Record offtake, record procurement, record stocks in government warehouses and record exports. This has been the story of four records in the last one year and more of the Covid-19 pandemic, when “food” – more specifically, rice and wheat channelled through the public distribution system (PDS) – has become the NDA government’s preeminent social safety net programme.
Until 2019-20, offtake of grain from the Food Corporation of India’s (FCI) godowns averaged hardly 62 million tonnes (mt) per year, while even falling from almost 66 mt to just over 60 mt between 2012-13 and 2017-18. Much of it comprised PDS rations under the National Food Security Act (NFSA) of 2013. This law, passed during the previous UPA regime, entitles 81.35 crore Indians to receive at least 5 kg of wheat or rice per month at Rs 2 and Rs 3 per kg, respectively. The annual foodgrain allocation under NFSA – which includes a higher 35-kg monthly ration for 2.37 crore “poorest of the poor” households under the Antyodaya Anna Yojana – works out to nearly 55 mt.
Last year, during the nationwide lockdown, the NDA government launched a new Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). Under it, NFSA beneficiaries were provided an extra 5 kg grain per month free for April-November 2020, translating into an additional allocation of over 32 mt. The results can be seen in Chart 1. Offtake of rice and wheat from the central pool crossed an all-time-high of 93 mt in 2020-21, roughly 50% higher than in the previous year. Much of this was courtesy of PMGKAY, which, along with the Atmanirbhar Bharat Package (for returning migrant labourers) and other lockdown-related schemes, saw a total lifting of about 31.5 mt.
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PMGKAY has been re-launched this year, too, in the wake of the pandemic’s second wave. Initially, the government allocated the 5-kg extra free grain per month to NFSA beneficiaries only for May and June 2021. But on June 7, Prime Minister Narendra Modi announced its extension up to Diwali, i.e. November. That, again, is likely to boost offtake by 28 mt or more in 2021-22.
But it isn’t PDS grain offtake alone that has hit an all-time-high. Government agencies have, as on June 11, procured 42.3 mt of wheat and 55.4 mt of rice from the 2020-21 crops. This has broken even the record 39 mt and 51.8 mt that got procured in the previous year (Chart 2). The government has, in the post-pandemic period, both distributed as well as procured more grains than ever before.
While the spike in offtake is an outcome of the pandemic — free food has arguably been the single biggest relief measure for those worst affected by the economic disruptions after March 2020, ahead of even MGNREGA (another UPA legacy programme) — increased procurement is probably a fallout of the movement against the Centre’s farm reform laws. The minimum support price (MSP) value of the paddy and wheat bought by government agencies since October 2020 – the three farm laws got passed the previous month – comes to approximately Rs 238,250 crore. Some 38.5% of that amount has gone to Punjab and Haryana, whose farmers have been at the forefront of the protests. The government’s going all out to convince farmers that its reform laws aren’t aimed at ending the MSP-based procurement regime, can be seen in paddy and wheat purchases from Punjab scaling new highs in the 2020-21 crop year. Record procurement has been its strongest defence against allegations of being anti-farmer.
This links up with a third record. Even after the unprecedented 93 mt-plus offtake, thanks to PMGKAY, stocks of rice and wheat in the Central pool were at an all-time-high of 109.44 mt as on June 1, surpassing even last year’s 97.27 mt at this point. Stock levels have been rising since 2017, reversing the declining trend of the preceding four years (Chart 3).
If stock accumulation has largely to do with the political economy compulsions of MSP-based procurement, Covid-time distress has provided an opportunity for whittling down FCI’s grain mountain. FCI’s “economic cost” of procuring, handling, transporting, storing and distributing grains was estimated at Rs 39.99 per kg for rice and Rs 27.40/kg for wheat in 2020-21. The subsidy on the 31.5 mt of grains (20.8 mt rice and 0.7 mt wheat) distributed free under PMGKAY and other special relief programmes would have, then, totalled around Rs 112,500 crore. The actual cost, though, would have been lower, because FCI also incurs interest and storage expenses in holding excess stocks in its godowns. This “carrying cost of buffer”, pegged at Rs 5.40/kg in 2020-21, is saved even when grain is given out free. The corresponding annual savings on 31.5 mt would have been in excess of Rs 17,000 crore. Similar savings will accrue on the 28 mt additional grain allocations under PMGKAY for 2021-22.
Now is the final record: 2020-21 also saw a record 19.8 mt of rice and wheat being exported from India (Chart 4). On paper, practically this entire quantity shipped out was grain procured from the open market. According to the Department of Food and Public Distribution, a mere 75,000 tonnes wheat and 4,000 tonnes rice got exported from the central pool in 2020-21. This was wholly on “humanitarian grounds” through the Ministry of External Affairs.
The surge in exports has been significantly aided by the hardening of international prices. The UN Food and Agriculture Organization’s Cereal Price Index hit a 95-month-high in May. But global prices apart, the competitiveness of Indian rice and wheat may have been also enabled by recycled/ leaked grain from the PDS. Given the massive quantities offered free/near-free under PMGKAY/NFSA, it shouldn’t surprise if some of this grain has got diverted to the open market or even for exports.
However, at the end of the day, it is the abundant crop produced by farmers that has made all four records – PDS offtake, procurement, stocks and exports – possible even amidst the worst pandemic in over a century.
(The writer is National Rural Affairs & Agriculture Editor of The Indian Express and on sabbatical as Senior Fellow with the Centre for Policy Research)
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