FOOD SECURITY AND PROCUREMENT OF RICE IN...
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CHAPTER-6
FOOD SECURITY AND PROCUREMENT OF RICE IN INDIA
6.1. INTRODUCTION:
Rice holds a unique place in Indian Economy as it contributes 70 per cent
to the total production of food grains in India. It is noteworthy that in recent times,
most of the rice growing areas have received very good rainfall except in the
states of Punjab, Haryana, and West Bengal, UP where 95 per cent of the lands
are irrigated. Hence, quantum of rainfall does not influence much, the production
of rice and its prices. But, prices of rice are increasing due to increased cost of
production occurring through increased demand of energy for operating water
lifting devices in irrigated areas. Added to this, violent fluctuations in yield per
acre and cost per unit of output are noticed. In this context, to safeguard the
interests of rice growers, the government started adopting the measure of
procurement of rice from the farmers. Hence, in this chapter, an attempt is made
to examine the level of procurement at the all India level and across the major
producing states of India. Procurement of rice has been made to ensure adequate
stock of rice for public distribution system. The PDS is the channel through which
rice and other grains are supplied to the BPL and other beneficiaries under the
food security scheme at subsidised rates. The aim of food security scheme is to
“provide for food and nutrition security, in human life cycle approach by ensuring
access to adequate quantity and quality of food at affordable prices for people to
live a life with dignity” Basu, Kaushik (2011). This scheme of food security
assumes greater significance since rice is consumed by majority of people in the
country. The paradox of high economic growth and slow reduction in the number
of food insecure persons needs to be understood in proper perspective. As such, in
this study, an analysis of consumption pattern of rice, determinants of minimum
support price and food security have been made. At the end of the paper,
suggestions to improve the scheme of PDS in respect of rice are given. It would
therefore be interesting to see any relationship between the movement of food
security, procurement, consumption and prices. In doing so, a pre-green
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revolution from 1950-51 to 1965-66 and after-green-revolution from 1966-67 to
1989-90 and reform period of 1990-91 to 2010-11 has been taken into
consideration. This chapter aims to examine the above aspects as a background.
Section I of this chapter is devoted to determinants of procurement of rice in
major producing states in India. Section II is devoted to investigate and relate the
food security and minimum support prices in rice sector. Section III relates to the
consumption pattern of rice. The last part is devoted to suggesting perspective
fruitful rice policies.
6.2. BACKGROUND OF THE STUDY:
The green revolution transformed the traditional cropping in favour of rice at
the cost of coarse cereals. The green revolution in India started in the late 1960s and
with its success India attained food self-sufficiency within a decade. On the
contrary, the agricultural growth in the 1980s (the second ‘wave’ of the Green
Revolution) involved almost all the crops including rice and covered the whole
country, it enabled to raise rural income and alleviate rural poverty substantially
(which is a very important stable food in eastern and southern India) (Koichi Fujita,
2007).
The next phase of free market in food was under the Food Minister, Rafi
Ahmed Kidwai, beginning from 1952. Improved food grains production in 1953
and 1954 led to declining prices and a temporary break from chronic shortages.
Government procurement of food grains was stopped and restrictions on the
movement of grains were removed. Paradoxically, even as farmers faced
deflationary conditions, there were shortages and price rise in various parts of the
country. The instability in prices, combined with adverse weather in the autumn of
1955, has a dampening effect on production.
In 1957, the Ashok Mehta-led Food Grains Enquiry Committee concluded
that an expended money supply, growing industrialisation and urbanisation and
increased investment led to enhanced purchasing power. On the other hand,
hoarding by traders, producers and consumers as well as speculative activities in
anticipation of public investment by the government led to a rise in prices.
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Additionally, it found that prices were allowed to fall too low in 1955 and that there
was no coordinated policy combating inflation shortages that began in 1956.
The government had to reintroduce controls and carry-out price support
operations to curb the fall in prices. It opened an additional 10,000 ration shops
between October 1956 and September 1957, and released its stock to combat price
rise. This episode underscored the need for the government to intervene in the
market to influence prices and output. The food-grains enquiry committee
recommended the setting up of institutions like the FCI and the CACP for this
purpose. The government’s decision to promote cash transfer in the National
Security Bill presented in the recently concluded session of parliament ignores these
lessons from India’s past.
Since the 1950s India has made major strides in agricultural production as
evidence by the large government-held stocks of wheat and rice. However,
problems of inadequate nutrition, starvation and double digit food price inflation
remain. Strengthening of the PDS, as seen in Chhattisgarh and Tamil Nadu, would
serve the purpose of ensuring food security for the nation through stabilising prices,
production and consumption. As seen in the past, government withdrawal from the
food sector can lead to a decline in production and an increase in hoarding and
speculative activity. Unlike the PDS, cash transfers cannot counter the resultant
shortages and price rise. In a growing economy like India with constantly increasing
demand, the government needs to intervene on both the demand and supply sides to
ensure food security for all its citizens.
To understand the importance of a broad food policy, we only have to look at
India’s brief experiments with decontrol. The government’s policy reaction to the
Bengal famine of 1943, which led to the death 1.5 million people, provides us with
a primer of what not to do in famine situation. At first, there was a complete laissez-
faire policy towards food grain trade, which led to hoarding by traders, farmers and
consumers. Subsequently, the provincial governments introduced a policy of
procurement and distribution of food grains, which failed miserably as they did not
have the requisite infrastructure to implement the policy. For example, grains were
rotting in Calcutta, the centre of distribution in the eastern region, as the
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government has not made arrangements to handle in coming stock. To avoid what
was called a “tragedy in unpreparedness”, the government took steps towards
setting up a comprehensive food administration, including procurement by the
government, the building of buffer stocks and the introduction of rationing
(Madhavi Cherin, the Hindu News Paper, May 13-2013).
According to feminist poem titled Mother (Aai, in Marathi) connects with
many a child raised with dignity and pride amidst hunger and self-denial (by
Lanjewar 1981):
I have seen you turning back the tide of tears trying to ignore your stomach’s growl Suffering parched throat and lips Building a dam on a lake… I have seen you sitting in front of the stove burning your very bones to make coarse bread and a little something to feed everybody, but half-feed yourself so there’d be a bit in the morning… I have seen you washing clothes and cleaning pots in different households rejecting the scraps of food offered with pride…
Distribution of subsidized rice and wheat is an important instrument of food
security policy in India. During the 1960s and 1970s, as the dependence on imports
was high, the quantity distributed was around 10 million tonnes per year. During the
1980s and 1990s, the average quantity hovered around 15 million tonnes per year.
However, during the last 10 years, the volume of subsidized grains distributed in the
country has considerably gone up. It varied between 36 and 50 million tonnes
during 2002-03 to 2009-10. It is expected to have exceeded 60 million tonnes
during 2010-11, when food inflation was at very high level. The food grain, mainly
rice is supplied at subsidized prices under a large number of schemes covering
around 50 per cent of the total population. These include (a) targeted public
distribution system (TDPS), (b) supplementary nutrition program, (c) mid day
meals for school children, (d) food for work or employment-linked programmes;
and (e) other welfare programmes. The TPDS is the major programme and includes
20 million poorest of the poor households (Antodaya), 65.2 million below poverty
line families (BPL), and other vulnerable households that are otherwise above the
poverty line (APL).
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Procurement of food-grains, in particular, wheat and rice, is an open-ended
operation. The Food Corporation of India (FCI) procures food-grains at the MSP,
which are based on the recommendations of the Commission for Agricultural Costs
and Prices (CACP). In addition, in recent years, a number of states have opted for
Decentralised Procurement Scheme introduced in 1997, under which food-grains
are procured and distributed by the State governments themselves. Between 2006-
07 and 2010-11, MSP of rice and wheat were hiked at an average annual rate of
14.1 per cent and 14.6 per cent, respectively. On an average, agricultural price
policy has provided a margin of around 20 per cent over total costs to both rice and
wheat farmers (Dev and Rao, 2007).
In order to achieve goals such as inter-year price stability against a bumper
harvest or below-normal production, guaranteed prices to producers, reasonable
prices for consumers and food supply at subsidised rates to vulnerable sections, the
government has been carrying out procurement and storage (buffer stock) of food-
grains (rice and wheat) since the mid-1960s. These measures have been
implemented through two important institutions, namely, the Commission on
Agricultural Costs and Prices (CACP), which is entrusted with the task of
suggesting MSP, and the Food Corporation of India, which carries out the task of
procurement to ensure that producers do not get a price below MSP and that food-
grains required for maintaining a reasonable level of buffer stock and for the public
distribution system are in place. (Chand Ramesh, 2005).
Historically, after the Jha Committee report of mid-sixties, the first detailed
statement of price policy came in the form of a booklet from the Agricultural Costs
and Prices Commission in 1986. This has induced us to have a fresh look at the
major instruments of price policy, viz., Minimum Support Price, Procurement and
Public Distribution System. The Commission was headed by Prof M. L. Dantwala
and in its final report the Commission suggested the Minimum Support Prices for
Paddy (Deshpande.R.S, 2002).
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The commission for agricultural costs and prices (CACP), makes price
recommendations to the over time, support prices have become a guaranteed
income support rather than a price-risk hedge. Is procurement evenly distributed
over rice growing states? No, the main beneficiaries of procurement are Punjab,
Haryana and Andhra Pradesh. For example last year, for paddy, out of 19 million
tonnes, Andhra Pradesh accounted for more than 7 million tonnes and nearly the
same amount from Punjab. How is the price policy responsible for huge stocks of
food grain? Over the '1990s, misuse of the price policy has created a huge food
management problem. Procurement prices for paddy have been continuously rising
each year, creating a distorted incentive for farmers to switch to rice cultivation.
Price policy has an impact on the cost of procurement operations and ultimately on
distribution costs, both on the open market and on the PDS (Gulati A. and Pradeep
K.Sharma, 2011).
The production of food grains during the season about 70 per cent is accounted
by rice alone. It is noteworthy that most of the rice areas have received very good
rainfall so far except Punjab, Haryana and West U.P. which is more than 95per cent
irrigated, hence rainfall intensity and distribution so far may not impact the rice
production, though the cost of production is likely to increase due to more demand
of energy for operating water lifting devices in irrigated areas.What is the level of
procurement of paddy at the national and across the major producing states in India.
Food security in Asia has traditionally focused on rice—its consumption
procurement, and minimum support prices. The technological change of the mid
sixties was a step towards meeting the food crisis that threatened food security of
the country during those years. At that time it was suggested that the technological
change alone might not bring the required dynamism in the growth of agricultural
sector and it needed to be supported with proper institutional backup.
The new Food Security Bill, which is under the consideration of Parliament,
envisages guaranteeing pre-defined quantity of staple grains to 75 per cent of rural
and 50 percent of urban population, with an overall coverage of 63.5 per cent of the
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total population. Out of these, 46 per cent of rural and 28 per cent of urban
population is categorized as priority households, which will be entitled for 7 kg of
rice or wheat per capita per month. The remaining households, which include APL,
will be covered on ‘as and when available basis’.
On the other hand, there is an allocation of Rs. 10,000/- crore to the Food
Security Bill, a project that will most certainly destroy the nation’s financial
security. This shows that the central government will continue to indulge in populist
schemes regardless of their financial consequences. It is unwise to be happy with a
fiscal deficit that is less than six per cent. The problem is that no attempt has been
made to stop or reduce this hemorrhaging of the economy. And the states are not far
behind in ever increasing expenditure on free power rice at Re.1 per kg and so on.
The nation will slowly but surely spend itself to economic failure, (Union Budget,
2013-14).
It would therefore be interesting to see any relationship between the movement
of food security, procurement, consumption and prices. In doing so, a pre-green
revolution of 1950-51 to 1965-66 and after-green-revolution of 1966-67 to 1989-90
and reform period of 1990-91 to 2010-11 has been taken into consideration. This
chapter aims to examine the above aspects as a background. The overarching
purpose of this study is to consider the food security, procurement and prices of rice
in India.
6.3. DETERMINANTS OF PROCUREMENT IN RICE
Procurement and support price acts basically as an insurance cover to
cultivators against the possibility of post-harvest crash in market prices. More
positively, it provides incentive, to farmers and stimulates higher production by
encouraging the use of modern inputs and by inducing investment in cost-reducing
technology. It also influences their choice of selling marketable surplus to
government agencies or in open market. But how is this crucial procurement price
determined? This question has been a matter of debate and controversy in India
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[Krishna and Raychaudhuri.1980; Subbarao, 1981; Krishna and Chhibber,
1983; Gulati, 1987].
Some earlier works like Krishna and Raychaudhuri (1980) tend to suggest
that procurement prices simply follow the trend of wholesale prices. However, in
our formulation we have included cost of production along-with past trends in
wholesale prices of wheat and paddy (as derived by us) as determinants of
procurement prices.
The Food Corporation of India (FCI) is the central nodal agency designated
for purchase of rice and wheat at pre-announced support prices. The FCI
establishes its own purchase centres but largely depends on the state agencies,
which operate on behalf of the FCI. Some state governments also make purchases
to meet the needs of their own initiated public distribution programmes, but the
quantum of such procurement is a small proportion of total procurement at the
national level.
As rice is grown in three seasons, the harvest and market arrivals of
paddy/rice are spread throughout the year. The rice produced in the kharif season
accounts for more than half of the total market arrivals and consequent
government purchases. Month-wise pattern of procurement of rice reveals that
around 50 per cent is procured during October-December, 30 per cent during
January-March, 15 per cent during April-June, and remaining 5 per cent during
July-September.
If we see trend in procurement of rice and wheat during the last 16 years there
is considerable inter-year variation in the scale of procurement of rice and wheat.
However, there is an increasing trend. The average annual procurement of rice
during the triennium ending for (TE) 2010-11 was at 31 million tonnes which was
considerably higher than that during TE 2000-01 (17.4 million tonnes). Similarly,
for wheat, the annual procurement during TE 2010-11 was 25.4 million tonnes as
compared to 14.9 million tonnes during TE 2000-01. The procurement during the
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current marketing season (2011-12) is already at record level for wheat at 28.3
million tonnes and for rice it is expected to reach around 35 million tonnes.
During 2008-09, out of the total rice procurement of 33.7 million tonnes, 52.3
percent was contributed by Punjab and Andhra Pradesh, and 27.8 per cent by UP,
Chhattisgarh and Orissa. These five states together accounted for around 80 per
cent of total procurement of rice in India. Prior to the launch of a decentralized
procurement scheme in 1997, the degree of concentration of procurement was very
high. In recent years several non-traditional states have started contributing to the
price support purchases of rice. Table-6.1 Share of Procurement of rice of major producing states of India
States/Year Punjab Haryana U P A P Orissa TN WB Chhattisgarh India 1996-97 32.77 9.29 7.02 34.89 3.67 5.61 1.23 --- 100.00 1997-98 38.86 8.14 6.88 24.73 4.49 7.90 1.30 --- 100.00 1998-99 34.96 2.38 6.89 40.63 3.82 5.82 1.12 --- 100.00 1999-2000 37.39 5.41 7.80 30.16 4.88 5.04 1.93 --- 100.00 2000-01 32.88 6.99 5.54 33.87 4.33 8.00 2.05 --- 100.00 2001-02 32.91 6.71 8.75 29.04 5.66 3.85 0.22 8.68 100.00 2002-03 48.34 8.07 8.28 16.05 5.42 0.65 0.77 7.86 100.00 2003-04 37.94 5.84 11.19 18.53 6.01 0.91 4.05 10.40 100.00 2004-05 36.89 6.73 12.04 15.82 6.44 2.64 3.82 11.49 100.00 2005-06 32.02 7.43 11.39 17.97 6.45 3.35 4.61 11.81 100.00 2006-07 31.18 7.08 10.07 21.22 7.97 4.29 2.56 11.41 100.00 2007-08 27.77 5.48 10.06 26.44 8.20 3.37 4.97 9.55 100.00 2008-09 25.39 4.23 10.95 26.90 8.28 3.56 4.95 8.46 100.00 2009-10 34.58 6.77 9.78 16.67 7.04 3.66 3.64 11.44 100.00 1996-97 to 2000-01
CAGR 11.69 1.62 8.22 13.62 16.80 15.04 29.12 --- 12.05
2001-02 to 2009-10 CAGR
1.47 2.40 7.42 6.43 11.21 20.93 40.23 7.87 5.83
2001-02 to 2010-11 CAGR
1.24 2.07 5.02 7.78 10.21 20.16 31.51 7.85 5.71
1996-97 to 2000-01 CV
4.56 8.66 4.09 4.78 6.14 7.72 9.98 --- 4.50
2001-02 to 2009-10 CV
0.88 1.69 2.86 4.09 3.64 5.47 6.83 2.68 2.11
2001-02 to 2010-11 CV
0.75 1.44 2.47 3.75 3.18 4.94 5.74 2.51 1.94
Source: www.agricoop.com, Ministry of Agriculture, Government of India. Note: in 000’ tonnes, Data for 2010-11 are based on Advance Estimates. Note: Punjab, Haryana, UP-Uttar Pradesh, AP-Andhra Pradesh, Orissa, TN- Tamil Nadu, WB- West Bengal, Chhattisgarh, India.
Table-6.1 Show the state-wise procurement of rice from major rice producing states in India
Punjab has topped the list of 8 rice producing states in India with regard to
procurement which rose from 32.77 per cent in 1996-97 to 34.88 per cent in 2009-
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10 with the highest procurement of 48.34 per cent in 2002-03. Andhra Pradesh is
another major rice producing state where procurement of rice varied between
minimum of 15.82 per cent in 2004-05 to a maximum of 40.63 per cent of rice in
1998-99. The other states accounted for less than 10 per cent of rice procurement.
The Compound annual growth rate of procurement of rice at all India level
was 12.05 per cent between 1996-97 and 2000-01 during which the compound
annual growth rates (CAGR) of rice procurement of Punjab, Haryana and UP were
lower than the national compound annual growth rates (CAGR). During 2001-02
to 2009-10 the compound annual growth rates (CAGRs) of rice procurement of
Punjab, Haryana, were lower than the national level compound annual growth
rates (CAGR) 5.71 of rice procurement. The compound annual growth rates
(CAGR) of other states of rice procurement were higher than national level
compound annual growth rates (CAGR) during the corresponding period between
1996-97 and 2010-11. Co-efficient of variance (CV) of rice procurement at all
India level during 1996-97 to 2000-01 was higher than the CV of UP but lower
than the co-efficient of variance of procurement of rice of other major rice
producing states. In the two subsequent period 2001-02 to 2009-10 and 2001-02 to
2010-11 the all India CVs of rice procurement was higher than the co-efficient of
variance (CV) of rice procurement of Punjab and Haryana but lower than the co-
efficient variation of rice procurement of other major rice producing states.
Table-6.2 Rice Procurement state wise share in Central Pool
The share of AP and Punjab in the procurement of rice in the central pool
have been high compared to other major rice producing states during the period
from 1999-2000 to 2011-12. However, a trend of fluctuations in the share of rice
procurement from these two states is observed during the corresponding period.
Among other major rice producing states the share of Haryana, Orissa, Tamil
Nadu and UP are substantial compared to other states. The share of Assam,
Karnataka, Bihar, Tamil Nadu and West Bengal has been lower.
The co-efficient of variance of the share in the procurement of rice by the
Central Pool of all the major rice producing countries are higher than the all India
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CV of 1.67 per cent except the CV of Haryana and Punjab. The CAGR of share of
states in procurement of rice by the Central of states like Assam, Bihar, Orissa,
Tamil Nadu, UP and West Bengal are higher than all India CAGR of 5.27. The
CAGR of other major rice producing countries is area lower than the CAGR of all
India. The rice millers in Erode, Karur and Coimbatore districts procure paddy
from Karnataka. Peak arrivals will be in the months of December to April. Usually
May-November is considered as lean season. In this case of Karnataka’s
procurement is mainly from Gangavathi, Sindhanur and Kartagi. Sona, Deluxe,
Emergency, BPT and ADT 43 are the major varieties procured. During off season
viz., from mid June to October arrivals from Andhra Pradesh are reported. Mostly
paddy from these areas is distributed around the district.
It has been observed that the procurement of rice has increased significantly
over time and this increase has been not only in absolute terms but the intensity of
procurement as a proportion of total production has also increased. Rice
procurement as a proportion of total rice production in the country has increased
from 6.4 per cent in 1972-73 to about 34 per cent in 2010-11. The intensity in the
procurement of rice registered wide fluctuations especially before 1999-2000.
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Table-6.2 SHARE OF MAJOR PRODUCING STATES IN THE PROCUREMENT OF RICE IN THE CENTRAL POOL OF INDIA
States/ UTs A.P. Assam Bihar Haryana Karnataka Orissa Punjab Tamil Nadu U.P. West Bengal India Increase over Previous Year
2011-12
1999-2000 34.17 -- 0.12 6.13 0.69 5.58 42.19 -- -- 2.18 100.00 --
2000-01 39.07 -- 0.11 8.04 1.25 5.00 37.78 -- -- 2.36 100.00 22.43
2001-02 33.01 -- 0.46 7.60 0.70 6.44 37.26 4.36 9.93 0.25 100.00 25.28
2002-03 18.05 -- 1.09 9.12 -- 6.11 54.66 0.74 9.36 0.87 100.00 -56.7
2003-04 21.51 0.09 1.77 6.77 -- 7.15 43.98 1.05 12.97 4.70 100.00 64.9
2004-05 18.43 -- 1.61 7.85 0.10 7.49 42.98 3.08 14.02 4.43 100.00 17.76
2005-06 21.14 0.00 2.17 8.73 0.20 7.59 37.69 3.94 13.40 5.14 100.00 29.06
2006-07 24.54 -- 2.19 8.18 0.10 9.22 36.06 4.96 11.79 2.95 100.00 -24.71
2007-08 29.94 -- 2.19 6.20 0.07 9.29 31.46 3.82 11.39 5.63 100.00 36.29
2008-09 30.21 0.01 3.61 4.75 0.36 9.34 28.53 4.01 13.36 5.81 100.00 53.66
2009-10 27.46 0.03 3.24 6.61 0.31 9.07 33.71 4.51 10.55 4.51 100.00 -20.68
2010-11 33.27 0.05 3.06 5.84 0.62 8.54 29.90 5.34 8.84 4.54 100.00 21.64
2011-12* 24.24 0.04 5.79 7.48 1.26 8.07 29.20 5.95 12.47 5.49 100.00 -18.26 1999-00 to
2011-12 CV 2.52 11.73 6.60 1.42 7.64 2.89 0.77 4.60 2.55 4.61 1.67 23.57
1999-00 to 2011-12CAGR
4.63 9.30 39.99 3.52 0.97 10.16 1.53 20.39 7.90 21.49 5.27 2.01
Source: www.caluculatedfci.com, (Food Corporation of India). Note: Neg-Less than 500 tonnes, *as on 21.05.2012. Note: Marketing Season-Wise) (Figures in lakh tonnes)
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Chart-1 compound annaual growth rate of rice procurement for central pool in India (Marketing season wise)
Source: table-6.2
6.4. MINIMUM SUPPORT PRICES OF RICE:
Table-6.3 MINIMUM SUPPORT PRICE FOR RICE IN INDIA Year/Average Paddy Common Coarse Cereals
*1975-76 to 1980-81 510.00 507.00 *1981-82 to 1990-91 1494.00 1375.00 *1991-92 to 2000-01 3745.00 3205.00 *2001-02 to 2011-12 7845.00 7195.00
1991-92 230 205 1992-93 270 240 1993-94 310 260 1994-95 340 280 1995-96 360 300 1996-97 380 310 1997-98 415 360 1998-99 440 390 1999-00 490 415 2000-01 510 445 2001-02 530 485 2002-03 530 485 2003-04 550 505 2004-05 560 515 2005-06 570 525 2006-07 580 540 2007-08 645 600 2008-09 850 840 2009-10 950 840 2010-11 1000 880 2011-12 1080 980 2012-13 1280 2013-14 1345
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#Compound Annual Growth Rate (CAGR) 1975-76 to 1980-81 7.70 7.83 1981-82 to 1990-91 5.85 4.47 1991-92 to 2000-01 8.69 7.73 2001-02 to 2010-11 8.23 8.07
**Co-efficient of Variation (CV) 1975-76 to 1980-81 2.49 2.59 1981-82 to 1990-91 1.86 1.49 1991-92 to 2000-01 2.44 2.47 2001-02 to 2010-11 2.71 2.63
Source: Directorate of Economics and Statistics, Department of Agriculture and Cooperation, GOI. Note: In case of Bihar and Kerala additional incentive bonus extended upto 31.05.2007 and in case of
Andhra Pradesh, Chhattisgarh, Orissa, Tamil Nadu and West Bengal additional incentive bonus extended upto 30.09.2007. (i) Paddy common for 2006-07 include an additional incentive bonus of ` 40 per quintal on procurement between October 1, 2006 to March 31, 2007. (ii). Paddy common for 2008-09 includes a bonus of ` 50 per quintal over the MSP. Note: (Fair Average quality) Rupees per quintal
In this table-6.3 shows details the average MSP for paddy (common)
during 1975-76 to 1980-81 was the lowest i., e. at Rs. 510.00 per quintal which
is more than doubled during the next decade between ranging from 1981-82 to
1990-91 which is the Rs 1494.00. The MSPs for rice during 1991-92 to 2000-01
rose by more than hundred percent to Rs. 3745.50 over the previous decade
1981-82 to 1990-91 highest MSP for rice at Rs. 7845.00 which prevailed
during 2001-02 to 2011-12. An almost identical trend of MSP for coarse cereals
was observed during the corresponding decade between 1975-76 to 1980-81 and
2001-02 to 2011-12. The fact that in recent years there has been a tendency
among successive governments to fix Minimum Support Prices (MSP) for
paddy and wheat in excess of the levels prescribed by the Commission for
Agricultural Costs and Prices (CACP). While this increases farmers’ incentive
to produce more, it has raised the market prices and has reduced the demand for
cereals. Studies conducted at the National Council of Applied Economic
Research demonstrate this fact (Sharma, 2001).
There has been a continuous increase in the MSP of rice from Rs. 230
per quintal in 1991-92 to Rs. 510 in 2000-01 and further to Rs. 1080 per quintal
in 2011-12, similarly a continuous rise in MSP coarse cereals from Rs. 205 per
quintal in 1991-92 to Rs. 445 per quintal in 2000-01 and further to Rs. 980 per
quintal in 2011-12 is observed. The compound annual growth rate of MSP for
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rice (common) and for coarse cereals has indicated a trend of fluctuations
during the period from 1975-76 to 2001-2011(table-5). A similar trend of
fluctuations in the co-efficient variation (CV) of the MSP for the two produce
has been observed during the corresponding period.
Chart-2 Trend in Minimum Support Price for Paddy during 1970-71 to 2010-11
Source: table-6.3.
Table-6.4 Minimum Support Prices of Paddy in India (According to crop year as on 10.06.2010) (Rs. Per quintal) (Fair Average Quality)
Year Common Grade 'A' 2004-05 560 590 2005-06 570 600 2006-07 580^ 610^ 2007-08 645$$/850~ 675$$/880~ 2008-09 850$ 880$ 2009-10 950& 980 2010-11 1000 1030 2011-12 1080 1110 2012-13 1250 1500
2004-05 to 2011-12 CV 34.42 28.79 2004-05 to 2011-12 CAGR 11.53 10.71
Source: Directorate of Economics and Statistics, Dept of Agriculture and Cooperation, GOI
The data obtained from the official sources indicate that there is no
significant difference between the Minimum Support Price (MSP) for common
and Grade variety of paddy during the period from 2004-05 to 2011-12. There
has been a continuous rise in the MSP of both common and Grade ‘A’ variety
of paddy during the above period. The MSP of common variety of paddy rose
from Rs. 560 per quintal in 2004-05 to Rs. 1080 per quintal in 2010-11 and the
MSP of Grade ‘A’ variety of paddy rose from Rs. 590 per quintal in 2004-05 to
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Rs. 110 per quintal in 2011-12 (table-6). The co-efficient Variation (CV) of
MSP of common variety of paddy was 34.42 during 2004-05 to 2011-12 and
that of Grade ‘A’ Variety was 28.79 per cent during the corresponding period.
The CAGR of MSP of common variety of paddy was 11.53 per cent during
2004-05 to 2011-12 and that of Grade ‘A’ variety of paddy was 10.71 per cent
during the same period. This was mainly because of increase in the cost of
production of rice in the country. The Grade ‘A’ fetched slightly better prices in
the market when compared to common grade.
Table-6.5 Projected Cost of Production and MSP in Rice during 1999-2000 to 2009-10
Year Project C2 cost per qtl (in Rs)
MSP (In Rs.)
MSP over Cost (%)
1999-00 400.6 520 29.8 2000-01 429.3 540 25.8 2001-02 471.7 560 18.7 2002-03 505.2 560 10.9 2003-04 525.2 580 10.5 2004-05 530.9 590 11.1 2005-06 557.6 600 7.6 2006-07 569.5 650 14.1 2007-08 595 775 30.3 2008-09 619 930 50.2 2009-10 644.9 1030 59.7
Source: www.calculatedcacp.com, GOI
The data on costs and returns of crops from Cost of Cultivation Scheme are
available with a lag and therefore actual cost data for the years 2008-09 and 2009-10 are
not available to compare with MSP data. Therefore, we have used projected cost data
which is used by CACP for recommending MSPs. As can be seen from the table, the
margin over cost declined over time for rice from 30 per cent in 1999-00 to 7.6 per cent
in 2005-06. But, the margin of MSP over cost for rice rose significantly from 14 per
cent in 2006-07 to nearly 60 per cent in 2009-10. Therefore, it can be said that the recent
increases in support prices have the effect of ameliorating the distress of rice farmers.
The price support policy of the government is directed at providing insurance
to agricultural producers against any sharp fall in farm prices. The minimum guaranteed
prices are fixed to set a floor below which market prices cannot fall. Till the mid 1970s,
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government announced two types of administered prices, Minimum Support Prices,
Procurement Prices. Substantial increases in MSP of rice and the system of open ended
procurement have resulted in two problems. Firstly, increases in the MSP much above
the cost of production in the efficient states such as Punjab and some regions of Haryana
and UP have caused farmers to divert more land for production of rice from coarse. This
has aggravated the problem of rising food subsidies, particularly buffer subsidies, which
presently account for over 20 per cent of the food subsidy bill. The carrying cost of
these stocks is becoming un-sustainable. A re-orintaion of the food grain policy is
therefore imperative. There is a need for a re-thinking on the rationale of raising the
MSP of rice every year.
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Table-6.6 Government Operations in Rice in India during 2011-12 to 2012-13
Marketing Year (Oct-sept)
Govt ProcurementMillion tonnes
MSP for Paddy Rs. Per tonne PDS off-take
Million Tonnes**
PDS Issue Price for Milled Rice Rs. Per tonne
Govt. Food Subsidy Billion
Rs. Common Grade A APL Grade A BPL AAY 2002/03 16.40 (22.8) 5,500 5,800 26.10 8,300 5,650 3,000 241.80 2003-04 22.90 (25.8) 5,500 5,800 25.10 8,300 5,650 3,000 251.80 2004-05 24.70 (29.7) 5,600 5,900 20.80 8,300 5,650 3,000 258.00 2005-06 27.60 (30.1) 5,700 6,000 24.00 8,300 5,650 3,000 230.80 2006-07 25.10 (26.9) 6,200 6,500 24.80 8,300 5,650 3,000 240.10 2007-08 28.70 (29.7) 7,450 7,750 25.20 8,300 5,650 3,000 313.30 2008-09 34.10 (34.4) 9,000 9,300 24.70 8,300 5,650 3,000 437.50 2009-10 31.40 (35.2) 10,000 10,300 27.60 8,300 5,650 3,000 584.40 2010-11 34.20 (35.6) 10,000 10,300 30.00 8,300 5,650 3,000 638.40 2011-12 37.00 (36.0) 10,800 11,100 31.80 8,300 5,650 3,000 728.20 2012-13 12,500 12,800 8,300 5,650 3,000 ***750.0
Sources: http://fciweb.nic.in/ Note: * Estimated; ** On Fiscal Year (Apr–Mar) basis; ***Budgeted PDS = Public Distribution System; APL = Above Poverty Line BPL = Below Poverty Line; AAY = Antyodaya Anna Yojana (Poorest of the Poor), Figures in parenthesis show government procurement as percent of production.
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Following the table-6.6 with view to maximize distribution due to food
security concerns and to compensate farmers for the increasing cost of production,
the government has been steadily increasing the Minimum Support Price (MSP) of
paddy. The government increased the MSP for paddy for MY 20011–12 by Rs. 800
per metric tonne to Rs. 10,800 per tonne for Common varieties and Rs. 11,300 per
tonne for Grade ‘A’ varieties. The government has not increased the sale price of
rice distributed through the PDS (issue price) since July 1, 2002, although the MSP
has doubled during this period, contributing to the increasing food subsidy. The
government food subsidy has tripled since 2002–03 to Rs728 billion in Fiscal Year
2011–12 (Apr–Mar) with FY 2012–13 food subsidy budgeted at Rs. 750 billion. The
implementation of the National Food Security Act is likely to lead to further
escalation in food subsidy. India’s MY 2010–11 rice exports are estimated at 2.8
million tonnes compared to around 2.1 million tonnes in MY 2009–10 (mostly
Basmati rice as non-Basmati rice exports were banned during April 1, 2008 to
September 8, 2011).
Table-6.7 Major Producing State-wise Minimum Support Prices (MSP) Proposed by
Commission for Agricultural Costs and Prices (CACP) for Kharif Crops in India (2009-10 to 2011-12) (Rs. Per. Qntl)
Major States Paddy (Common) Paddy (Grade-A)
2009-10 2010-11 2011-12 2009-10 2010-11 2011-12 Recommended by CACP 950 1000 1080 980 1030 1110 Andhra Pradesh 1557 1646 1900 1640 1682 2030 Assam 900 1000 1200 950 1050 1250 Bihar 1360 - 1531 - - - Haryana 1250 1300 1350 - - - Karnataka 988 1500 1500 - - 1650
Sources: www.cacp.com Commission for Agricultural Costs and Prices (CACP), Govt of India
Table-6.7 provides the detail of Minimum Support Price proposed by CACP for
paddy for different states from 2009-10 to 2011-12 (Rs. Per Qntl). CACP recommended
MSP for paddy (common) at Rs. 950, Rs.1000, and Rs. 1080 for 2009-10, 2010-11 and
2011-12 respectively. However, different states have fixed higher MSP for the three
years except Assam which fixed lower MSP in 2009-10. Similarly MSP for paddy
(grade-A) fixed by CACP was Rs. 980, Rs. 1030 and Rs. 1110 for 2009-10, 2010-11 and
Rs. 2011-12. The states except Assam have fixed higher MSP for this variety of rice.
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Table-6.8 Procurement Incidentals and Distribution Cost of Rice in India (1994-95 to 2012-13) (Rs. Per Quintal)
Year Rice ($) Procurement Incidental Rice Distribution Cost 1994-95 58.13 98.91 1995-96 54.1 127.34 1996-97 67.47 161.97 1997-98 54.23 181.66 1998-99 56.04 191.6 1999-00 * 77.09 172.69 2000-01 * 83.63 166.43 2001-02 66.81 119.62 2002-03 61.67 157.72 2003-04 30.68 214.52 2004-05 58.48 256.51 2005-06 39.12 272.37 2006-07 193.66 289.58 2007-08 214.91 297.82 2008-09 * 226.87 280.76 2009-10 * 288.6 184.92 2010-11* 313.09 223.49 2011-12 # 366.85 291.32 2012-13@ 383.26 397.12
Source: Ministry of Consumer Affairs, Food and Public Distribution, Govt of India. Note: *: Provisional, #: Revised Estimated, @: Budget Estimated.
Table-6.8 provides the details of procurement incidentals and distribution
cost of rice in India (1994-95 to 2012-13). Procurement incidental cost of rice in
India has shown a general trend of a rise through with periodical decline during
certain years, the incidental cost rose substantially since 2006-07 till 2012-13
compared to the previous years from 1994-95 to 2005-06 when incidental cost
reached the lowest level of Rs. 39.12 Per qntl rice distribution cost has been high
since 1995-96 on wards the cost per qntl rose from Rs. 98.91 per qntl to Rs. 256.51
per qntl in 2004-05 and further to Rs. 397.12 per qntl in 2012-2013. Increase in
procurement incidental and distribution cost obviously resulted of in higher price to
the beneficiary buyers of rice.
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Table-6.9 Percentage Share of Production and Procurement of Rice in India
Year Production ProcurementProcurement as %
of Production 1996-1997 81.73* 122.23 66.87 1997-1998 82.54* 143.32 57.59 1998-1999 86.08* 118.67 72.54 1999-2000 896.83 182.28 492.01 2000-2001 849.80 212.81 399.32 2001-2002 933.40 221.28 421.82 2002-2003 718.20 164.22 437.34 2003-2004 885.26 228.28 387.80 2004-2005 831.31 246.85 336.77 2005-2006 917.93 276.56 331.91 2006-2007 933.55 251.07 371.83 2007-2008 966.93 287.36 336.49 2008-2009 991.80 341.04 290.82 2009-2010 891.00 320.34 278.14 2010-2011* 95.98 35.03 273.99 2011-2012* 104.32$ 35.03 297.80 2012-2013* 85.59@ 12.24 699.26 1996-97 to 2000-01 CV 108.40 26.09 -- 2001-02 to 2012-13 CV 53.01 56.92 --
Source: Ministry of Consumer Affairs, Food and Public Distribution, Govt of India. Note: *: Figure Area In million tonne, #; Procurement as on 30-11-2012, $: Fourth Advance Estimates released on 16.07.2012, @: First Advance Estimates released on 24.09.2012. Note: during 1996-97 to 2012-13 (in Lakh Tonne).
Table-6.9 provides the details share of procurement of rice in production
from 1996-97 to 2012-13. There has been a substantial production of rice during
the period from 1999-2000 to 2009-10. Similarly procurement as a share of
production during the corresponding period has indicated a continuous and
substantially rise procurement as the percentage of production rose from 122.23
lakh tonne to 276.56 lakh tonne in 2005-06 and further to 320.34 lakh tonne in
2009-10. There is a trend of decline in procurement during the last two years i.e.,
2010-11 to 2012-13.
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Charet-3 Share of Percentage in Production and Procurement of Rice in India during 1996-97 to 2012-13 (in Lakh Tonne)
Source: table-6.9
6.5 FOOD INFLATION AND RICE:
Table-6.10 Annual Average Food Inflation Rate (%)
(Based on WPI with base 1993-94 and (2004-05)
Year Food Grains Rice
1993-94 2004-05 1993-94 2004-05
2000-01 -1.47 - -2.22 -
2001-02 -0.81 - -0.30 -
2002-03 1.10 - -0.60 -
2003-04 1.15 - -1.69 -
2004-05 0.68 - -0.36 -
2005-06 5.35 7.2 3.75 5.2
2006-07 10.16 14.12 2.92 4.56
2007-08 4.61 6.92 6.74 11.30
2008-09 8.63 11.02 11.11 14.83
2009-10 15.59 14.49 14.41 12.31
2010-11 - 4.78 - 5.72
Source (Basic Data): Sthanu R. Nair, Central Statistical Organisation (http://eaindustry.nic.in) Note: (-) indicates not available.
Table-6.10 provides the of details annual average basis, the fiscal years
2008-09 and 2009-10 recorded high inflation in food products. Notably, in terms
of duration and magnitude, the food price spiral witnessed from January 2008
onwards was the longest and largest since April 1995. One widely debated aspect
of the episode of food inflation was the spiralling prices of food-grains, in
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particular rice amidst a piling up of a gain mountain in government storage depots.
The Central Government was in the firing line of criticism from various quarters
including the Supreme Court for failing to control rice prices during 2008-09 and
2009-10. Two systemic problems associated with India’s food grain management
have received considerable attention. They are the high minimum support price
(MSP) offered for food grain and high level of food grain procurement by the
government (Basu 2011).
International agencies are warning of high food prices on a global scale in
2013 if urgent action is not taken. The president is address to parliament has
only a cursory mention of inflation “inflation is easing gradually, but is still a
problem”, he said still problem? Surely the suffering of people from the relentless
prices rise inflected on them by the flawed policies of the United Progressive
Alliances deserves more recognition and redress. Even the World Bank, whose
neoliberal policy impositions are responsible to a great extent for global food
inflation, has warned that “high and volatile food prices are becoming the new
normal (Brind Karat, 2013 The Hindu News Paper).
While wheat exported at global prices was between Rs.1800 to 2000 a
quintal, the support price the Indian farmer received was at least one third less at
Rs, 1,285. The export of rice also was at prices far higher than the MSP. Thus, the
government helped traders and exporters make profits while denying farmers a fair
price. The stocks should and must be used to ensure an amount of food grains not
less than 35 kg per family at subsidised rates through a universal public
distribution system.
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6.6. DETERMINANTS OF FOOD SECURITY:
A broad definition of food security that has commonly been accepted in the
literature states that food security implies access by all people at all times to
sufficient quantities of food to lead an active and healthy life. The world food
summit held in Rome (13-17 November 1996) used the following definition in its
action plan: “Food security exists when all people, at all times, have physical and
economic access to sufficient, safe and nutritious food to meet their dietary needs
and food preferences for an active and healthy life”. According to this, food security
requires not just adequate supply of food at the aggregate level but also enough
purchasing capacity with the individual/household to demand adequate levels of
food (Srinivasan.P.V, 2009).
Table-6.11 Share of Per capita Availability of Rice in the Per capita Availability of Food-grains
Years Rice Food-grain % Share in rice of food grain 1990 77.4 172.5 44.87 1991 80.9 186.2 43.45 1992 79.2 171.1 46.29 1993 73.4 169.4 43.33 1994 75.7 172.0 44.01 1995 80.3 180.8 44.41 1996 74.6 173.5 43.00 1997 78.1 183.6 42.54 1998 73.1 163.2 44.79 1999 74.2 170.0 43.65 2000 74.3 165.9 44.79 2001 69.5 151.9 45.75 2002 83.5 180.4 46.29 2003 66.2 159.7 41.45 2004 71.3 168.9 42.21 2005 64.7 154.2 41.96 2006 72.3 162.5 44.49 2007 70.8 161.6 43.81 2008 64.0 159.2 40.20 2009 68.8 162.1 42.44
1951 to 1956 CV 5.97 3.16 2.82 1981 to 1985 CV 1.65 0.11 1.55 1990 to 2000 CV 0.34 0.38 0.22 2001 to 2009 CV 0.92 0.57 0.52 1990 to 2000 CAGR -0.62 -0.48 -- 2001 to 2009 CAGR -1.14 -0.22 --
Source: www.caluculatedagricoop.com, GOI Note: (As on 20-07-2010). 1. The net availability of food-grains is estimated to be gross production (-) seed, feed & wastage, (-) exports (+) imports (+/-) change in stocks. Note: (Per Annum) (KG per Year).
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Table-6.11 provides the detail of Per capita Net Availability of Food grains
and Rice in India. The percapita availability of rice in India during the 1990s and
the first decade in the new millennium has varied between a minimum of 64 kg
per year and a maximum of 80.9 kg per year. The percapita availability of food-
grain varied between a minimum of 151.9 kg to a maximum of 186.2 kg during
the corresponding period. The percentage share of rice in food-grains availability
per capita varied from a minimum of 41.96 per cent to a maximum of 46.29 per
cent during the same period.
The co-efficient variance from a minimum of 41.96 per cent to a maximum
of 46.29 per cent is noticed during the same period. The co-efficient of variance
of the percapita availability of rice between 1951-56 and 2001-09 varied between
0.34 and 7.63 per cent, while the CAGR of the same was negative during 90s and
the first decade of the present century. The co-efficient of variance of percapita
availability of food-grains during the corresponding period varied between 0.11
per cent and 4.88 per cent. The CAGR of the same was negative during the same
period. The CVs of percentage share of rice in food-grains varied between 0.22
per cent and 2.88 per cent during the same period.
6.7. CONSUMPTION OF RICE:
The patterns of calorie as well as protein intake do not depict a clear trend
for both rural and urban households. For the overall period form 1983-84 to
2009-10, the calorie and protein consumption has declined in the rural areas and
increased in the urban areas. (Radhakrishna and Reddy.2004, Rao.2003).
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Table-6.12 Average Per head monthly rice consumption of rice major producing states of rural and urban in India 2010-11
States
Urban Rural
Rice Total
cereals
% share of rice total cereals
Rice Total
cereals% share of rice
total cereals
AP 9.31 10.39 89.65 11.16 12.02 92.89 Assam 11.36 12.70 89.45 12.49 13.11 95.27 Bihar 6.04 12.74 47.45 6.96 12.91 53.88 Chhattisgarh 9.25 12.70 72.82 12.32 12.96 95.04 Haryana 1.55 9.22 16.77 0.74 10.18 7.25 Karnataka 5.60 9.28 60.34 5.61 10.49 53.43 Odissa 10.33 12.52 82.53 13.13 13.76 95.41 Punjab 1.16 8.30 13.93 0.68 9.78 6.99 Sikkim 1.21 9.71 12.41 9.62 10.71 89.80 Tamil Nadu 8.18 9.07 90.16 9.87 10.57 93.33 Uttar Pradesh 2.74 10.27 26.69 3.93 11.83 33.23 West Bengal 7.69 10.00 76.91 11.13 12.03 92.45 All-India 4.75 9.68 49.03 6.36 11.68 54.51
Source: NSSO report No.530, Households consumer expenditure in India -2009-10 Note: Rice includes rice products, (Average quantity consumed (Kg).
Table-6.12 provide details of share of availability regarding the average
monthly quantity of consumption of rice per person in India which indicate the
average consumption of rice which is at 4.75 kgs in urban area and is lower than
the monthly average consumption of rice in rural areas at 6.36 kgs. Similarly, the
consumption of cereals in urban areas is at 9.86 kgs per person which is lower than
the average consumption of cereals of 11.68 kgs in rural areas. The consumption of
rice as a percentage of total cereals in urban areas is at 49.03 per cent which is
lower than the consumption of rice as a percentage total cereal in rural areas which
is at 54.51 per cent.
State wise consumption of rice in urban areas was highest at 10.33 kg per
person in Orissa and lowest at 1.16 kgs per person in Punjab. In rural areas highest
rice consumption per person, was again in Orissa at 13.13 kgs and lowest at 0.74 kg
per person in Haryana. Consumption of cereals was highest at 12.70 kgs per person
in Assam and Chhattisgarh and lowest at 8.30 kgs per person in Punjab
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consumption of rice as a percent of total cereals per person was highest at 89.65 per
cent in AP and lowest at 12.41 per cent in Sikkim in urban areas states. In rural
areas the consumption of total cereals was highest at 13.76 kgs per person in Orissa
and lowest at 9.78 kgs in Punjab. The consumption of rice as percentage of total
cereals was highest at 95.27 in Assam and lowest at 6.99 per cent in Punjab. A food
coupon system for distribution of rice and kerosene through PDS was introduced in
Andhra Pradesh during 1998-1999 (Government of Andhra Pradesh: 2001).
Basically, the scheme was aimed at improving the delivery system of kerosene and
rice. Under the scheme mere possession of card was not adequate to draw PDS rice,
wheat or kerosene. People today prefer to consume more of non-cereals and among
cereals the preference is for rice and wheat as against coarse cereals.
6.8. TARGET OF PUBLIC DISTRIBUTION SYSTEM IN INDIA:
India’s government food distribution programmes, including both the old PDS
and the current TPDS, have been criticized for their limited impact on the poor, and for
inefficiency. Although large amounts of grain appear to have been distributed through
the PDS and TPDS, poor households still rely primarily on the market for their supplies
of wheat and rice. According to the 1999-2000 National Sample Survey, only about 10
per cent of poor rural households and 14 per cent of poor urban households purchased
grain from the TPDS (Ramaswami and Murugkar, 2005). A study of TPDS efficiency
estimated that it costs Rs 3.14 to transfer Rs1.00 of benefit to poor households through
the Target Public Distribution System in the State of Andhra Pradesh, and Rs 4.00 to
transfer the same benefit in the State of Maharashtra. Out of the total expenditure on
food subsidies in these States, 26.5 to 31 per cent was lost in transfers to non-poor
households; 16 to 26.5 per cent was lost because of the abnormally high costs of grain
transport, handling, and storage; and 15 to 28 per cent was lost because of “leakages” to
the open market and other forms of fraud. The share of subsidy expenditure actually
reaching poor households was about 25 per cent in Maharashtra and 32 per cent in
Andhra Pradesh (Ramaswami, 2002). Another issue is concern about loss of government
control of physical grain markets and private traders in the current system. The potential
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benefits of shifting to a food stamp programme are discussed in India’s 10th Five Year
Plan (Government of India, Planning Commission, 2002).
In India, although the green revolution technology resulted in greater self-
sufficient in food production and reduced import dependence it did not benefit uniformly
farmers from different regions and different socio-economic back-grounds. While it
solved the food security problem at the aggregate level it was left to subsidy programmes
such as the public distribution system (PDS) to take care of food security at household
level. The latter is therefore closely linked to health, educational and other infrastructure
services (Srinivasan.P.V, 2009).
Table-6.13 provides the detail of procurement, off-take and stocks of Rice
form 1991-1992 to 2012-2013. The percentage procurement of rice for public
distribution during the 1990s and the present decade (2001-02 to 2010-12) in the
country has indicated divergent trends. The procurement of rice for public
distribution system (PDS) was slow during the first decade from 1991-92 to
1999-00. During the next decade there has been a rapid growth of procurement
of rice for PDS. The procurement which was just 17.16 per cent in 1991-92 rose
to a maximum of 66.35 per cent in 2011-12. However, the off take of rice for
PDS was lower which ranged between a minimum of 17.95 per cent in 1992-93
and a maximum of 56.87 per cent in 2011-12. Stock of rice for PDS ranged from
a minimum of 11.07 per cent in 1991-92 to a maximum of 53.44 per cent in
2011-12 and reached a high of 80.6 per cent. The recommendation of the
Expenditure Reforms Commission is based on a study carried out by Dr Kirit
Parikh (Parikh: 1999) according to which a buffer stock of 10 million tonnes
was adequate from a food security angle. The present levels of buffer stocks in
the country are far in excess of requirements and create more economic
instability than stability.
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Table-6.13 Share of Percentage rice in Public Distribution System - Procurement, Off-Take and Stocks in India
Year Procurement Off-take Stocks Rice Total Rice Total Rice Total
1991-92 54.84 17.16 49.47 20.74 80.04 11.071992-93 66.60 19.1 55.10 17.95 78.37 12.671993-94 51.36 26.4 50.86 18.6 65.97 20.541994-95 52.50 24.99 45.52 19.44 67.46 26.81995-96 44.81 22.16 47.76 24.35 62.73 20.821996-97 59.28 20.04 48.03 25.63 80.26 16.411997-98 60.99 23.84 59.07 18.96 72.02 18.121998-99 47.73 24.2 57.07 20.73 55.73 21.821999-00 54.03 30.76 53.88 23.05 54.38 28.912000-01 53.64 35.29 57.22 18.21 51.56 44.982001-02 50.59 41.75 48.95 31.3 48.82 51.022002-03 49.96 38.03 49.86 49.84 52.30 32.812003-04 56.81 36.58 50.76 49.33 63.29 20.652004-05 58.88 40.83 55.94 41.47 74.23 17.972005-06 64.34 41.48 59.36 42.25 82.31 16.622006-07 74.02 35.53 68.15 36.77 73.45 17.932007-08 70.26 37.42 67.38 37.43 70.08 19.752008-09 59.14 55.53 62.33 39.5 60.71 35.582009-10 56.21 57.98 55.03 48.86 61.60 43.362010-11 54.82 56.79 56.36 52.87 64.98 44.352011-12 57.14 66.35 57.07 56.28 62.41 53.442012-13 12.39 43.41 0.00 0.00 38.10 80.6
Co-efficient Variation (CV)
1972-73 to 1980-81 21.06 23.20 13.08 12.82 20.18 57.82 1981-82 to 1989-90 6.28 19.44 8.04 17.86 20.08 37.001991-92 to 2000-01 11.68 22.38 8.95 13.03 16.11 43.872001-02 to 2009-10 13.65 19.24 12.64 15.38 16.60 44.84
Compound annual growth rate (CAGR) 1972-73 to 1980-81 7.24 7.26 5.36 7.26 25.17 7.26 1981-82 to 1989-90 4.74 3.66 2.18 3.66 2.25 3.66 1991-92 to 2000-01 4.87 5.70 2.22 5.70 6.48 5.70 2001-02 to 2009-10 6.78 4.00 3.93 4.00 1.80 4.00
Source: Ministry of Food, Consumer Affairs and Public Distribution, Government of India. Note: 1. Total Stocks Include coarse cereals. For 2010-11, procurement data is up to August 18, 2011, Off- take for the period April 30, 2011 and Stocks as on August 01, 2011.
Food Corporation of India (FCI) is the central agency responsible for
undertaking procurement, transportation and storage operations in India. Rising
procurement prices raise economic costs of FCI operations, which are Rs 1,174
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per quintal of rice at present, and are all set to rise. To cover part of the costs,
PDS prices have been raised throughout the nineties, especially after 1997-98.
This turned away most PDS customers, since market prices were below PDS
prices. So, while rising prices have led to a huge supply response from farmers,
PDS off take has fallen. As a result, grain stocks have ballooned over the past
few years, and today stand at 58 million tonnes, in spite of dumping 18 million
tonnes of food in the open market at half the economic cost, over the past few
months. Has anything been done to correct the problem? In 1997-98, targeted
PDS was introduced, under which two sets of PDS prices were announced, one
each for Above Poverty Line (APL) and Below Poverty Line (BPL) users. Since
their inception, APL prices had to be raised to cover the rising costs of FCI.
As consumers fled the PDS, issue prices had to be lowered to 70 per cent
and 48 per cent of costs to FCI for APL and BPL users, respectively. Another
policy that is being tried is decentralized procurement, whereby states are
individually responsible for procurement and storage operations. Some states like
West Bengal have been following this practice, but most states complain of
inadequate finances and infrastructure to undertake this operation. Among the
most vocal opponents of decentralized procurement are Punjab and Haryana,
who will have to confront farmers lobbies on their own. Food-for-work
programmes have been implemented which make grain available to states at BPL
prices, yet the programme has shown some results only in Rajasthan. What are
the fiscal implications of higher prices? Recently issue prices were cut even
further to encourage PDS off take. This will put more pressure on food subsidy.
As it is, bulk of the Rs 18,000-crore food subsidy bill is actually a producer
subsidy; consumers hardly derive any benefit from the PDS in addition, FCI pays
for procurement with food credit, and higher procurement prices lead to
unwarranted diversion of investible funds [World Bank-2002].
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Table-6.14 Share of Consumption of major producing states under Public Distribution System in India
State 1993-1994 2009-10 AP 20.6 29.7Assam 3.2 10.4Bihar 0.2 4.7Chhattisgarh 2.2 38.8Haryana 4.3 0.5Karnataka 14.5 34.5Orissa 0.8 22.9Punjab 2.3 0.1Tamil Nadu 17.9 47.6Uttar Pradesh 3.2 16.1West Bengal 1.7 5.3All India 9.9 21.7
Source: Authors estimates based on unit level data from NSSO
Table-6.14 provides the detail of role of PDS in meeting the consumption
requirement of households. Out of the total consumption requirement of food-
grains of people during in India, 1993-94 it was 9.9 per cent of which it was met
out of public distribution system (PDS) which got increased to 21.7 per cent in
2009-2010. This reveals the expanded activities of Public Distribution System in
India. The share of PDS in the consumption of rice has increased in all states,
except in Haryana, Punjab. The share of PDS in the total consumption of rice
was higher in AP, Chhattisgarh, Karnataka, Orissa, and Tamil Nadu. This
percentage got pushed up to an alarming level of 80 per cent.
A recent ADB study defined an Asian Poverty Line of $1.35. On this basis two-
thirds of India’s population or around 740 million Indian people live in poverty.
The recently introduced multi dimensional deprivation index (MPI) also places
about 645 million (55.4 percent) Indians below the poverty line. According to
Human Development Report, percapita GDP India rank 134 among 182
countries worldwide.
The Union cabinet has cleared the National Food Security Bill that gives legal
entitlement to 67 per cent Population (including 75 per cent rural and 50 per cent
urban) for subsidised grains under the Targeted Public distribution system
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(TPDS). A beneficiary will be entitled to 5 kg of rice, wheat or coarse cereals at
Rs. 3, 2 and Re.1 a kg a month and will be identified by the state based on
parameters prescribed by the Union government. But 71 amendment of cabinet
gave its nod to propose by the food ministry, including the one that said the 2.43
Crore Antyodaya Anna Yojana (AAY) beneficiary households will continue to
get their quota of 35 kg grains a month under the TPDS.
In its revised form, the bill favours the “two-child norm” by denying maternal
benefits to a pregnant woman beyond to live births. The law ministry quoted
Supreme Court judgement and the National Population Policy of 2000 to justify
the provision. The communist party of India (Marxist) had opposed the clause in
the Standing Committee meeting and gave a dissent note on it (Gargi Parsai, the
Hindu News Paper-March-20-2013).
6.9. ANTYODAYA ANNA YOJANA (AAY) IN INDIA:
In order to make the Targeted Public Distribution System (TPDS) more
focused and targeted towards the poorest of the poor BPL families, the Govt. of
India launched the Antyodaya Anna Yojana. 35 kg of rice per month is issued at
highly subsidized rate of Rs. 3/- per kg to the identified families from April 2002.
There are 38000 identified beneficiaries under the scheme. Government of India
has been making allocation of subsidized food-grains for all the accepted
number of 6.52 crore BPL families including about 2.43 crore Antyodaya
Anna Yojana (AAY) families. Allocation of subsidized foodgrains are also
made to Above Poverty Line (APL) families based on the availability of food-
grains in the Central pool and past off-take. Presently, the allocation of food-
grains to APL families to the States/UTs range between 15 kg. and 35 kg. per
family per month.
In order to make the TPDS more focused and targeted at the poorest of
the poor, Antyodaya Anna Yojana was launched in December, 2000 for one
crore poorest of the poor families to be identified from the BPL families.
Coverage under this scheme has been expanded thrice since then i.e. during
2003-04, 2004-05 and 2005-06, covering additional 50 lakh households each
time to be identified from BPL families. Thus, the total coverage under AAY
195
was raised to 2.50 crore families. The identification of AAY families within
the target of AAY families given to each State/UT is the responsibility of
concerned State/UT Government. Out of the target of 2.50 crore AAY families
given to the State/UT Governments, the State/UT Governments have identified
and issued ration cards to about 2.43 crore AAY families.
The identification of the Antyodaya families and issuing of distinctive
Ration Cards to these families is the responsibility of the concerned State
Governments. Guidelines were issued to the States/UTs for identification of
the Antyodaya families under the AAY and additional Antyodaya families
under the expanded AAY. It has been stressed upon to identify poorest of the
poor amongst the BPL families to be included in the AAY list. Allocation of
food grains under the scheme is being made to the States/UTs on the basis of
issue of distinctive AAY Ration Cards to the identified families.
Table-6.15 Percentage allocation of rice under Antyodaya Anna Yojana (AAY) in major producing states of India during 2008-09 to 2012-13
Major States/Year
2008-09 2009-10 2010-11 2011-12 2012-13
2008-09 to 2012-13 Over the Year
Co-efficient Variation (CV)
Andhra Pradesh 6.42 6.42 6.40 6.39 6.40 32.66 Assam 2.90 2.90 2.89 2.89 2.89 57.48 Bihar 10.00 10.00 10.24 10.26 10.28 26.06 Haryana 1.20 1.20 1.20 1.20 1.20 227.85 Karnataka 4.94 4.94 4.93 4.86 4.68 26.20 Orissa 5.21 5.21 5.19 5.19 5.20 30.19 Punjab 0.74 0.74 0.74 0.74 0.74 188.82 Tamil Nadu 7.68 7.68 7.66 7.65 7.67 27.15 Uttar Pradesh 16.86 16.86 16.81 16.80 16.83 25.99 West Bengal 6.10 6.10 6.08 6.07 6.09 71.69 India 62.06 62.06 62.13 62.05 61.98 27.46
Source: Ministry of Consumer Affairs, Food and Public Distribution, Govt of India. Note: (000’ million tonnes)
Table-6.15 provides the detail Allocation of rice for AAY- in Major states
(2008-09 to 2012-13). Maximum allocation of rice for AAY has gone to Uttar
Pradesh (16.80 per cent to 16.86 mm tones) during 2008-09 to 2012-13 followed
Bihar (10.00 to 10.28 mm tonnes) Tamil Nadu (7.65 to 7.68 mm tonnes), Andhra
Pradesh (6.39 to 6.42), West Bengal (6.07 to 6.10), Orissa (5.19 to 5.21), and
196
Karnataka (4.68 to 4.94). Allocation of rice for AAY has been low in case of
Assam, Haryana and Punjab which accounted for the minimum allocation of rice
under AAY (0.74, 1000 mm tonnes).
Chart-4 Major State-Wise Allocation of Rice for Antyodaya Anna Yojana (AAY) In India during 2008-09 to 2012-13 (000’ million tonnes)
Source: Table-6.15
6.10. USE OF INFORMATION COMMUNICATION TECHNOLOGY
SYSTEM IN PUBLIC DISTRIBUTION SYSTEM OF RICE IN INDIA:
ICTs play a very important role in the promotion of growth of agriculture
sector. Earlier ICT instruments like T.V, newspaper played an important role in
helping the board to reach the ideas to the farmers. Emergence of mobile phone
and internet enhanced the scope of communication between the various stake
holders ICT has enabled Central and State Government’s for updating of rice and
wheat daily market price to farmers through mobile SMS every day. Facilities are
also arranged for online communication between farmers and scientists and other
experts in the field. The Planning Commission, in early 2000s, found that the
total leakage of grains meant for BPL population was 58 per cent. Pending
unanimity in approach for identification of beneficiaries, Aadhaar smart cards
could help reduce identification errors and leakages significantly. Smart cards
have the ability to store and record a large amount of programmed and authorised
biometric information that can be matched to the actual fingerprint or signature of
an individual involved in a transaction, including eligibility for rations, quantity,
price and time intervals at which he/she could be supplied rations. These features
of the proposed smart card are expected to immensely help the existing food
197
coupon or food-stamp system, introduced on a pilot basis in select districts in
Andhra Pradesh, Arunachal Pradesh and Bihar. Greater use of Information and
Communication Technology (ICT) in PDS, such as GPS tracking of movement of
vehicles transporting PDS commodities, CCTV monitoring of FPS and
computerisation of various operations of PDS could also improve its efficiency.
An even bolder measure would be direct cash transfer that offers households the
choice of purchase of any mix of grains, pulses or other household basics up to the
value of the coupon. Provisions have also been made for transparency and
accountability including disclosure of records relating to the PDS, social audits,
and setting up of vigilance committees besides an elaborate grievance redressal
mechanism (Economic Survey, 2011-12, GOI).
6.11. Future Challenges:
There is need for further research to understand the consistently poor
performance of PDS in some states and reasons behind improvement in others
besides, increasing the efficiency of public expenditure and strengthening of
social safety net programme like, ICDS, NFSM, Mid-Day Meal, PDS, etc. The
lessons learnt from the successful states in PDS management should be
replicated in poor-performing states. Alternative system of PDS can also be
explored in these states. One of the reasons for increasing paddy price is the
increase in cost of cultivation of the same. People today prefer to consume more
of non-cereals and among cereals the preference is for rice as against coarse
cereals. The increase in food subsidies is benefiting rice producers in regions
where the government procures these two crops most conspicuously, that is,
Punjab, Haryana, AP and Karnataka. The option of involvement of private
players in procurement and storage may also be explored subject to retaining the
public control in view of food security needs. Often neglected but equally
important are domestic policy reforms. Domestic pricing and marketing reforms
continue to be the weakest link in Indian agriculture. Thus, while the government
holds mammoth stocks of food (estimated at about 60 million tonnes in January
2009), a large number of Indians suffer from poverty and malnutrition. Because
of political pressures from various interest groups, the government often ends up
198
pursuing economically unsound policies. Rather than buckling to pressure for
procurement, governments need to encourage the use of other domestic
instruments and institutional innovations. The State government’s ambitious
Anna Bhagya Scheme that aims to provide rice at Re. 1 a kg may have brought
smiles to 98.35 lakh Antyodaya Anna Yojana and below the poverty line
cardholders. But, the thousands of loaders of food-grains at the Karnataka Food
and Civil Supplies Corporation (KFCSC) god-owns are toiling without any
social security or employment benefits. It is from these god-owns that the
subsidised rice reaches the 20,450 fair price shops across the State. Anna Bhagya
Scheme that aims to provide rice at Re. 1 a kg may have brought smiles to 98.35
lakh Antyodaya Anna Yojana and below the poverty line cardholders. Each grain
of rice has our sweat in it. But the authorities have failed to respond to our plight.
With the launch of the Anna Bhagya Scheme, our work has increased but our
pay scales remain the same,
BOX ITEM
Budget Pays lip Services to Food Security – Union Budget – 2013-14
Although Finance Minister P.Chidambaram has pledged and additional amount of Rs.
10,000/- crore to meet the requirement of providing concessional food-grains to only
identified beneficiaries under the proposed National Food Security Bill, it appears that he
has garnered this sum by curtailing the annual budgeted Public Distribution System food
security requirement of the Department of Food. The food subsidy budgeted for 2013-14 is
Rs. 80,000/- crore, and compared with the Rs. 85,000/- crore projected the revised
estimates for 2012-13 was around Rs. 90,000/- crore. As against this, the allocation is for
Rs. 80,000/- crore. The estimated requirement of food subsidy in the government’s
National Food Security Bill was Rs. 1, 17,000/- crore for distribution of 7 kg of food
grains per person per month.
Subsidy Demand:
The parliamentary standing committee, to which the bill was referred, projected a subsidy
demand Rs. 1, 12,000/- crore for the distribution of 5 kg food grains per person per month.
They suggested coverage of 67 per cent of the population. By all accounts the food bill
subsidy allocation should be between ideally Rs 20,000 to Rs. 30,000 crore, unless the
government intends to reduce the number of beneficiaries.
199
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