variance of procurement of rice of other major rice producing states. In the two subsequent period to and to the all India CVs of rice procurement was higher than the co-efficient of variance (CV) of rice procurement of Punjab and Haryana but lower than the coefficient variation of rice procurement of other major rice producing states. Table-6.2 Rice Procurement state wise share in Central Pool The share of AP and Punjab in the procurement of rice in the central pool have been high compared to other major rice producing states during the period from to However, a trend of fluctuations in the share of rice procurement from these two states is observed during the corresponding period. Among other major rice producing states the share of Haryana, Orissa, Tamil Nadu and UP are substantial compared to other states. The share of Assam, Karnataka, Bihar, Tamil Nadu and West Bengal has been lower. The co-efficient of variance of the share in the procurement of rice by the Central Pool of all the major rice producing countries are higher than the all India 172

11 CV of 1.67 per cent except the CV of Haryana and Punjab. The CAGR of share of states in procurement of rice by the Central of states like Assam, Bihar, Orissa, Tamil Nadu, UP and West Bengal are higher than all India CAGR of The CAGR of other major rice producing countries is area lower than the CAGR of all India. The rice millers in Erode, Karur and Coimbatore districts procure paddy from Karnataka. Peak arrivals will be in the months of December to April. Usually May-November is considered as lean season. In this case of Karnataka s procurement is mainly from Gangavathi, Sindhanur and Kartagi. Sona, Deluxe, Emergency, BPT and ADT 43 are the major varieties procured. During off season viz., from mid June to October arrivals from Andhra Pradesh are reported. Mostly paddy from these areas is distributed around the district. It has been observed that the procurement of rice has increased significantly over time and this increase has been not only in absolute terms but the intensity of procurement as a proportion of total production has also increased. Rice procurement as a proportion of total rice production in the country has increased from 6.4 per cent in to about 34 per cent in The intensity in the procurement of rice registered wide fluctuations especially before

12 Table-6.2 SHARE OF MAJOR PRODUCING STATES IN THE PROCUREMENT OF RICE IN THE CENTRAL POOL OF INDIA Increase over States/ UTs A.P. Assam Bihar Haryana Karnataka Orissa Punjab Tamil Nadu U.P. West Bengal India Previous Year * to CV to CAGR Source: (Food Corporation of India). Note: Neg-Less than 500 tonnes, *as on Note: Marketing Season- Wise) (Figures in lakh tonnes) 174

13 Chart-1 compound annaual growth rate of rice procurement for central pool in India (Marketing season wise) Source: table MINIMUM SUPPORT PRICES OF RICE: Table-6.3 MINIMUM SUPPORT PRICE FOR RICE IN INDIA Year/Average Paddy Common Coarse Cereals * to * to * to * to

14 #Compound Annual Growth Rate (CAGR) to to to to **Co-efficient of Variation (CV) to to to to Source: Directorate of Economics and Statistics, Department of Agriculture and Cooperation, GOI. Note: In case of Bihar and Kerala additional incentive bonus extended upto and in case of Andhra Pradesh, Chhattisgarh, Orissa, Tamil Nadu and West Bengal additional incentive bonus extended upto (i) Paddy common for include an additional incentive bonus of ` 40 per quintal on procurement between October 1, 2006 to March 31, (ii). Paddy common for includes a bonus of ` 50 per quintal over the MSP. Note: (Fair Average quality) Rupees per quintal In this table-6.3 shows details the average MSP for paddy (common) during to was the lowest i., e. at Rs per quintal which is more than doubled during the next decade between ranging from to which is the Rs The MSPs for rice during to rose by more than hundred percent to Rs over the previous decade to highest MSP for rice at Rs which prevailed during to An almost identical trend of MSP for coarse cereals was observed during the corresponding decade between to and to The fact that in recent years there has been a tendency among successive governments to fix Minimum Support Prices (MSP) for paddy and wheat in excess of the levels prescribed by the Commission for Agricultural Costs and Prices (CACP). While this increases farmers incentive to produce more, it has raised the market prices and has reduced the demand for cereals. Studies conducted at the National Council of Applied Economic Research demonstrate this fact (Sharma, 2001). There has been a continuous increase in the MSP of rice from Rs. 230 per quintal in to Rs. 510 in and further to Rs per quintal in , similarly a continuous rise in MSP coarse cereals from Rs. 205 per quintal in to Rs. 445 per quintal in and further to Rs. 980 per quintal in is observed. The compound annual growth rate of MSP for 176

15 rice (common) and for coarse cereals has indicated a trend of fluctuations during the period from to (table-5). A similar trend of fluctuations in the co-efficient variation (CV) of the MSP for the two produce has been observed during the corresponding period. Chart-2 Trend in Minimum Support Price for Paddy during to Source: table-6.3. Table-6.4 Minimum Support Prices of Paddy in India (According to crop year as on ) (Rs. Per quintal) (Fair Average Quality) Year Common Grade 'A' ^ 610^ $$/850~ 675$$/880~ $ 880$ & to CV to CAGR Source: Directorate of Economics and Statistics, Dept of Agriculture and Cooperation, GOI The data obtained from the official sources indicate that there is no significant difference between the Minimum Support Price (MSP) for common and Grade variety of paddy during the period from to There has been a continuous rise in the MSP of both common and Grade A variety of paddy during the above period. The MSP of common variety of paddy rose from Rs. 560 per quintal in to Rs per quintal in and the MSP of Grade A variety of paddy rose from Rs. 590 per quintal in to 177

16 Rs. 110 per quintal in (table-6). The co-efficient Variation (CV) of MSP of common variety of paddy was during to and that of Grade A Variety was per cent during the corresponding period. The CAGR of MSP of common variety of paddy was per cent during to and that of Grade A variety of paddy was per cent during the same period. This was mainly because of increase in the cost of production of rice in the country. The Grade A fetched slightly better prices in the market when compared to common grade. Table-6.5 Projected Cost of Production and MSP in Rice during to Year Project C2 cost MSP MSP over per qtl (in Rs) (In Rs.) Cost (%) Source: GOI The data on costs and returns of crops from Cost of Cultivation Scheme are available with a lag and therefore actual cost data for the years and are not available to compare with MSP data. Therefore, we have used projected cost data which is used by CACP for recommending MSPs. As can be seen from the table, the margin over cost declined over time for rice from 30 per cent in to 7.6 per cent in But, the margin of MSP over cost for rice rose significantly from 14 per cent in to nearly 60 per cent in Therefore, it can be said that the recent increases in support prices have the effect of ameliorating the distress of rice farmers. The price support policy of the government is directed at providing insurance to agricultural producers against any sharp fall in farm prices. The minimum guaranteed prices are fixed to set a floor below which market prices cannot fall. Till the mid 1970s, 178

17 government announced two types of administered prices, Minimum Support Prices, Procurement Prices. Substantial increases in MSP of rice and the system of open ended procurement have resulted in two problems. Firstly, increases in the MSP much above the cost of production in the efficient states such as Punjab and some regions of Haryana and UP have caused farmers to divert more land for production of rice from coarse. This has aggravated the problem of rising food subsidies, particularly buffer subsidies, which presently account for over 20 per cent of the food subsidy bill. The carrying cost of these stocks is becoming un-sustainable. A re-orintaion of the food grain policy is therefore imperative. There is a need for a re-thinking on the rationale of raising the MSP of rice every year. 179

18 Table-6.6 Government Operations in Rice in India during to MSP for Paddy Rs. PDS Issue Price for Govt. Food Marketing Year Govt Procurement PDS off-take Per tonne Milled Rice Rs. Per tonne Subsidy Billion (Oct-sept) Million tonnes Million Tonnes** Common Grade A APL Grade A BPL AAY Rs. 2002/ (22.8) 5,500 5, ,300 5,650 3, (25.8) 5,500 5, ,300 5,650 3, (29.7) 5,600 5, ,300 5,650 3, (30.1) 5,700 6, ,300 5,650 3, (26.9) 6,200 6, ,300 5,650 3, (29.7) 7,450 7, ,300 5,650 3, (34.4) 9,000 9, ,300 5,650 3, (35.2) 10,000 10, ,300 5,650 3, (35.6) 10,000 10, ,300 5,650 3, (36.0) 10,800 11, ,300 5,650 3, ,500 12,800 8,300 5,650 3,000 ***750.0 Sources: Note: * Estimated; ** On Fiscal Year (Apr Mar) basis; ***Budgeted PDS = Public Distribution System; APL = Above Poverty Line BPL = Below Poverty Line; AAY = Antyodaya Anna Yojana (Poorest of the Poor), Figures in parenthesis show government procurement as percent of production. 180

19 Following the table-6.6 with view to maximize distribution due to food security concerns and to compensate farmers for the increasing cost of production, the government has been steadily increasing the Minimum Support Price (MSP) of paddy. The government increased the MSP for paddy for MY by Rs. 800 per metric tonne to Rs. 10,800 per tonne for Common varieties and Rs. 11,300 per tonne for Grade A varieties. The government has not increased the sale price of rice distributed through the PDS (issue price) since July 1, 2002, although the MSP has doubled during this period, contributing to the increasing food subsidy. The government food subsidy has tripled since to Rs728 billion in Fiscal Year (Apr Mar) with FY food subsidy budgeted at Rs. 750 billion. The implementation of the National Food Security Act is likely to lead to further escalation in food subsidy. India s MY rice exports are estimated at 2.8 million tonnes compared to around 2.1 million tonnes in MY (mostly Basmati rice as non-basmati rice exports were banned during April 1, 2008 to September 8, 2011). Table-6.7 Major Producing State-wise Minimum Support Prices (MSP) Proposed by Commission for Agricultural Costs and Prices (CACP) for Kharif Crops in India ( to ) (Rs. Per. Qntl) Major States Paddy (Common) Paddy (Grade-A) Recommended by CACP Andhra Pradesh Assam Bihar Haryana Karnataka Sources: Commission for Agricultural Costs and Prices (CACP), Govt of India Table-6.7 provides the detail of Minimum Support Price proposed by CACP for paddy for different states from to (Rs. Per Qntl). CACP recommended MSP for paddy (common) at Rs. 950, Rs.1000, and Rs for , and respectively. However, different states have fixed higher MSP for the three years except Assam which fixed lower MSP in Similarly MSP for paddy (grade-a) fixed by CACP was Rs. 980, Rs and Rs for , and Rs The states except Assam have fixed higher MSP for this variety of rice. 181

20 Table-6.8 Procurement Incidentals and Distribution Cost of Rice in India ( to ) (Rs. Per Quintal) Year Rice ($) Procurement Incidental Rice Distribution Cost * * * * * # @ Source: Ministry of Consumer Affairs, Food and Public Distribution, Govt of India. Note: *: Provisional, #: Revised Budget Estimated. Table-6.8 provides the details of procurement incidentals and distribution cost of rice in India ( to ). Procurement incidental cost of rice in India has shown a general trend of a rise through with periodical decline during certain years, the incidental cost rose substantially since till compared to the previous years from to when incidental cost reached the lowest level of Rs Per qntl rice distribution cost has been high since on wards the cost per qntl rose from Rs per qntl to Rs per qntl in and further to Rs per qntl in Increase in procurement incidental and distribution cost obviously resulted of in higher price to the beneficiary buyers of rice. 182

21 Table-6.9 Percentage Share of Production and Procurement of Rice in India Year Production Procurement Procurement as % of Production * * * * * $ * 85.59@ to CV to CV Source: Ministry of Consumer Affairs, Food and Public Distribution, Govt of India. Note: *: Figure Area In million tonne, #; Procurement as on , $: Fourth Advance Estimates released on First Advance Estimates released on Note: during to (in Lakh Tonne). Table-6.9 provides the details share of procurement of rice in production from to There has been a substantial production of rice during the period from to Similarly procurement as a share of production during the corresponding period has indicated a continuous and substantially rise procurement as the percentage of production rose from lakh tonne to lakh tonne in and further to lakh tonne in There is a trend of decline in procurement during the last two years i.e., to

22 Charet-3 Share of Percentage in Production and Procurement of Rice in India during to (in Lakh Tonne) Source: table FOOD INFLATION AND RICE: Table-6.10 Annual Average Food Inflation Rate (%) (Based on WPI with base and ( ) Year Food Grains Rice Source (Basic Data): Sthanu R. Nair, Central Statistical Organisation ( Note: (-) indicates not available. Table-6.10 provides the of details annual average basis, the fiscal years and recorded high inflation in food products. Notably, in terms of duration and magnitude, the food price spiral witnessed from January 2008 onwards was the longest and largest since April One widely debated aspect of the episode of food inflation was the spiralling prices of food-grains, in 184

23 particular rice amidst a piling up of a gain mountain in government storage depots. The Central Government was in the firing line of criticism from various quarters including the Supreme Court for failing to control rice prices during and Two systemic problems associated with India s food grain management have received considerable attention. They are the high minimum support price (MSP) offered for food grain and high level of food grain procurement by the government (Basu 2011). International agencies are warning of high food prices on a global scale in 2013 if urgent action is not taken. The president is address to parliament has only a cursory mention of inflation inflation is easing gradually, but is still a problem, he said still problem? Surely the suffering of people from the relentless prices rise inflected on them by the flawed policies of the United Progressive Alliances deserves more recognition and redress. Even the World Bank, whose neoliberal policy impositions are responsible to a great extent for global food inflation, has warned that high and volatile food prices are becoming the new normal (Brind Karat, 2013 The Hindu News Paper). While wheat exported at global prices was between Rs.1800 to 2000 a quintal, the support price the Indian farmer received was at least one third less at Rs, 1,285. The export of rice also was at prices far higher than the MSP. Thus, the government helped traders and exporters make profits while denying farmers a fair price. The stocks should and must be used to ensure an amount of food grains not less than 35 kg per family at subsidised rates through a universal public distribution system. 185

24 6.6. DETERMINANTS OF FOOD SECURITY: A broad definition of food security that has commonly been accepted in the literature states that food security implies access by all people at all times to sufficient quantities of food to lead an active and healthy life. The world food summit held in Rome (13-17 November 1996) used the following definition in its action plan: Food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life. According to this, food security requires not just adequate supply of food at the aggregate level but also enough purchasing capacity with the individual/household to demand adequate levels of food (Srinivasan.P.V, 2009). Table-6.11 Share of Per capita Availability of Rice in the Per capita Availability of Food-grains Years Rice Food-grain % Share in rice of food grain to 1956 CV to 1985 CV to 2000 CV to 2009 CV to 2000 CAGR to 2009 CAGR Source: GOI Note: (As on ). 1. The net availability of food-grains is estimated to be gross production (-) seed, feed & wastage, (-) exports (+) imports (+/-) change in stocks. Note: (Per Annum) (KG per Year). 186

25 Table-6.11 provides the detail of Per capita Net Availability of Food grains and Rice in India. The percapita availability of rice in India during the 1990s and the first decade in the new millennium has varied between a minimum of 64 kg per year and a maximum of 80.9 kg per year. The percapita availability of foodgrain varied between a minimum of kg to a maximum of kg during the corresponding period. The percentage share of rice in food-grains availability per capita varied from a minimum of per cent to a maximum of per cent during the same period. The co-efficient variance from a minimum of per cent to a maximum of per cent is noticed during the same period. The co-efficient of variance of the percapita availability of rice between and varied between 0.34 and 7.63 per cent, while the CAGR of the same was negative during 90s and the first decade of the present century. The co-efficient of variance of percapita availability of food-grains during the corresponding period varied between 0.11 per cent and 4.88 per cent. The CAGR of the same was negative during the same period. The CVs of percentage share of rice in food-grains varied between 0.22 per cent and 2.88 per cent during the same period CONSUMPTION OF RICE: The patterns of calorie as well as protein intake do not depict a clear trend for both rural and urban households. For the overall period form to , the calorie and protein consumption has declined in the rural areas and increased in the urban areas. (Radhakrishna and Reddy.2004, Rao.2003). 187

26 Table-6.12 Average Per head monthly rice consumption of rice major producing states of rural and urban in India Urban Rural States % share of Total Total % share of rice Rice rice total Rice cereals cereals total cereals cereals AP Assam Bihar Chhattisgarh Haryana Karnataka Odissa Punjab Sikkim Tamil Nadu Uttar Pradesh West Bengal All-India Source: NSSO report No.530, Households consumer expenditure in India Note: Rice includes rice products, (Average quantity consumed (Kg). Table-6.12 provide details of share of availability regarding the average monthly quantity of consumption of rice per person in India which indicate the average consumption of rice which is at 4.75 kgs in urban area and is lower than the monthly average consumption of rice in rural areas at 6.36 kgs. Similarly, the consumption of cereals in urban areas is at 9.86 kgs per person which is lower than the average consumption of cereals of kgs in rural areas. The consumption of rice as a percentage of total cereals in urban areas is at per cent which is lower than the consumption of rice as a percentage total cereal in rural areas which is at per cent. State wise consumption of rice in urban areas was highest at kg per person in Orissa and lowest at 1.16 kgs per person in Punjab. In rural areas highest rice consumption per person, was again in Orissa at kgs and lowest at 0.74 kg per person in Haryana. Consumption of cereals was highest at kgs per person in Assam and Chhattisgarh and lowest at 8.30 kgs per person in Punjab 188

27 consumption of rice as a percent of total cereals per person was highest at per cent in AP and lowest at per cent in Sikkim in urban areas states. In rural areas the consumption of total cereals was highest at kgs per person in Orissa and lowest at 9.78 kgs in Punjab. The consumption of rice as percentage of total cereals was highest at in Assam and lowest at 6.99 per cent in Punjab. A food coupon system for distribution of rice and kerosene through PDS was introduced in Andhra Pradesh during (Government of Andhra Pradesh: 2001). Basically, the scheme was aimed at improving the delivery system of kerosene and rice. Under the scheme mere possession of card was not adequate to draw PDS rice, wheat or kerosene. People today prefer to consume more of non-cereals and among cereals the preference is for rice and wheat as against coarse cereals TARGET OF PUBLIC DISTRIBUTION SYSTEM IN INDIA: India s government food distribution programmes, including both the old PDS and the current TPDS, have been criticized for their limited impact on the poor, and for inefficiency. Although large amounts of grain appear to have been distributed through the PDS and TPDS, poor households still rely primarily on the market for their supplies of wheat and rice. According to the National Sample Survey, only about 10 per cent of poor rural households and 14 per cent of poor urban households purchased grain from the TPDS (Ramaswami and Murugkar, 2005). A study of TPDS efficiency estimated that it costs Rs 3.14 to transfer Rs1.00 of benefit to poor households through the Target Public Distribution System in the State of Andhra Pradesh, and Rs 4.00 to transfer the same benefit in the State of Maharashtra. Out of the total expenditure on food subsidies in these States, 26.5 to 31 per cent was lost in transfers to non-poor households; 16 to 26.5 per cent was lost because of the abnormally high costs of grain transport, handling, and storage; and 15 to 28 per cent was lost because of leakages to the open market and other forms of fraud. The share of subsidy expenditure actually reaching poor households was about 25 per cent in Maharashtra and 32 per cent in Andhra Pradesh (Ramaswami, 2002). Another issue is concern about loss of government control of physical grain markets and private traders in the current system. The potential 189

28 benefits of shifting to a food stamp programme are discussed in India s 10th Five Year Plan (Government of India, Planning Commission, 2002). In India, although the green revolution technology resulted in greater selfsufficient in food production and reduced import dependence it did not benefit uniformly farmers from different regions and different socio-economic back-grounds. While it solved the food security problem at the aggregate level it was left to subsidy programmes such as the public distribution system (PDS) to take care of food security at household level. The latter is therefore closely linked to health, educational and other infrastructure services (Srinivasan.P.V, 2009). Table-6.13 provides the detail of procurement, off-take and stocks of Rice form to The percentage procurement of rice for public distribution during the 1990s and the present decade ( to ) in the country has indicated divergent trends. The procurement of rice for public distribution system (PDS) was slow during the first decade from to During the next decade there has been a rapid growth of procurement of rice for PDS. The procurement which was just per cent in rose to a maximum of per cent in However, the off take of rice for PDS was lower which ranged between a minimum of per cent in and a maximum of per cent in Stock of rice for PDS ranged from a minimum of per cent in to a maximum of per cent in and reached a high of 80.6 per cent. The recommendation of the Expenditure Reforms Commission is based on a study carried out by Dr Kirit Parikh (Parikh: 1999) according to which a buffer stock of 10 million tonnes was adequate from a food security angle. The present levels of buffer stocks in the country are far in excess of requirements and create more economic instability than stability. 190

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