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It would also be interesting to know what Food Corporation of India has done in terms of improving conditions in existing warehouses apart from building new ones, during the past five years
Since 2004, the present United Progressive Alliance (UPA) government has, on an average, spent close to Rs1 lakh crore, yes, Rs1 lakh crore per year on various anti-poverty schemes. Nothing, really has improved, as poverty remains, and only the money spent on these programmes have simply vanished into the thin air, so to speak.
The interim budget for 2013-14 provides for Rs92,000 crore for food subsidy, which, the Food Corporation of India (FCI), said falls short of the procurement costs by almost Rs40,000 crore.
Our finance minister, P Chidambaram, has estimated the food subsidy bill for FY 2014-15 to be around Rs1.15 lakh crore in his interim budget. But this amount is twice more than India's poverty gap, the cost of pushing all households above the poverty line, if cash transfers were used instead.
According to the survey carried out by the National Sample Survey Organisation (NSSO), the Consumption Expenditure Survey available for 2012-13 is estimated to be Rs57,544 crore, as mentioned in the press.
In fact, a government official is reported to have stated that the reason for food subsidy substantially exceeding the poverty gap is due to the huge costs incurred by the Food Corporation of India in holding the foodgrains. The procurement costs, loading and unloading expenses, transportation from point of collection/ production to storage point, insurance cover, pilferage prevention (security aspects), interest charges and reloading expenses for onward delivery are other factors to be borne in mind. He felt that there is tremendous potential for FCI’s operational costs to be reduced and more efficient restructuring would help. On the top of all these, would be the enormous expense, in terms rent chargeable, that would ultimately increase the costs of the grains stored. One cannot forget the interest charges on all the money spent on these charges.
As the finance minister rightly pointed out that it is not the point to talk about if the food subsidy should be continued or not, but to see if the limited resources that are available be used more efficiently for targeting poverty effectively and ensure that focus is on making the grains at the most economical price. Efforts have to be continuously made to reduce the subsidy burden. At the same time, giving cash transfers would not be helpful as this may be misused and defeat the very purpose to reduce the poverty.
In a recent interview, Chidambaram apparently made these references and felt that these matters need to be sorted out between the FCI and the Ministry of Consumer Affairs on one hand, and with the banks on the other, who make the finance available for such transactions.
Moneylife has carried various stories on the foodgrain situation and the pathetic conditions of storage in the Food Corporation of India's godowns in the country. There are many areas of controls and checks that come to play when exports are involved. Whether it is rice, wheat soya meal or other items that are in demand internationally, the overseas buyer cannot wait indefinitely for price quotations. At the same time, like in the case of raw sugar, it is not possible for the industry to survive unless suitable export subsidy is given.
Time and again it has been reported and evidence have appeared in the press showing details of the poor storage facilities that we have in the country; in fact, in many areas, there are no facilities or what is available is inadequate.
Only an independent study would reveal the problems faced by Food Corporation in dealing with such large volumes of foodgrains that come in and similar amounts that have to be go for shipment. Transportation and equipment handling for maintenance of stored grains are just as important that may hamper the work in these warehouses.
It is time that the government comes forward to make some radical changes in the scene. As a corporate social responsibility (CSR), opportunity may be given to business houses to be allotted adequate land to construct huge warehousing facilities, on long term lease, from where the foodgrains can be distributed locally or taken out for export shipment.
Such a move would become workable if the concerned states make the land available in areas of production; some land near the ports would also help for easy shipments overseas. But in the meantime, it is imperative that an independent audit be done on how effectively FCI is functioning, in terms of purchase, storage and deliveries, besides others matters such as prevention of pilferage, protection from rodents and weather effects. It would also be interesting to know what they have truly done in terms of improving conditions in existing warehouses apart from building new ones, in the last five years.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)