Issues of buffer stocks & food security

Relevance:

Mains: GS III –

• Issues of buffer stocks & food security

• What are Buffer Stocks? 
  • Buffer stocks refer to a pool of certain commodities like Rice, Wheat, etc which are maintained to provide food security and tackle unforeseen emergencies like drought, famine, wars, etc. In India, the buffer stocks are maintained by the public sector.
  • Stocking of Food Grains was first introduced in India in 1969 during the 4th Five year plan period.
  • The Food Corporation of India was set up in 1964 under the Food  Corporation Act 1964 to achieve the aims of the Food Policy.

• The objective of maintaining Buffer stocks: The public sector food grain buffer stocks in India are maintained with three main objectives: 
  • Better returns for Farmers: The procurement of food grains from the farmers at the Minimum Support Price(MSP) helps the farmers get rid of the distress sale of their products and ensures them reasonable return for their produce. 
  • Food Security:  The buffer stocks of food grains are maintained to achieve the goal of providing every Indian citizen with sufficient food for their sustenance i.e maintaining food security.
  • Price stability: Whenever there is a rise in the prices of food stocks the buffer stocks are released into the market to bring down the prices to an acceptable level. This was the government tries to keep the food inflation at acceptable levels.
  • The buffer stocks also help the government carry out its social welfare programs for the poor and the underprivileged sections of the population.
  • Source of food grains for welfare programs: The food stock procurement helps the government-run its social welfare schemes like the Targeted Public distribution system (TPDS)and Other Welfare Schemes (OWS) like mid-day meals scheme for school-going children, distribution of food grains to people displaced due to natural calamities, etc.
• Buffer Norms: 
  • The minimum food grains which the Central government should maintain at the beginning of each quarter to ensure enough supply for the public distribution system and other distribution schemes of the government.
  • Food Stock available in the central governments’ pool is the stock held by:
    • State Government Agencies (SGAs)
    • States which are taking part in the Decentralised Procurement Scheme
    • Food Corporation of India(FCI)
  • The stock of food grains in the Central pool is distributed all around the year depending on the off-take and procurement trends. Therefore, the season of production and procurement is a major factor to determine the minimum food grain stocks required in any particular quarter of the year.
  • As of now, the stocking norms for buffer stock decided by the GoI comprises of:
    • Operational Stocks: The stock required to meet the monthly requirements under TDPS and OWS.
    • Food Security Stocks: The reserves to meet the procurement shortfall.
  • The food grains for issue under OWS and TDPS are considered as operational stock, whereas the surplus is considered as buffer stock and operational stock both. The stock which is over the minimum stockpiling norms is treated as excess stock and it is exported from time to time, extra allocations for some states or through open market sales.

Challenges: 

• High Cost of Logistics and administration: With a majority of the funds allocated for buying the buffer stocks, it becomes troublesome for the Agricultural ministry and FCI to adjust the budget to make funds available for the efficient establishment and working of the storage units. This can be seen in the following ways:
  • Dual Wastage: Huge quantities of food stocks get spoiled due to unscientific storage methods and at the same time a large percentage of the population is dying of hunger in India.
  • Warehousing Issues:  Lack of sufficient storage space and other storage infrastructure after the procurement.
  • Wastage: Open, outdoor storage, the food grains are often spoiled by rodents, frost, and rain, causing a huge financial loss for the government.
  • Transportation issues: The cost of transportation of the grains to and from the FCI godowns is huge. Spilling and spoilage at the time of transportation also increase the losses.
  • Diversion and pilferage:  The Buffer stocks are sometimes diverted to black markets, liquor manufacturing units, Ghost beneficiaries. This way instead of the targetted population, others benefit from the buffer stocks of food grains, starving a great percentage of the population.
• Trade Distortion practice: Many developed countries of the West consider the government procurement of food grains and maintenance of the buffer stocks as a trade distortion practice. They drag India to the WTO regarding the same.
• Skewed Cropping pattern: Integration of the buffer stocks with MSP for food grains like rice and wheat leads to excessive production of these food grains. These are water-intensive crops and need the greater application of fertilizers for greater productivity. This not only affects the environment but also affects crop diversity, compromising the nutritional security of India. Farmers belonging to regions not favourable for the production of rice and wheat will also have an inclination for goring rice and wheat.
• Open-Ended Procurement:  in the absence of proper estimation of the overall buffer stock estimation for running the PDS and emergencies, the open-ended procurement of the food stocks further poses a challenge to proper storage and outtake of the buffer stocks.

The way forward: The government had set up a six-member Shanta Kumar committee to suggest restructuring or unbundling of FCI to improve its financial management and operational efficiency in procurement, storage, and distribution of food grains. Important recommendations made are as follows:

• Reduce the number of beneficiaries under the National Food Security Act from the current 67 % to 40%.
• Allow the Private sector to procure and store food grains.
• Stop bonuses on minimum support price (MSP) paid by states to farmers, and adopt a direct benefit transfer system so that MSP and food subsidy amounts can be directly transferred to the accounts of farmers and food security beneficiaries.
• FCI should involve itself in full-fledged grains procurement only in those states which are poor in procurement. In the case of those states which are performing well, like Haryana, Punjab, Andhra Pradesh, Chhattisgarh, Madhya Pradesh, and Odisha, the states should do the procurement.
• Abolishing levy rice: Under the levy rice policy, the government buys a certain percentage of rice (varies from 25 to 75% in states) from the mills compulsorily, which is called levy rice. Mills are allowed to sell only the remainder in the open market
• Deregulate the fertilizer sector and provide cash for fertilizer subsidy of Rs 7,000 per hectare to farmers.
• Outsource of stocking of grains: The committee calls for setting up of negotiable warehouse receipt (NWR) system. In the new system, farmers can deposit their produce in these registered warehouses and get 80% of the advance from the bank against their produce on the basis of MSP.
• Clear and transparent liquidation policy for buffer stock: FCI should be given greater flexibility in doing business; it should offload surplus stock in the open market or export, as per need