For all those couched in socialistic mindset and obstinate about keeping complete control on food supply and distribution in pursuit of food security – regardless of all the negatives that go with it – need to take a look at a report of the Comptroller and Auditor General [CAG] on “Procurement and milling of paddy for Central pool” tabled in the Parliament on December 8, 2015. But, first a word on the trigger for audit by CAG is in order. A whistle-blower in Odisha had alleged that close to Rs 10,000 crores of black money was being generated every day as millers were hiding or under-reporting earnings from sale of paddy by-products. Reportedly, the Prime Minister’s Office [PMO] had forwarded...
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Category: Pricing Policies & Subsidies
Direct income support – half-a-dozen speed breakers ahead
In January 2013 the then UPA – government had announced a nation-wide roll-out of direct benefit transfer [DBT] – an acronym for transfer of subsidy amount in to the bank account of the beneficiary. But, the mission remained on paper as even in LPG [liquefied petroleum gas] where it was launched on a limited scale June, 2013, the plan was abandoned in January, 2014. Modi – government resurrected DBT for LPG in November, 2014 in select districts and by January, 2015 embraced all 676 districts in India. Emboldened by its success [leakages have been completely eliminated and this alone would result in saving of over Rs 10,000 crores annually] is now planning big to cover all other subsidies viz., kerosene,...
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Food subsidies still haunt India at WTO
But they needn’t, if India sticks to the view that the benchmark price for measuring extent of support is too low and outdated India is concerned over the delay in reaching a ‘permanent solution’ to the problem of dealing with food procurement subsidies. The WTO members are thrashing out a work programme for the 10th Ministerial to be held in Nairobi this December. Under Agreement on Agriculture (AoA), developing countries can give agricultural subsidies or aggregate measurement support (AMS) up to 10 per cent of the value of agricultural production. AMS has two components viz., (i) ‘product-specific’ or the excess of price paid to farmers over international price or ERP (external reference price) multiplied by quantum of produce; (ii) ‘non-product...
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‘Unshackle’ food sector before cash transfer
Emboldened by the success of DBT (direct benefit transfer) in LPG, the government is keen to launch this in food and fertilizers. To begin with, it will launch a pilot scheme in Puducherry where 330,000 ration card holders could receive Rs 300-400 a month each in their bank account in lieu of their monthly quota of rice after the lists are validated and their bank accounts are seeded with Aadhaar. Beneficiaries will be free to spend the money on any thing, not necessarily grain. If, the pilot in Puducherry is successful, it will be rolled out in other Union Territories (UTs) When juxtaposed with Modi – government’s tall claim about implementing DBT [a committee under Mr Shanta Kumar – a...
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India’s food reforms – trapped in ‘twilight’ zone
Pressure is mounting on the government even from within to fix a much higher minimum support price (MSP) for paddy during July – June 2015-16 agriculture crop season than the amount recommended by the Commission on Agriculture Cost and Prices (CACP). The CACP had recommended a modest increase of 4% which translates to about Rs 50 per quintal over existing price of Rs 1360 per quintal for common variety of paddy. On the other hand, some sections within government are gunning for a hike of double this amount or Rs 100 per quintal. Meanwhile, farmers organizations e.g. Bharat Krishak Samaj (BKS) have resurrected demand for bonus over and above MSP that some states viz., Chattisgarh, Madhya Pradesh etc were giving...
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Volte-face on food reforms
On August 15, 2014 the prime minister had announced government’s intent to trifurcate Food Corporation of India (FCI) in to three entities each devoted to procurement, handling and distribution. Being a cosmetic exercise and far from making a dent on maladies afflicting the sector, the announcement failed to enthuse analysts. In a (pleasant) surprise turn of events, a committee constituted up under chairmanship of Mr Shanta Kumar – a senior leader of BJP and ex-minister in the NDA government under Vajpayee – has come up with recommendations which are out-of-the-box and hold a promise of bringing about a ‘paradigm shift’ in India’s food economy. It recommends:- (i) drastic curtailment in the role of the state/government in addressing food needs...
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Unleashing reforms in food sector
Prime Minister, Modi has directed the food ministry to take a look at the recommendations of the Shanta Kumar committee on restructuring and re-orientation of food procurement, handling and distribution system and prepare action points for consideration by the cabinet committee on economic affairs (CCEA). The committee was set up in the back drop of Modi’s statement in his Independence Day address on August 15, 2014 that his government was considering to trifurcate the operations of monolith Food Corporation of India (FCI) in to three distinct entities each focusing on procurement, handling and distribution with a view to improve efficiency and reduce cost. This had left an impression that the existing dispensation of government buying ‘unlimited’ quantities of food from farmers...
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Lift the veil on subsidies
In his maiden budget for 2014-15 presented on July 10, 2014, finance minister, Arun Jaitely had announced setting up of an expenditure management commission (EMC) to recommend a road- map up for rationalizing and phasing out major subsidies. As a follow up, on September 4, the government constituted the EMC under chairmanship of Dr Bimal Jalan. The commission’s mandate puts under scanner government’s spending on all its programmes and schemes, procurement from defence to office items besides the methodology for counting receipts and expenditure. It is expected to recommend measures for utilization of allocated funds in the most cost effective manner. While addressing the just concluded ET Global Business Summit, Jaitely informed that the recommendations of the commission made in...
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Time to say ‘good bye’ to subsidies
One of the planks on which Modi got mandate to govern was his promise to deliver on fiscal consolidation. In its maiden budget for 2014-15, government has pledged to achieve this by pruning subsidies and higher tax revenue based on lower rates. Recently, prime minister approved constitution of an expenditure management commission (EMC) under chairmanship of Dr Bimal Jalan former governor RBI to recommend a road-map up for rationalizing and phasing out major subsidies viz., food, fertilizers and oil. The commission has been asked to submit its report within 18 months. However, it will submit an interim report in 6 months. The protracted time frame for the committee should not be taken to mean any dilution of government’s commitment on this crucial reform....
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Food, fertilizers and fuel – need ‘overhaul’, not just re-routing of subsidy
In its maiden budget presented on July 10, 2014, NDA-government has announced setting up of an expenditure reforms commission (ERC) that will examine all subsidies viz., food, fuel, fertilizers and come up with a road map for restructuring them. Further castigating existing dispensation as one that does not target beneficiaries (read poor) and leads to ever rising ‘un-quantifiable’ subsidies, it has promised to switch over to a scheme of direct cash transfer (DCT) to poor in a focused and transparent manner. Since then, it is close to a month and ERC has not been constituted as yet. At this pace, we can’t expect its recommendations before end of current year. Therefore, any major restructuring may have to wait at least...
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