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Milind Murugkar
June 30, 2013
India's food security system aligns the interests of farmers and consumers in a complex way. The Food Corporation of India (FCI) is responsible not just for the supply of subsidised grain to the states but also for running the public distribution system (PDS).

It is also supposed to ensure minimum support prices (MSP) for grain producers and is also expected to stabilise the open market prices of grain. There is an inherent complexity in balancing the conflicting interests of consumers, farmers and traders. This leaves scope for politicians to cleverly manipulate the debate on the food policy to suit their vested interests.

Recently, following the opposition from the Samajwadi Party, the government had to suspend the option of an ordinance to bring in the National Food Security Act. The spokespersons for the Samajwadi Party said that the Bill is against the interests of the farmers but did not explain why.

Earlier, the Union agriculture minister had criticised the Bill, saying that: "If 68% people buy wheat at such a low rate, how will the farmers get their remunerative price? They will have to start cultivating some other crop. This could lead to a serious food security issue in the nation" (Hindustan Times, December 29, 2012).

But a recent paper by some economists argued exactly opposite. They say that the food Bill will compel the government to raise the minimum support price for grain. This will discourage the farmers from diversifying away from the foodgrain production. The authors of this paper also include Ashok Gulati, the chairman of the Commission for Agricultural Costs and Prices (CACP).

So what is the truth? Will this Bill deprive the grain producers of the remunerative prices? Or will it force the government to procure grain at ever increasing prices as these economists say? Will the farmers move away from foodgrain production threatening India's self-sufficiency as the agriculture minister fears? Or will it encourage them to continue producing foodgrains as these economists argue?

Because of experience a perception is formed that the benefits to the consumers are conferred always at the cost of the farmers. The imposition of export bans and invoking the essential commodities Act to lower the market prices of grain give credence to this perception.

But when it comes to procurement for the PDS the effect is exactly the opposite. Increased demand for procurement for the PDS, in fact, raises the political power of the farmers.

And as the food security Act would raise the procurement of the grain steeply, the government will be forced to incentivise the farmers to produce more grain by raising the MSP (essentially the procurement price). So how can the food Bill be termed anti-farmer?

The causal link between the procurement and the lobbying power of the wheat growers becomes obvious if we look at the figures of the MSP and procurement. During the last decade both have risen. From 2001 to 2007, the support price increased by 20%.

Then things changed dramatically. In 2007–08, in just one year, the support price increased by 21% and the following year by another 18%. This is the period during which world food prices peaked.

India responded by closing off exports to world markets and by hiking support prices so that it could procure enough to maintain supply to the PDS. Farmers did not protest against the export ban as they got a steep hike in MSP.

A more consistent explanation for raising the MSP is the government's overriding commitment to the PDS. The failure to supply adequate grain to the PDS is perceived to be electorally costly.

It is often forgotten that the food subsidy Bill also includes the subsidy to farmers through the price support. The ballooning of the food subsidy Bill is due to the steep rise in the support prices. It is thus absurd to say that the food Bill harms the interests of the farmers.

Let us also not forget that the farmer is not a homogeneous social entity. Most of the farmers in the country are small, dry land farmers who buy foodgrains from the market. And most of them will be included in the ambit of the food security cover for the first time because of the food Bill. This will be a big help for these poor farmers.

The politics aimed at obstructing the food Bill in the name of farmers harms the interests of the farmers.

Milind Murugkar is a policy analyst with Pragati Abhiyan, a non-profit development organisation.

The views expressed by the author are personal.