Indian food chain needs a major surgery

April 21, 2020

According to UN body, Food and Agriculture Organization’s (FAO) recent report titled ‘The State of Food Insecurity in the World 2017’, 14.5% of India’s total population are undernourished, 21% of children under-five years are severely underweight, and 28.4%% are stunted due to chronic undernourishment.  India barely managed to reduce people with the hunger to 190.7 million in 2016-17 from 210.1 million in 1990-92.  However, our arch-rival China, whose number of hungry people was higher than India, has managed to reduce to 134.7 million in 2016-17 from 289 million in 1990-921.   Undernourishment has a significant impact on child development, which in turn influences adult productivity and economic growth of the country.  And, India is home to about one-quarter of the world’s food insecure people, and improving its nutritional status remains a significant challenge, despite surplus production2.


The production of food grains increased from around 50 Mt in 1950-51 to over 272 Mt during 2016-17, a fivefold increase in six decades, due to Green revolution.   India is the top producer of milk, pulses, and jute in the world.  It ranks second in the production of rice, wheat, sugarcane, groundnut, vegetables, fruit, and cotton. India also is a leading producer of spices, fish, poultry, livestock and plantation crops3.  The abysmal performance of India in food sector notwithstanding surplus production can be attributed to mono-cropping, misplaced procurement policies through Minimum Support Prices (MSP), storage in Food Corporation of India (FCI) godowns, malfunctioning Public distribution system (PDS), and changing consumer patterns.


The 1960’s Green Revolution was a boon to address the issue of malnutrition in the developing world. However, now it has turned out to be a bane due to cereal-based mono-cropping which does not ensure balanced food security, indiscriminate use of fertilizer and pesticides, excessive depletion of groundwater, propelled by cheap power, and un-scientific farming patterns and destruction of forest land 4,5.


India’s procurement policy is expected to address four issues. First, to address the possible food crises due to drought or any other natural calamity, second to prevent violent fluctuation in prices of commodities due to macroeconomic imbalances, third to avoid black marketeering and speculation, and forth to support the vast PDS network6.


The PDS started during British Raj to fight the famine, expanded rapidly in the post-independent period.  PDS is controlled by the Central Government which procures food grains through the FCI by paying Minimum Support Prices (MSP) to the farmers.  With a network of more than 4.62 lakh fair price shops (FPS) distributing commodities annually to about 160 million families, the PDS in India is perhaps the largest distribution network of its kind in the world.  The cost of operating the current PDS is worth more than Rs. 30,000 crore, and amounts to 5.2 per cent of total Central Government expenditure.  Such high cost is mainly due to the procurement prices, logistics, and state taxes.  MSPs are raising every year adding up to the purchase costs.   The country has also been stocking almost double than it needs in FCI godowns and per year carrying cost of grain is as high as Rs 5 per kg. Carrying costs Include rent, management, maintenance and interest on money blocked in stock7.


Unfortunately, the whole operation is bursting with corruption, handling losses, theft, pilferage, wastage, and poor logistics, making it spuriously expensive.  An RTI application filed to FCI, responsible for procurement and distribution of food grains, had revealed that 62,000 tonnes of food grains have been damaged in FCI godowns across the country, in the last four years8.  Though the losses are attributed to natural calamities like cyclone and floods, experts say it is also an indication of poor storage facilities, pilferage, and transit loss.


Often the high-quality Rice and Wheat are replaced and diverted by few corrupt PDS Network officials to the hotels or private parties.  Many bogus ration card holders also drain the FPSs. The FPSs are located in urban and semi-urban areas and do not reach real poor and hungry people who are situated in remote villages 9.  PDS includes only cereals, and there is no provision for protein.  Malnutrition and stunted growth in children are mainly due to protein – energy malnutrition 10.


National Food Security Act (NFSA) was enacted to enlarge India’s food distribution programme substantially, in September 2013.  The NFSA extends previous distribution programme for wheat and rice, and now provides up to 5 kg per person per month for 67% of the population at prices of INR 3/kg for rice, INR 2/kg for wheat and INR 1/kg for coarse grain11. This programme, if fully implemented, would be the largest food distribution programme ever to be undertaken.  As of now, the programme has been implemented only in few states3.


In effect, FCI, MSP, APMC, and Essential Commodities Act have created a sort of Government managed monopoly in food sector which has resulted in severe agrarian crisis with escalating farmers suicides. While the Agriculture income is supposed to be tax-free, but in reality, a farmer spends up to 15% of the cost of production while selling his produce in the form of various fees and taxes 12.


Although the majority of the-the Indian diet is vegetarian, it is highly diverse, with large regional variations and there are evident changes in patterns over time.  Often, the grains supplied by the PDS are not their staple diet, and therefore they either sell them in the black market or feed it to their livestock.


Unless the Government changes its Agriculture policy, change the current MSP, FCI and PDS structure, the economic growth, and food security are far-reaching goals.  The Government is now famous for surgical strikes against external enemies.  However, it has to conduct a major surgery on the enemy within to ensure food security to the majority of its citizens.  Here are some useful suggestions arrived after studying best practices across the world to address this major issue.


First, the Government has to do away with the mono-crop MSPs. Monocrop MSP has pushed the farmers to complacency.  For example, in Punjab and Haryana, the farmers have stopped growing pulses and oil seeds.  Such mono-cropping has added to the state exchequer in the form of imports.  Hence, farmers should be encouraged to rotate crops by offering MSPs to all Agricultural products or provide incentives to grow the crops in demand.


Second, the FCI operations should be decentralization to all States, and State FCI can be further decentralized to the district levels.  Instead of moving the grains through the extended supply chain, District level FCI branches should be empowered to purchase the staple grains of the local population and distributed locally.


Third, new technology should be used in supply chain and warehouse management.  RFID coded tamper proof bags of 30 kgs should be utilized, and complete logistics should be through GPS installed vehicles. RFID coding will enable us to trace every grain.  This traceability improves the quality, prevents theft, misuse, and diversion, and also increases the shelf life of the grains.


Fourth, FCI should start using the private, APMC or rural granaries to store the food grains.  Rural underground granaries were used for a long time in ancient India and known to extend the shelf like of grains up to 3 years. FCI can measure and package the grains in RFID coded Tamper Proof packages and store in Rural Granaries and procure them in Just-in-time method.  The farmers can be compensated through Warehouse Cash receipts.


And finally, the PDS should include a source of protein, vegetable proteins sources like Corns, Chickpea or non-vegetable protein sources like egg or milk powder.












Dr. Prahlada N.B

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