Foodgrains rot while poor stay hungry in India. Why?
India has over 70 tonnes of rice and wheat stored in government warehouses even as prices of foodgrains surged in July. The government should release the stock so that artificial shortage disappears and the poor don’t have to go hungry.
Indian government policies, long blamed for not being in touch with reality when it comes to fiscal matters, now seems inhuman.
Last month, prices of cereals used in everyday cooking rose over 17%, pushing the wholesale price index to reach close to 5%. That’s uncomfortably high.
You might expect that India fell short of essential foodgrains. The reality is that the government has been holding 73.9 tonnes of foodgrains in its warehouses, more than double the minimum requirement. This has led to an artificial shortage in the market, making food items unaffordable to the poor. Most of the storage is in old warehouses without cooling and sometimes, without a roof. Analysts estimate that 10% of such stored foodgrains will just rot and never reach the hungry masses.
What can be the reason for such a colossal waste in India where half the children are stunted because their families cannot afford the nutrition they need? Turns out that the government wants to recover the money it had paid to farmers when buying the produce, known as Minimum Support Price. This price is set every day to prevent distress sale by farmers, and safeguard their income.
The government has the ability to set prices in the open market simply because it is the biggest player. Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices, an agency that advises the government on farm produce prices, said in a recent interview that if the government decides to open the warehouses and makes 15- 20 million tonnes of extra foodgrains available, prices will fall sharply and put the brakes on inflation. That’s taking into account some wastage due to poor distribution infrastructure in rural areas. However, the fall in prices will make the sale unprofitable. So while the Congress government has otherwise made a habit of spending ever higher sums on subsidies in programs where leakages are common, it has played the invisible hand of the market when it comes to essential foodgrains! At a time when food prices rose 3% in most developing countries, in India it rose by over 10% on this government’s watch.
The poor are spending over half their meagre income on food alone. Average households are spending a bit less, at around half, on food.This is worrying for an economy that relies on private consumption. Higher food prices has led to demand for higher wages which in turn would make exports less competitive. Rating agencies have cautioned the government that higher foodgrain prices are slowing growth and widening its deficits. This can lead to a downgrade in sovereign ratings. And all because the government would rather let foodgrains rot than release them in the market.
