We have to understand that the Green Revolution strategy of using the same mechanism to provide farmers remunerative prices while simultaneously ensuring food security, no longer works. The two objectives require separate strategies.
Infusion of largefood stocks into the market will almost certainly force food prices down to politically unacceptable levels from the farmers' standpoint.
The picture of foodgrains being allowed to rot instead of being distributed to the poor has been so ethically disturbing that even the Supreme Court was tempted to comment on the issue. But this focus on the injustice of the situation is not without its downside.
It converts a complex issue into a simple one of an insensitive government standing against a seemingly obvious solution. In the process it diverts attention away from the real challenge the Government faces: that of transforming a public distribution mechanism that has far outlived its utility.
The mechanism of the current public distribution system (PDS) was best suited for the needs of the food deficit years before and during the Green Revolution. It was then necessary for the government to first offer credit and technology to the farmers to help them raise production, and once that was achieved, to guarantee their entire stock of the Green Revolution crops — rice and wheat — would be procured. The procured rice and wheat could then be sold in the PDS at a price that incorporated whatever further subsidy the government of the day could afford.
This mechanism worked best as long as whatever was offered in the PDS was bought. But as we moved to a period when the off-take from the PDS did not absorb all that was offered, the system was left with unsold stocks. And since these stocks had already been paid for they only added to the food subsidy.
The free market response — indeed the neo-liberal solution — to this problem would be for the Government to procure less and to get rid of the stocks by dumping them in the market. Distributing the food to the poor, so as to reduce the costs of storing grain, would be not just a politically attractive option but would also reduce the food subsidy.
PRICES IN AGRICULTURE
What makes this option unacceptable, though it is consistent with the ideological leanings the government is believed to hold, is the larger problem in agriculture. The crisis in agriculture has seen Indian farmers becoming more dependent on prices for their economic survival. The scope to increase earnings through higher yields has been rather limited.
Moreover, the net cultivated area has not increased by much over the last half a century, while the rural population has grown manifold. The number of persons dependent on a unit of land has thus grown quite substantially. And it does not help that the growing inequality and the awareness of lifestyles in better-off urban families increases the material aspirations of the next generation of the families of farmers.
Any action that would reduce the prices farmers can get is then almost certain to be resisted very strongly by the farming community. And the infusion of large food stocks into the market will almost certainly force food prices down to politically unacceptable levels. It is theoretically possible to argue that if this additional food is given only to those who are not currently buying food in the market there would be no impact on prices.
But in a country where some States provide Below Poverty Line cards to around 80 per cent of the population no one believes the food will be given only to those who have no resources to buy food in the open market. The Government is thus left in a position where it prefers to take on the Supreme Court rather than court the anger of farmers by distributing surplus food.
WRONG CROP CHOICES
The Government could get some relief if there is an increase in yields so that the farmers don't need artificially inflated prices for their economic activity to be remunerative. But here again the procurement mechanism comes in the way.
The guaranteed procurement of rice and wheat at remunerative prices makes these crops insensitive to the usual market signals. This can result in a cropping pattern that is not designed to make the best use of local conditions. Punjab has become a major producer of rice when it is clear to all that its water resources make the continued production of this crop unsustainable. The administered prices of rice may well have ensured that the state has moved away from crops that it is best suited to produce.
It is thus imperative to come to terms with the fact that the Green Revolution strategy of using the same mechanism to provide farmers remunerative prices while simultaneously ensuring food security, no longer works.
ALTERNATIVE STRATEGY
The two objectives require separate strategies. Farmers require better directed strategies in a number of areas other than administered prices. There is a need to develop an innovative mechanism that will help farmers deal with risk without distorting their decisions on the crops they will grow. There is a need to improve yields by not just adopting new technologies, but also by removing the economic and other bottlenecks to their being used by farmers.
This would allow for a separate and better directed food security strategy. The procurement could cover a wider range of crops and without any compulsion to gather excess stocks. The resultant savings on the food subsidy can be directed towards public investment in dryland agriculture. This would contribute to an overall improvement in yields. And even if such an increase in yields is modest, we would at least not have to see grains bought with a substantial food subsidy being wasted on rats.
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