ep 24 2014 : The Economic Times (Delhi)
Don't Nationalise the Food Economy
Allow private trade to play a bigger role
Food minister Ram Vilas Paswan says the government will raise the subsidised food grain entitlement per person to 7 kg from 5 kg a month. That would be a mistake. Relying on the public distribution system to achieve food security is tantamount to nationalisation of the food economy. It will only increase the government’s distorting dominance in the grain market, push up the subsidy bill and feed food inflation. Instead of being the largest and most inefficient hoarder of grain, the government should let private trade procure, store and distribute grain.The Food Corporation of India (FCI) should maintain only a minimum security buffer. This will entail keeping the minimum support price (MSP) separate from and below the procurement price. Paswan admits that it is a challenge to store grain and check leakages in transportation and distribution. Grains stored in the open rot, and excess stocks raise carrying costs of the FCI.
The government should revamp the FCI, shot through with corruption and inefficiency, to usher in a competitive market for grain. It will bring down leakages and lower grain prices. Also, the consumption subsidy should be transferred as cash to consumers. They can use the money to buy grain from competing outlets, including fair price shops, and competition will keep costs down. It will also help cut out inefficiencies of the FCI such as loader salaries of .
`1 lakh a month. However, there are fears cash transferred to the male in a household can be diverted for liquor.
Such fears are not entirely misplaced and, therefore, the government can transfer cash to women’s bank accounts. Their bank accounts should be linked to Aadhaar, or the unique identity number.
States such as Tamil Nadu offer cooked food to the poor as part of food security. It’s not a bad idea, given the economies of scale to be realised in storage and processing of food. However, food security is not only about distribution of food. The focus should be to raise farm output and enhance efficiency across the board. That means moving away from subsidy to investment in the farm sector.
The government should revamp the FCI, shot through with corruption and inefficiency, to usher in a competitive market for grain. It will bring down leakages and lower grain prices. Also, the consumption subsidy should be transferred as cash to consumers. They can use the money to buy grain from competing outlets, including fair price shops, and competition will keep costs down. It will also help cut out inefficiencies of the FCI such as loader salaries of .
`1 lakh a month. However, there are fears cash transferred to the male in a household can be diverted for liquor.
Such fears are not entirely misplaced and, therefore, the government can transfer cash to women’s bank accounts. Their bank accounts should be linked to Aadhaar, or the unique identity number.
States such as Tamil Nadu offer cooked food to the poor as part of food security. It’s not a bad idea, given the economies of scale to be realised in storage and processing of food. However, food security is not only about distribution of food. The focus should be to raise farm output and enhance efficiency across the board. That means moving away from subsidy to investment in the farm sector.
