Need set of rules on foodgrain release: Basu

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Chief Economic Advisor Kaushik Basu has said that improved storage alone will not bring down food prices and calls for a redesign of the mechanics of acquiring and releasing food to poor. In a paper on foodgrain management Basu has argued that a set of rules are needed for automatic release of foodgrains to the poor, reports CNBC TV18's Siddharth Zarabi.

Here is the verbatim transcript of his comments. Also watch the accompanying video.

The working paper by Kaushik Basu, the Chief Economic Advisor, is being hosted on the Finance Ministry website a few days back actually. In some ways this influential policy work has raided right in the midst of this food grains debate.

Now there are three essential arguments that are being made in this 40 page paper and it is hoped in this paper that at least this will generate a debate on policy options before the government. The first argument is that improved storage according to the working paper will not lead to lower prices and therefore there are some steps that are needed to address this situation.

The chief among these being the fact that the restrictions that are imposed on the foodgrain that is supplied by food corporation India to millers and therefore then onwards to end users, there are restrictions at the last mile. This paper argues that those restrictions should be done away with because that will lead to more efficient distribution and allocation of resources in foodgrain scarce society like India.

The second real argument is about the redesign of the public distribution system and while the paper does not go into great length about it. It talks about the option of food coupons to begin with. This was a suggestion which was earlier floated in the economic survey this year and the working paper takes this forward, links it with the unique identification project which is underway.

Even talks about the option of somehow putting it together through mobile phones and if not at this stage a direct cash transfer which the working paper says would be ideal. It talks about food coupons being given to the women in every household and these food coupons even being transferable, sellable commodities in that sense. So really a strong suggestion from the Finance Ministry chief economic advisor to this end.

And the third bit really is sort of criticising the government's actions with regards to food grain procurement and storage. The key point here being made in two financial years, financial year '07 and financial '08 when wheat and rice prices were sort of low, the paper says that procurement did not go up which sort of mitigates against the economic concept of buying when prices are low and therefore saying that things like the cabinet committee on prices which decides on food grain releases is not a system that should be followed.

We should instead go in for automatic release of foodgrains as and when prices go up and therefore attempt to bring down prices.

So in some ways really to summarise this is a important policy paper from an influential policy wonk at this stage, whether it finds resonance in the government is a big question mark but at least a start has been made in these 40 pages to do a critical analysis of the food grain management and distribution system and several alternatives have been suggested.

I think that is the best way to answer that and this paper recognises the fact that storage as well as procurement is something that the government has to be mainly concerned with but there are no short term options that.