BackEnsuring real food security for the poor
Ending run of subsidies to rich farmers and ensuring that agricultural output does not fall will be a tough nut to crack
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When India halted a global agreement on trade facilitation in late July to protect its poor consumers and farmers, its stand was widely criticized. Accusations of bad faith flowed freely. Some commentators even foresaw the end of global trade liberalization in India’s quest for food security.All that may have been premature.
Last week, India took the first step in getting back to the negotiating table. It has notified to the World Trade Organization (WTO) the amount of agricultural subsidies it dished out to its farmers, and implicitly its poor consumers of food in the seven years from 2004-05 to 2010-11. India spent $56.1 billion in the last year alone of this period in supporting its agriculture.
A reading of the 27-page document (available on the WTO’s document notification page) sheds some interesting light on the political economy of India’s agricultural subsidies. While many of the details are patchy, it is the relative balance between subsidies for poor consumers—proxied by money spent on buffer stock holding for this period—and those for farmers in the form of inputs, that are revealing. For these seven years, India spent close to $60 billion on buffer stock operations, a sum that rose from $5.7 billion in 2004-05 to $13.8 billion in 2010-11, a 142% increase. In contrast, input subsidies—the ones that go to farmers in the form of cheap fertilizers and power among other inputs—galloped from $10.2 billion in 2004-05 to $29 billion in 2010-11, a 184% increase in seven years. In absolute terms, input subsidies amounted to $145 billion, more than double of what is an extremely rough measure of support for poor consumers. A major part of the public stockholding of foodgrains rots away and does not reach the poor. Even by that diluted standard, it is India’s farmers who are the real beneficiaries of its food security efforts and not the poor.
This, however, is not what India claims as the reason for taking such a strong position on food security. One week after the deadline for the trade facilitation agreement, 31 July, passed commerce minister Nirmala Sitharaman issued a statement in the Lok Sabha. While she made a passing reference to protecting the interests of farmers, her strongest words were reserved for the protection of poor as a sovereign right (para 16 of the statement). This paper has before argued that food security is indeed a sovereign right. It is time the government put this into practice.
India does not have to substitute one set of ruinous subsidies, for its producers, with another equally ruinous ones in the form of a flawed food security law. The data released to the WTO only confirms the long-held suspicion that food subsidy is in a very large part a producers subsidy. What India needs to do is to alter the relative balance between what ends up going to rich farmers and the crumbs for the poor.
There is plenty that can be done smartly. If providing cheap food to the poor is an aim, surely there are better mechanisms to ensure better delivery. Little attention has been paid to devising them. For example, timely releases of a large number of small batches of foodgrains during a period of high inflation, instead of selling a huge amount to a few sellers is a much better policy to ensure the poor get reasonably priced food. Similarly, instead of purchasing huge amounts of wheat and rice every year—even when market prices are high—it will be much better if the government purchases more during years when foodgrain prices are low and less in those years when they are high.
At the moment a high level committee is examining ways to restructure the Food Corporation of India (FCI), the behemoth that both buys and supplies foodgrains across the country. Restructuring the FCI is an important part of altering the political economy of food in favour of the poor, away from farmers who have surplus foodgrains to offload in the market.
The Narendra Modi government will have to grapple hard with this problem. Ending the run of subsidies to rich farmers and ensuring that agricultural output does not fall will be a tough nut to crack.
Is the case for food security really for India’s poor consumers? Tell us at views@livemint.com
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