Food Security Act and our agriculture

Prof Bijoy *

Farmers planting rice at a Paddy Field in June 2010

We are used to attaching high importance to agriculture and allied activities because most of us are engaged in this sector. When we talk of inclusive development we stress the importance of agriculture because it touches our lives in many ways. Despite the importance we attach to this sector,our agricultural policies have little to show our seriousness. Have we ever thought of the implications of the Food security ordinance on the farmers of Manipur?

The high cost of production as a consequence of the introduction of High yielding variety technology has rendered this activity no longer as attractive as it used to be.

NREGA gave us employment and also helped in raising the wage rate. The romance of the paddy fields has long disappeared in the mad rush for money and more money. Despite all talks public investment in agriculture has stagnated. In short there is little externality and it has increasingly become self financing. It is textbook knowledge that price of rice, our dominant agricultural produce, is a key determinant of the decision of the farmer as to how large his paddy field would be.

At the core of the matter lies the profit motive, the ubiquitous rationale of every human action. At first sight it may appear to be different but ultimately it boils down to this motive. Simply stated the farmer will decide to grow more paddy if he hopes to get more profit. To sustain the profit in the face of rising price of agricultural inputs such as HYV seeds, fertilisers, insecticides, diesel the price of paddy should also rise.

Prices may rise due to higher demand or artificial scarcity created by big business houses which are cartels. Prices may fall due to a bumper harvest. Our infamous sugar cycle is the lagged response of sugarcane growers to low price of sugarcane. A bumper crop of sugarcane used to be a problem for the grower because the market demand was simply not there and price therefore would decline.

Farmers are known even to burn down their sugarcane fields to arrest the price decline. The lower price will induce the growers to grow less sugarcane – so much less that another round of scarcity appears. The sugarcane prices would gradually rise from the bottom. It would rise to induce the farmers to grow more and more sugarcane till the fate of bumper crop catches up.

We cannot allow our farmers to pass through this cycle and also ask them to produce more and more. There is a need to guarantee them a price that will take care of cost of production and a margin of profit to incentivise production. That is the rationale of minimum support price. The MSP is announced in advance and farmers will have no problem in selling the crop at the MSP to the procurement agency. There is practically no limit to procurement.

Not only is the privilege confined to a few select crops, procurement is also resorted to in a few select states.Under the procurement system the food-grains conforming to the specifications offered for sale at the procurement centres are to be purchased at the MSP. The farmers can sell at the open market also even at a higher price.

It started with wheat in 1966-67 and now covers 25 crops. Recently the Cabinet Committee on Economic Affairs (CCEA) raised the minimum support price (MSP) for common grade paddy to Rs 1,310 a quintal and grade A variety to Rs 1345a quintal for 2013-14 (July-June).

UPA is bent on introducing food security act before the Lok Sabha polls. It will do to the fortune of the ruling party what NREGA did to UPA II. The plan is to start implementing it on Aug. 20, the birthday of our former PM Rajiv Gandhi. This is going to be the biggest food security programme ever taken up anywhere any time.

This will enable a large proportion of Indians to purchase rice and wheat at unimaginably low prices- rice at Rs 3 per kg and wheat at Rs 1 per kg. Andhra Pradesh is expected to procure 95 lakh tonnes of rice during 2012-13 followed by Punjab’s 85 lakh tonnes. We have seen levy system of rice in our childhood. However it was very unpopular among the masses.

The ordinance on Food Security Bill was signed by President Pranab Mukherjee on July 5, 2013 with the aim of providing food-grains every month to nation’s two-third population at highly subsidized rates. The Food Security programme when implemented will be the biggest in the world with the government spending estimated at one lakh 25 thousand crore rupees annually.

The availability of rice at such low price will benefit the consumers and the market price also cannot be much higher. If the prices of local produce remain as high as before, it will not take much time for the consumers to switch over to superfine rice. Once that happens, our farmers will be adversely affected.

Immediately after the harvest they sell rice at a cheap rate and people who can afford to hoard some stock sell at a higher price in the lean season. This time there is not going to be any lean season. Consumers will have access to cheap rice throughout the year. Of course one can bet that it will not work efficiently in Manipur due to factors both within and beyond our control.

Can we presume that we will be inefficient throughout? Growing awareness of the public and the concern for good governance will make it difficult to be inefficient. The way out is procurement of our rice at MSP by Food corporation of India as in other parts of India. If we have not been doing it, we should do it now to save our farmers and make development meaningfully inclusive. Instead of transporting our quota from Dimapur, we can maintain our stock here.

It will save the transport cost and we would like, for the first time, to have rice from the fair price shop. We may have to invest more in constructing more and better godowns for rice. If we end up procuring more than our requirements, the surplus can be transferred to the general pool.

The economics of this programme can be managed positively if we consider the inconveniences of our farmers. In short the Food Security Act will be a boon to the consumers. It will be a curse for our farmers if it is not backed by an effective procurement policy. Most of the farmers will be switching over to more remunerative crops.

When rice is replaced by some other crops, rural economy also will change in many ways. There is no way to cut cost of production upto the level required by the market. This will unleash a chain of destabilising forces several times bigger than the Loktak project.