Major policy decisions need not wait for parliament sessions, especially if it is the election season. On February 28, 2016, at a farmers’ rally in Bareilly, prime minister Narendra Modi announced the government’s resolve to double the income of farmers in five years. It was to coincide with the 75th anniversary of India's Independence in 2022. On November 4, 2023, he announced at a public rally in Durg in election-bound Chhattisgarh (polling on November 7 and 17) that the distribution of food grains will continue for another five years. The National Food Security Act 2013 already provides for it.
Both the Congress and the Bharatiya Janata Party (BJP) have been promising new welfare schemes for the poor. For the agriculture sector, a number of promises are being made, including the payment of a higher than minimum support price (MSP) for paddy and the waiver of farm loans.
Pre-election Announcements
In the run-up to the general elections of 2019, the Pradhan Mantri Kisan Samman Nidhi (PM Kisan) was announced by the then finance minister while presenting the interim Union Budget on February 1, 2019. It was made applicable with retrospective effect from December 1, 2018. The state governments were not required to share any burden as it was launched as a central sector scheme for providing Rs 6,000 to all the small and marginal land owners. After winning the 2019 parliamentary elections in May 2019, the scheme was extended to non-small and marginal landholders also. In 2022-23, 10.71 crore eligible landholders received Rs 6,000 in their bank accounts. The total amount disbursed in the last financial year was Rs 58,201.85 crore.
This is one major reason why the rural and urban poor and the agriculture sector look forward to frequent elections. They must be really worried about the simultaneous elections. Some economists worry about the fiscal impact of such schemes, also called ‘revdis. Many other, more equity-minded commentators point out the sops given to big corporates, like loan write-offs approved through the legal route of the National Company Law Tribunal (NCLT). These need not of course be timed to coincide with the elections.
The announcement to continue food grain distribution flows from the National Food Security Act (NFSA) enacted by the United Progressive Alliance (UPA) government in 2013 which had the objective to “ensure access to adequate quantity of quality food at affordable prices to people to live a life with dignity”. The NFSA provided that the price of rice and wheat will not exceed Rs 3 per kg and Rs 2 per kg, respectively. The central government was enabled to revise the price after three years, that is by 2016. The only condition was that the price should not exceed the minimum support price for wheat and coarse grains and the derived minimum support price for rice, based on the MSP of paddy.
Stock Levels
Due to the buildup of stocks on account of excessive procurement during pre-Covid-19 years, the government doubled the allocation under the Pradhan Mantri Garib Kalyan Anna Yojna (PMGKAY). From April 2020 to December 2022, 103.7 million tonnes (mt) of food grains were lifted for distribution. It was a great help to the poor who had lost their employment due to sudden lockdowns. Some reports in the media suggested that the leakages had come down and the PMGKAY prevented starvation of vulnerable populations. This was also given the credit for the victory of the ruling party in Uttar Pradesh in the 2022 Assembly elections.
After winning the Assembly elections in Uttar Pradesh, and due to lower procurement of wheat in 2022-23, the government realised that it would not be possible to continue with additional allocations. So, from January 2023, the additional allocations were withdrawn but the issue of food grains was made totally free. Even during the UPA years and before the enactment of the NFSA, efforts were made several times to obtain approval from the government for increasing the issue price but it did not materialise. It must be noted that the issue price charged by the Union government since 2002 has been Rs 4.15 per kg for below-poverty line (BPL) households and Rs 6.10 per kg for above-poverty line (APL) families. The issue price for rice was Rs 5.65 per kg for BPL households and Rs 8.30 per kg for APL families.
So, for more than 20 years, the issue prices could not be raised by successive governments at the Centre. Due to the PMGKAY and lower procurement of wheat in 2022-23, the government reduced the allocation of wheat and increased the allocation of rice even to predominantly wheat-consuming states.
If we take 2019-20 as a normal year, the government may require about 31 mt of rice and 24 mt of wheat to meet the requirement of the NFSA. For welfare schemes, about 2.3 mt of rice and 1.4 mt of wheat may be needed. In addition, about 5 mt of wheat is needed for the open market sale scheme.
For continuing the food grain distribution under the NFSA at the current level of coverage (80.2 crore people), the government will have to procure at least about 34 mt of rice and 31 mt of wheat. Barring the last two years, the government has procured much more than this. The government has taken extreme measures to bring down the prices of wheat through the open market sale scheme (OMSS) from January to March 2023 and of paddy to around MSP by restricting the export of rice. So, it should not be difficult to provide food grains for the next five years at the current level of allocation.
Switch to DBT
But the main question is not really the availability of food grains. In the absence of Census and consumption expenditure survey data, the number of people actually deserving of free food grains is not really known. Moreover, no comprehensive study of grain leakages has been conducted by the National Statistical Office (NSO) in the last ten years. Record high export of non-basmati rice was linked by some experts to the possibility of high leakages from the NFSA allocations.
In order to enable people to buy more nutritious food, India should be moving towards direct benefit transfer, especially for the people who are not very poor. One hopes that in food surplus states, DBT for food will be tried so that people can buy pulses, meat, fish or other proteins.
The Congress government of Karnataka is providing money through DBT instead of additional rice. If it is successful, the Union government must also move towards the same so that the dependence on government procurement, especially for rice from water-stressed regions is reduced. For agroecological reasons alone, there is a need to reduce the distribution of rice under NFSA.
Siraj Hussain is a former Agriculture Secretary to the Government of India. Views are personal, and do not represent the stand of this publication.
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