Distributing foodgrains at low price not a solution: Basu
Amid instances of food items rotting in storage houses and the poor not getting enough to eat, Chief Economic Advisor Kaushik Basu has said distribution of foodgrains at a low price by the government may not be a solution, as traders manipulate the system.delhi Updated: Sep 06, 2010 20:18 IST
Amid instances of food items rotting in storage houses and the poor not getting enough to eat, Chief Economic Advisor Kaushik Basu has said distribution of foodgrains at a low price by the government may not be a solution, as traders manipulate the system.
"If the grain is just given away at a low price to whoever comes to buy, it is likely that a part of this food will get picked up by traders and resold to government through the procurement window. In other words, the government will end up subsidising repeatedly for the same foodgrain," Basu said in a working paper.
The paper assumes importance as the Supreme Court on August 12 had orally observed that the government should ensure free distribution of foodgrains to the poor, instead of letting them rot. However, in the written order, the court said, "The government shall supply foodgrains to the poor at a low cost or no cost."
Following the Supreme Court directive, the government last week decided to release an extra 2.5 million tonnes of food grains to states for distribution among the poor, but it will not be free.
Meanwhile, Prime Minister Manmohan Singh on Monday gently told the Supreme Court, which recently directed the government to distribute foodgrains free to the poor, not to get into the "realm of policy formulation".
"How can foodgrains be distributed free to an estimated 37 per cent of the population which lives below the poverty line?" Singh asserted.
Basu further said the rise in food prices is not due to a lack of storage facilities in the country.
"The exasperation that our citizenry feels about foodgrains rotting in poorly maintained storage facilities is understandable," Basu said.
"Inspired by the sight of foodgrain going waste, it is often made out to be that our central problem is that of poor foodgrain storage. This paper disagrees with this popular view," he added.
"While we no doubt should improve our storage facilities, it is important to be clear that this in itself will not lower the price of food," he said.
Basu further said that one has to take a holistic view of the entire system of foodgrains management - production, procurement and release.
"This does not make the problem insoluble nor the wastage of food pardonable, but simply means that we have to give a lot of thought to the design of our foodgrains policy in its totality," the paper added.
Commenting on the proposed National Food Security Act, he said it is a move in the right direction and provides an opportunity to improve the food distribution system.
"Yet, despite all the good intention, we can get this policy wrong. It is critical to understand that it is not enough to throw money at the problem," Basu said.
The government has to design the entire foodgrains policy skillfully to ensure that the right to food is fulfilled and at the same time, the country's fiscal system is able to withstand the expenditure, he added.