UPSC IAS exam preparation - Indian Agriculture and related issues - Lecture 7

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PDS, Buffer stocks &
Food Security Act - Part 2

10.0 Buffer stocks and the Food Security Act

Public sector foodgrain stocks are an important pillar of India's food policy and food security. These have been used to serve three important societal goals.

To provide space for effective implementation of MSP for rice and wheat through procurement mechanism.
To maintain price stability arising out of year to year fluctuations in output or any other exigency.
As a source of supply for public distribution system and various other schemes to sustain food and nutrition security particularly of economically weaker sections.

The Food Corporation of India is the main agency for procurement, storage and distribution of food grains. In addition to the requirements of wheat and rice under the Targeted PDS, the Central Pool is required to have sufficient stocks of these in order to meet any emergencies like drought/failures of crop, as well as to enable open market intervention in case of price rise.

10.1 Buffer Norms

The “Buffer Norms” are the minimum food grains the centre should have in the Central pool at the beginning of each quarter to meet requirement of public distribution system and other welfare measures.

According to stocking policies stocks are conceptualized at least along three lines, each one targeting a different function inherent in buffer stocking policies. These are operational, strategic, and base stocks.

Operational stocks: to be used to feed various safety net and welfare schemes such as the PDS and OWS delineated in NFSB. The quantum of this stock depends on the obligations the government is making to people under these schemes. Under the current NFSB, this obligation is about 61.2 mt of cereals.

Strategic reserves for stabilization: to be used mainly as a buffer against any drought or any other unforeseen shocks, when production drops or normal movement of grains is obstructed. Under such circumstances, open market prices generally shoot up and these strategic reserves can be utilized to stabilize the cereal prices. Under the current envisaged NFSB, which would provide highly subsidized grain (at one-eighth to one-tenth of the economic cost) to almost two-third of the population, the purpose of stabilizing the prices for the remaining markets takes a back seat.

Base level stocks or "dead stocks": a certain minimum stock which is generally not available at a short notice of 2-3 months. This concept is akin to "dead storage" in any reservoir.

The last changes in the Buffer norms were in April 2005 and according to the norm: the minimum rice in the Central pool should be 118 lakh tons on January 01, 122 lakh tons on April 01, 98 lakh tons on July 01 and 52 lakh tons on October 01. Similarly, the quantity of wheat should be 82 lakh tons on January 01, 40 lakh tons on April 01, 171 lakh tons on July 01 and 110 lakh tons on October 01.

In January 2016 the Government of India made changes to the buffer norm requirements (wheat rice) as follows (in million tonnes).

Food grain stocking norms refers to the level of stock in the Central Pool that is sufficient to meet the operational requirement of foodgrains and exigencies at any point of time. Earlier this concept was termed as Buffer Norms and Strategic Reserve.

Presently stocking norms fixed by Government of India vide OM dated 22.01.2015 comprise:

Operational stocks: for meeting monthly distributional requirement under TPDS and OWS.
Food security stocks/reserves: for meeting shortfall in procurement.

Stocking norms are for a quarter and consist of operational stock for the quarter and strategic reserve to take care of short fall in production or natural calamities.

10.2 Objectives of Buffer Stocks

The buffer stocks are required to feed TPDS and other welfare schemes, ensure food security during the periods when production is short of normal demand during bad agricultural years, and to stabilize prices during period of production shortfall through open market sales.

Changes in the Buffer Norms: With the bulging procurement as well as the demand, the government had asked the National Centre for Agricultural Economics and Policy Research (NCAP) to study the buffer norm and make recommendation on increasing it if the demand has gone up. A technical group was also studying the report of NCAP.

According to the data, India has a comfortable position in the buffer stock which is sometimes more than double than the required buffer norms. However, it has raised the questions over the storage capability of the FCI and rotting grains in the open godowns in the country. The issue was again taken to the Supreme Court which suggested that government should distribute the grains free to the poor. The problem is immense, but solution of this problem is not instant. The FCI has to increase the storage capacity to accommodate the record procurement which is expected this year because of a very good monsoon.

10.3 Requirement of Operational Stocks under NFSA

The National Food Security Act (NFSB) envisaged distribution of about 61.2 mt of cereals, primarily rice and wheat, through the existing public distribution system (PDS). To fulfill the underlying legal commitment, it is important to ensure adequate availability of grain with the public authorities. This necessitates a relook at the buffer stocking norms devised for every quarter. The quantum of operational stocks to be held at the beginning of every quarter will be decided by synchronizing the commitments that government is making to people each month and the inflow of grains in government godowns through its procurement mechanism each month.

The quantum of operational stock needed will be first decided by the commitments that government is making to people each month, the inflow of grains in government godowns through its procurement mechanism each month, and then working out what would be needed for say each month or each quarter. Under NFSB, upto 67% of the population would be provided a uniform entitlement of 5 kg per person per month at highly subsidized prices of Rs 3, Rs 2, Rs 1 per kg for rice, wheat, coarse grains respectively. The entitlement of Antyodaya Anna Yojana (AAY) households, which constitute poorest of the poor will, however, be protected at 35 kg per household per month (i.e., 7 kg per person per month assuming 5 persons per household). It has also been proposed that the existing allocation of foodgrains to the States/UTs would be protected, subject to it being restricted to average annual offtake during last three years (2009-10 to 2011-12). Accordingly, the requirement for average monthly PDS offtake is calculated as 2.3 mt for wheat (27.6 mt annually) and 2.8 mt for rice (33.6 mt annually).

Against this annual requirement of 61.2 mt for PDS and OWS, one must see what has been the magnitude and pattern of total procurement and off-take for say last five-six years.

10.4 Schedules to the NFSA

The Act has three schedules (these can be amended "by notification"). Schedule 1 prescribes issue prices for the PDS. Schedule 2 prescribes "nutritional standards" for midday meals, take-home rations and related entitlements. For instance, take-home rations for children aged 6 months to 3 years should provide at least 500 calories and 12-15 grams of protein. Schedule 3 lists various "provisions for advancing food security", under three broad headings:

revitalization of agriculture (e.g. agrarian reforms, research and development, remunerative prices),
procurement, storage and movement of foodgrains (e.g. decentralised procurement), and
other provisions (e.g. drinking water, sanitation, health care, and "adequate pensions" for "senior citizens, persons with disability and single women").

11.0 WTO AND INDIA’S FOOD SECURITY ACT

Due to the new food security programme, India would have breached its AMS (Aggregate Measurement of Support) commitments to WTO. Many WTO members argued that India's new food security law, which guarantees grains to around 70 per cent of the country's 1.25 Action people at throwaway prices, would unnaturally decrease local prices and hurt demand for their products in the country.

The implementation of India's controversial Food Security Act, which guarantees to provide 82 crore people with 5 kilograms of food grain per person every month at a proce of Rs 1-3 a kilogram, requires at least 62 million tonnes of food grains per year.

India's contention was that the western countries extend huge subsidies running into Actions of dollars to their own farm sector but are opposed to poor countries giving genuine support to marginal farmers and cheap food to the poor. As food prices and the number of poor to be supported in developing countries have risen in the last two decades since the agreement on agriculture was framed, these subsidies have gone up substantially. In a major victory for India, the World Trade Organisation or WTO in the Bali round agreed to allow countries to provide subsidy on staple food crops without any threat of punitive action, a concession that salvaged the last round of world trade talks (Dec 2013) from the brink of collapse. The deal allowed nations such as India to fix a Minimum Support Price (MSP) for farm produce and to sell staple grains to the poor at subsidised rates. It also permits countries to store foodgrains to meet contingency requirements.

Finally, India signed the first ever TFA of the WTO in February 2016.

12.0 Economic Cost of grains

Grains are far more costly than they appear to be. The following table explain it.

13.0 ONE NATION ONE RATION CARD

'One Nation One Ration Card' scheme will allow portability of food security benefits. It was targeted to be available across the country from July 1, 2020 (hopefully).

13.1 The key idea

A poor migrant worker will be able to buy subsidised rice and wheat from any ration shop in the country, so long as their ration cards are linked to Aadhaar. At present, to avail of the National Food Security Act benefits (NFSA), they need not link their Aadhar with PDS system.All States were given one more year to use point of sale (PoS) machines in the ration shops and implement the scheme, as per Food Minister Ram Vilas Paswan. Already, 77% % of the ration shops across the country have PoS machines and more than 85% of people covered under the National Food Security Act (NFSA) have their cards linked to Aadhaar. (Separately, there were serious privacy concerns on this issue).

Ten States -- Andhra Pradesh, Gujarat, Haryana, Jharkhand, Karnataka, Kerala, Maharashtra, Rajasthan, Telangana and Tripura - already offer this portability. The pan-India target was set at June 30, 2020. Migrants would only be eligible for the subsidies supported by the Centre, which include rice sold at Rs. 3/kg and wheat at Rs. 2/kg. Even if a beneficiary moved to a State where grains were given for free, that person would not be able to access those benefits, as they were funded by the State exchequer.

13.2 Features

Any migrant labourer will only be entitled (in a different state) to benefits that the Central Govt. offers (i.e. rice sold at Rs. 3/kg and wheat at Rs. 2/kg). He/she will not get the facilities of that new State as he does not belong there.

The Aadhar seeding can be done in the home state too, and is not necessary to do it at/in the new State.

This scheme will ensure that no poor person is deprived of subsidised grains. State governments have to fast track its implementation, and make it work latest by June 30, 2020. Migrants would only be eligible for the subsidies supported by the Centre, which include rice sold at Rs. 3/kg and wheat at Rs. 2/kg. Even if a beneficiary moved to a State where grains were given for free, that person would not be able to access those benefits, as they were funded by the State exchequer. Also, in a bid to reduce nutrition deficiencies among beneficiaries, the Centre would roll out a pilot project in 15 districts to fortify rice grains with iron, folic acid, Vitamin A and Vitamin B12. The first fortified grains would be available in ration shops from this November.

14.0 INDIA'S GREEN REVOLUTION AND MALNUTRITION

Despite the rapid strides made in foodgrain output, malnutrition remains high in India. Already, five decades have gone by since the Green Revolution was launched (and was successful).

14.1 The Green Revolution

It was conceived due to harvest failures and famine conditions in the mid-1960s. The main goal was to ensure India's national food security.But it has failed to eliminate hunger and provide adequate and appropriate nutrition for all of India's people.Many policies launched included subsidies for fertiliser and groundwater extraction, minimum support prices for foodgrains (especially rice and wheat), and procurement and public distribution of grains (also mostly rice and wheat).

Large production : Today, India is the world's second largest producer of both wheat and rice and the largest exporter of rice. Despite the large increases in total production, per capita availability of all foodgrains has increased only modestly as the population has more than tripled since the mid-1960s.

Per capita : Per capita net availability jumped from 144 kg per year in 1951 to 171 kg in 1971 largely due to greater availability of wheat, but over the last 50 years has fluctuated between 170 and 180 kg.What has changed markedly is that wheat and rice have largely displaced more nutritious pulses and other cereals such as millets in consumption. Why did that happen?

PDS and wheat / rice : Through the Public Distribution Scheme (PDS) of 5,00,000 Fair Price Shops around the country, wheat, rice, and sugar are supplied to the poor at highly subsidised prices. A criticism is that it created incentives to consume calories and excluded more nutritious foods.

14.2 Global Huner Index

India ranked 102nd out of 119 countries on the International Food Policy Research Institute's (IFPRI) 2019 Global Hunger Index (GHI) and is home to the largest number of malnourished people in the world, about one quarter of the global total.Malnutrition in India today is concentrated among children under five. While the rates of child malnutrition have diminished over the last decade or two, child wasting and stunting are still widespread. According to the 2018 Global Nutrition Report, in 2015 about 21 per cent of all children under five were wasted and 38 per cent stunted.

14.3 Problem of malnutrition

Problem of over-nutrition : India is also experiencing rapid increases in over-nutrition, largely due to over-consumption of calories. This trend is evident in the rising incidence of overweight and obesity especially among adolescents and adults, but also among children 5-19 years old. It is leading to higher rates of diabetes and other non-communicable diseases.

Low agricultural investment : From 1981-2014, the growth of public (Central and States) investment in agriculture and irrigation averaged 4.6 per cent and 4.0 per cent respectively, well below China's investment rates at a comparable level of development. The incidence of malnutrition, especially stunting, is higher in both rural and lower income households, primarily farm households.

Second reason : A second cause of persistent child malnutrition is the inefficiencies and distortions of the Green Revolution agriculture and food policies. Programmes focused on child nutrition such as the Integrated Child Development Scheme, launched in 1975, and the Mid-Day Meals Scheme, introduced in 1995, have not corrected the Public Distribution Scheme's bias toward calories. Subsidies continued the reliance on rice and wheat and did not include more varied and nutritious foods.

Third reason : Poor sanitation is another cause of persistently high child malnutrition in India. That includes impure drinking water and poor sanitation. India has made significant strides in improving safer drinking water availability, but according to the 2018 Global Nutrition Report, the prevalence of open defecation, a well-known cause of disease, especially in children, was still about 40 per cent in 2015. While the poverty rate in Sub-Saharan Africa is nearly three times higher than in India, and the rates of undernourishment in the two regions are nearly equal, open defecation is more prevalent in India, and so also are child wasting and stunting rates.

14.4 Summary

Today, India faces an urgent crisis of child malnutrition and a looming crisis of over-nutrition with long-term consequences for public health. The responses required include:

Reforming the Green Revolution policies of price supports, input subsidies, procurement, and public distribution to shift their focus from wheat and rice to more nutritious grains, pulses, vegetables, and fruits.
Moving swiftly to increase biofortification of a wider range of foods than is so far included in India's plans.
Improving sanitary facilities, especially in the rural areas where poverty and child malnutrition are concentrated.

In the 1960s, India showed itself and the world it could move dramatically to relieve hunger and feed itself.Today it is at another critical juncture in the search for overall food security.

GLOBAL HUNGER INDEX

What it is : The Global Hunger Index (GHI) is a tool designed to comprehensively measure and track hunger at global, regional, and national levels. GHI scores are calculated each year to assess progress and setbacks in combating hunger. The GHI is designed to raise awareness and understanding of the struggle against hunger, provide a way to compare levels of hunger between countries and regions, and call attention to those areas of the world where hunger levels are highest and where the need for additional efforts to eliminate hunger is greatest.
Measuring hunger is complicated : To use the GHI information most effectively, it helps to understand how the GHI scores are calculated and what they can and cannot tell us.
How are the GHI scores calculated? GHI scores are calculated using a three-step process that draws on available data from various sources to capture the multidimensional nature of hunger.
Four indicators : First, for each country, values are determined for four indicators:

UNDERNOURISHMENT: the share of the population that is undernourished (that is, whose caloric intake is insufficient);
CHILD WASTING: the share of children under the age of five who are wasted (that is, who have low weight for their height, reflecting acute undernutrition);
CHILD STUNTING: the share of children under the age of five who are stunted (that is, who have low height for their age, reflecting chronic undernutrition); and
CHILD MORTALITY: the mortality rate of children under the age of five (in part, a reflection of the fatal mix of inadequate nutrition and unhealthy environments).

Process : Second, each of the four component indicators is given a standardized score on a 100-point scale based on the highest observed level for the indicator on a global scale in recent decades.Third, standardized scores are aggregated to calculate the GHI score for each country, with each of the three dimensions (inadequate food supply; child mortality; and child undernutrition, which is composed equally of child stunting and child wasting) given equal weight.This three-step process results in GHI scores on a 100-point GHI Severity Scale, where 0 is the best score (no hunger) and 100 is the worst. In practice, neither of these extremes is reached.
Using four indicators : Using this combination of indicators to measure hunger offers several advantages. The indicators included in the GHI formula reflect caloric deficiencies as well as poor nutrition. The undernourishment indicator captures the nutrition situation of the population as a whole, while the indicators specific to children reflect the nutrition status within a particularly vulnerable subset of the population for whom a lack of dietary energy, protein, and/or micronutrients (essential vitamins and minerals) leads to a high risk of illness, poor physical and cognitive development, and death. The inclusion of both child wasting and child stunting allows the GHI to document both acute and chronic undernutrition. By combining multiple indicators, the index reduces the effects of random measurement errors.
GHI Severity Scale : GHI Severity Scale is defined as - ? 9.9 = low, 10.0-19.9 = moderate, 20.0-34.9 = serious, 35.0-49.9 = alarming, ? 50.0 = extremely alarming.
India : In the 2018 Global Hunger Index, India ranks 103rd out of 119 qualifying countries. With a score of 31.1, India suffers from a level of hunger that is serious.

PDS IN INDIA - LATEST UPDATE

Government of India - Ministry of Consumer Affairs, Food & Public Distribution

What it is : Under National Food Security Act, 2013 (NFSA), the eligible households are entitled to receive foodgrains, namely - Wheat, Rice & Coarse-grains (nutri millets) through Public Distribution System (PDS). Total number of Fair Price Shops (FPS) in India is 5,34,992. More than 80% have ePOS (electronic Point of Sales) machines too, with Aadhar enablement.
History : India's Public Distribution System (PDS) is the largest distribution network of its kind in the world. It was introduced around World War II as a war-time rationing measure. Before the 1960s,distribution was dependant on importedfoodgrains. It was expanded in the1960s as a response to the food shortages of the time. Then the government set up theAgriculture Prices Commission (later CACP) and the Food Corporation of India (FCI) to improve domestic procurementand storage of food grains for PDS. By the 1970s, PDS had evolved into a universal scheme for thedistribution of subsidised food. In the 1990s, the scheme was revamped to improve access of foodgrains to hilly and inaccessible areas, and the poor.
Entitlements : As per entitlements under the Act, the Antyodaya Anna Yojana (AAY) households are eligible to receive 35 kg of foodgrains per family per month, whereas the Priority Households (PHH) beneficiaries are eligible to receive 5 kg of foodgrains per person per month. Distribution of subsidized sugar of 1 Kg per AAY family per month is also continued under PDS.
States can sell other items too : Further, clause 9(9) of Targeted Public Distribution System (TPDS) (Control) Order, 2015, empowers the State/UT Governments to allow sale of commodities other than distribution of foodgrains through Fair Price Shops to improve the viability of the fair price shop operations.
Integrated Management of Public Distribution System (IM-PDS) : TheDepartment launched a new Central Sector scheme namely "Integrated Management of Public Distribution System (IM-PDS)" for implementation during 2018-19 and 2019-20. The key objectives of the scheme were to integrate the existing PDS systems/portals of States/UTs with the Central Systems/portals, introduction of National Portability of ration card holders to lift foodgrains from any fair price shop (FPS) across the country, and also National level de-duplication of ration cards/beneficiary. The implementation of National Portability will be done on a pilot basis in two clusters i.e. Andhra Pradesh & Telangana (Cluster-I) and Gujarat & Maharashtra (Cluster-II) w.e.f. August 1, 2019.
Distribution of Fortified Ration : The Nutrient requirements and recommended dietary allowances (RDAs) for all age groups of the population including children are set and revised periodically by the National Institute of Nutrition - Indian Council of Medical Research (NIN-ICMR). The requirement of nutrients in children varies with the age, gender and nutritional status of the children. The RDAs for Indian population are finalized by the NIN-ICMR based on the recommendations of the Expert Group, based on individual variability and nutrient bioavailability from the habitual diet.Now we have the "Centrally Sponsored Pilot Scheme on Fortification of Rice & its distribution through Public Distribution System". Financial Assistance up to 90% in case of North-Eastern, Hilly and Island States and up to 75% in case of rest of the States has been extended. Government of India has also advised all States/UTs especially those States/UTs that are distributing wheat flour through Public Distribution System (PDS), to distribute fortified wheat flour through PDS.
Grievance Redressal Under PDS : The Department of Food and Public Distribution in collaboration with States/UTs is implementing a scheme on 'End-to-End Computerization of TPDS Operations' to improve the efficiency and transparency in Public Distribution System (PDS) operations. The scheme comprises digitization of ration cards/beneficiary and other databases, online allocation, computerization of supply-chain management, setting up of transparency portal and grievance redressal mechanisms. Under the scheme online grievance redressal facility/Toll-free (1967/1800-series) number has been implemented in all States/UTs.
No. of ration cards state/UT wise : The whole exercise is quite large. The numbers are - 1. Andaman & Nicobar Islands - 14,602, 2. Andhra Pradesh - 92,93,081, 3. Arunachal Pradesh - 1,77,607, 4. Assam - 57,87,581, 5. Bihar - 1,63,44,784, 6. Chandigarh - 70,220, 7. Chhattisgarh - 52,85,760, 8. Dadra & Nagar Haveli - 45,210, 9. Daman & Diu - 19,949, 10. Delhi - 17,19,074, 11. Goa - 1,41,428, 12. Gujarat - 66,26,069, 13. Haryana - 26,65,586, 14. Himachal Pradesh - 6,82,721, 15. Jammu & Kashmir - 16,75,723, 16. Jharkhand - 57,03,023, 17. Karnataka - 1,24,48,653, 18. Kerala - 36,63,684, 19. Lakshadweep Islands - 5,157, 20. Madhya Pradesh - 1,17,47,674, 21. Maharashtra - 1,46,01,093, 22. Manipur - 5,87,197, 23. Meghalaya - 4,21,455, 24. Mizoram - 1,47,562, 25. Nagaland - 2,84,934, 26. Odisha - 86,84,037, 27. Puducherry - 1,76,571, 28. Punjab - 35,33,250, 29. Rajasthan - 1,05,99,974, 30. Sikkim - 95,116, 31. Tamil Nadu - 1,00,70,930, 32. Telangana State - 49,72,809, 33. Tripura - 5,78,852, 34. Uttar Pradesh - 3,53,37,547, 35. Uttarakhand - 13,24,139, 36. West Bengal - 5,63,13,364, Total - 23,18,46,416

FOODGRAIN STOCKS - NORMS AND STATUS

Overview : Foodgrain stocking norms refers to the level of stock in the Central Pool that is sufficient to meet the operational requirement of foodgrains and exigencies at any point of time. Earlier this concept was termed as Buffer Norms and Strategic Reserve.
Present norms : Presently stocking norms fixed by Government of India vide OM dated 22.01.2015 comprise:

Operational stocks: for meeting monthly distributional requirement under TPDS and OWS.
Food security stocks/reserves: for meeting shortfall in procurement.

Quarterly : Stocking norms are for a quarter and consist of operational stock for the quarter and strategic reserve to take care of short fall in production or natural calamities.
Storage Capacity of FCI : On the basis of peak stock requirement during normal procurement season, the overall storage capacity required for central pool foodgrains in the country is about 650 Lakh Metric Tonnes (LMT). Against this, the total storage capacity available with Food Corporation of India (FCI), Central Warehousing Corporation (CWC) and State Agencies (both owned and hired capacity), is 851.54 LMT (as on 31.12.2018) comprising 724.79 LMT in covered godowns and 126.75 LMT in Cover and Plinth (CAP) storage. As such, there is sufficient capacity for storage of central pool foodgrains at the national level.
Scientific storage : The foodgrains are stored scientifically with various preservation measures like fumigation and treatment with pesticides. In spite of taking necessary care and precautions, small quantities of foodgrains may become non-issuable due to various reasons like natural calamities, damages in transit, negligence of officials etc.
New Schemes : These are the new schemes for construction of godowns and silos in the country for Central Pool Stock of foodgrains:

Private Entrepreneurs Guarantee (PEG) Scheme: Under this Scheme, which was formulated in 2008, storage capacity is created by private parties, Central Warehousing Corporation (CWC) and State Government Agencies for guaranteed hiring by Food Corporation of India (FCI). A capacity of 142.12 LMT has been created as on 31.12.2018 since the inception of this scheme.
Central Sector Scheme (earlier Plan Scheme): This scheme is implemented in the North Eastern States along with a few other States. Funds are released by the Government to FCI and also directly to the State Governments for construction of godowns. A total capacity of 2,01,200 MT has been completed by FCI and State Governments during last 5 years from 01.04.2013 up to 31.12.2018.
Construction of Steel Silos: Government of India has also approved an action plan for construction of steel silos in the country for a capacity of 100 LMT in Public Private Partnership (PPP) mode for modernizing storage infrastructure and improving shelf life of stored foodgrains. Against this, as on 31.12.2018, steel silos of 6.25 LMT capacity have been created.

In procuring States, the capacity utilization is maximum during procurement. Subsequently, the stock is moved to deficit regions in order to create space for next procurement season. Similarly, in recipient (consuming) States, the storage capacity is optimally utilized by continuous induction and replenishment of stocks to facilitate uninterrupted off take under different schemes. Thus, as such storage capacity is as per requirement. The FCI monitors and assesses the storage capacity periodically and takes steps to create additional storage capacity in case of storage gap. It also resorts to hiring of capacity through various state agencies and private sector in case of requirement.