Baby Steps In Food Economy Reform Must Not Falter

Gradualism is necessary when politically sensitive reform measures are being introduced. But it can also give vested interests the time to derail welcome initiatives

Caution appears to be the watchword in the government’s move to reform the management of food-grains and the overall food policy. It has before it a set of very radical recommendations by the High Level Committee on Reorienting the Role and Restructuring of FCI [Food Corporation of India] headed by BJP veteran and former food and civil supplies minister Shanta Kumar. But recognising that these can be political hot potatoes, it wisely seems to prefer taking baby steps.

The committee’s report has attracted criticism of overreach for making recommendations not just about restructuring the FCI – widely seen as an inefficient and corruption-ridden organization – but also issues related to the foodgrain policy, including the National Food Security Act (NFSA) the minimum support price (MSP) policy and fertilizer policy.

An explanation of why the committee got into larger food-grain policy issues when its brief related to FCI is necessary. This policy has a crucial bearing on the operations of FCI, a fact noted by a 2001 report on FCI by the Administrative Staff College of India. The MSP, which started off as a kind of threshold price, soon became the price at which FCI was arm-twisted into procuring foodgrains even when there were excess stocks. When a corporation is forced to overstretch itself even when it does not make any economic sense, it is bound to run into trouble. That is what has happened to FCI and that is why the overall foodgrain policy has an impact on its functioning.

The most controversial (though sensible) recommendation of the Shanta Kumar committee was to reduce coverage under the NFSA from the current 66 per cent to 40 per cent. Understandably, that has been rejected outright. With crucial reform bills to be piloted through the Rajya Sabha in the face of a hostile Opposition, the government obviously does not want to open up yet another front.

Instead, the government has decided to take the first tentative steps towards cash transfers for food. The committee had suggested a phased introduction of cash transfers, starting with large cities with one million plus population. Food and public distribution minister Ram Vilas Paswan said last week that Chandigarh and Puducherry will host pilot programmes on this. These are sensible choices.  Starting with Chandigarh and Puducherry is sensible – these are urban areas and consuming, not producing, centres and where governance systems related to the public distribution system are in place.

There are no details yet on when the cash transfer programme will roll out but the announcement indicates a welcome seriousness of intent. This will be the first serious initiative in this direction after the Shiela Dixit government in Delhi initiated a direct benefit transfer programme – Annashree – in 2012.

The government is also proceeding gingerly on certain other recommendations relating to FCI.

It plans to experiment, again on a pilot basis, outsourcing the quality checks of food-grains to private players in 25 FCI depots in Chhattisgarh. Quality checks – a humungous source of corruption – are done manually right now and the committee had suggested that they be mechanised and also that third party agencies be roped in for this. Paswan admitted at the press briefing that the FCI was not too keen on this and asked what guarantee there was that outside agencies would do a better job. Starting small is clearly a way to overcome this resistance.

Given the huge inefficiencies within FCI, the committee had suggested outsourcing of its stocking operations to state and private agencies. This, it had said, should be done through competitive bidding to bring down costs of storage. But, perhaps fearing the ire of the powerful unions, the government appears to have side-stepped this important reform.

There’s going to be no outsourcing of existing stockholding operations. Paswan said new storage facilities that the FCI set up would be outsourced. This does not quite make sense. If the idea is to outsource, why should FCI create fresh storage capacity? It makes sense only if Paswan means that any new capacity will be created only through other agencies, which would gradually bring down the share of FCI in stockholding operations and thus reduce the potential for trouble that a unionized work force will give rise to.

Taking baby steps may be politically sagacious but can also give vested interests the time to derail welcome initiatives. Teething troubles get deliberately magnified as fundamental flaws and are used to junk the reforms. This is what happened to the cash transfer in lieu of subsidised kerosene in the Kotkasim block of Alwar district in Rajasthan, which was also a pilot. This also happened in the case of the Delhi government’s Annashree scheme, which got subsumed into the NFSA when it was enacted.

Gradualism is necessary when politically sensitive reform measures are being introduced. But the government must also take care to see that these baby steps aren’t forced to falter and stop.