Lessons from the Fracas over Foodgrains

July 5, 2023

GS Paper III Indian Economy

Context:

The Karnataka government’s decision to convert the promised Anna Bhagya scheme to a direct benefit transfer temporarily has brought into focus the limits of a State government’s policy intervention on a crucial matter such as food security.

Overview of the Scheme:

Name of the Scheme	Karnataka Anna Bhagya Scheme
Launched on	2023
Benefits	The government had envisaged the provision of five kg of free rice per person per month to 4.42 crore beneficiaries
Beneficiaries	BPL Category families of Karnataka

Few Related Schemes:

Scheme	Number of Beneficiaries	Remarks
Antyodaya Anna Yojana (AAY)	45 Lakh	Provides 5 kg of free rice per person per month to the poorest of the poor
Priority Household (PHH)	3.58 Crore	Provides 5 kg of free rice per person per month to households below the poverty line
Karnataka’s own category of PHH	39 Lakh	Provides 5 kg of free rice per person per month to households that are not covered by the NFSA
National Food Security Act (NFSA)	80 Crore	Provides 5 kg of wheat or rice per person per month to eligible households

Open Market Sale Scheme-Domestic (OMSS-D):

It is a government initiative in India aimed at selling surplus food grains in the open market. Under this scheme, the government releases excess food grains from its buffer stock to maintain price stability and ensure adequate food supply.

Purpose: The OMSS-D is implemented to manage surplus food grains available with the government and prevent their wastage.
- It aims to stabilize market prices and ensure availability of food grains in the domestic market.
Buffer Stock: The government maintains a buffer stock of essential food grains like wheat and rice. This stock is created through procurement from farmers at Minimum Support Prices (MSP) and is used to meet any food security needs or emergency situations.
Sale of Surplus Grains: When the buffer stock exceeds the required quantity for food security purposes, the government utilizes the OMSS-D to sell the surplus grains in the open market. This helps in managing the storage and reducing the carrying cost of excess food grains.
Market Intervention: OMSS-D acts as a market intervention tool to balance the demand and supply of food grains. By releasing surplus grains in the open market, the government influences prices and prevents sharp fluctuations that could impact consumers and farmers.
Sale Process: The surplus food grains under OMSS-D are made available through electronic auction platforms to registered bulk buyers, including traders, millers, and processors. The buyers bid for the grains, and the highest bidder is awarded the quantity applied for.
Price and Terms: The government sets the reserve price for the sale of food grains under OMSS-D. The buyers are required to adhere to the terms and conditions specified in the scheme, including the quantity limits and payment timelines.
Benefits: The OMSS-D benefits various stakeholders. It helps the government in managing its food stocks efficiently, reduces wastage, and generates revenue from the sale of surplus grains. It also ensures price stability in the market and provides buyers with a reliable source of food grains.

Changes to Open Market Sale Scheme (OMSS)- Impact on States and Small Buyers:

Flexibility: States have been given the flexibility to purchase surplus stock without e-auctions under the Open Market Sale Scheme (OMSS).
Greater Accommodation: OMSS now focuses on accommodating small and marginal buyers and traders. Currently, the quantity that a bidder can purchase in a single bid ranges from 10-100 metric tonnes.
Supplement of Allocation: The decision by the central government surprised rice-deficit states, as OMSS is utilized by them to supplement their allocation.
Impact on Launching Schemes: The suddenness of the decision had a significant impact on Karnataka, which had already begun preparations to launch the scheme, expecting support from the Food Corporation of India (FCI).

Reasons to Restrict Supply of Foodgrains:

Compulsion: The Centre has its own compulsions in restricting the availability of foodgrains under OMSS-D.
Lowest Pool: The quarterly stock position of rice and wheat in the Central pool, as on April 1, 2023, was the lowest in the last three years.
Monsoonal Impact: Uncertainty regarding the south-west monsoon and the possible impact of an adverse monsoon on the production of foodgrains.

Facts Data for Foodgrains:

Points	Data
Quantity drawn by all players from 2018-19 to 2022-23 (Average)	About 16 lakh tonnes per year
Highest quantity drawn in 2020-21	About 24.6 lakh tonnes
Karnataka’s annual requirement for Anna Bhagya	About 27.5 lakh tonnes per year
Karnataka’s allocation under the NFSA for 2023-24	Lower by about 1.5 lakh tonnes compared to the need
Monthly expenditure for grains at 36.6 per kg (Assuming required quantity obtained at cost)	Approximately 840 crore

Way Forward:

States’ Own Mechanism: States need to have their own mechanisms in place before launching schemes.
Consider Practicability of the Scheme: States must consider the macro picture and practicality of their new schemes.
Lack of Dependency: Central government and FCI cannot be expected to rescue every state without limitations.
Maintaining Discipline: Lack of discipline in launching schemes can lead to inadequate food stock at the national level.
Exercise Moderation on Food Security Promises: The present situation should serve as a lesson to all political players to exercise moderation while making electoral promises, especially on matters concerning food security.

Additional Information:

Constitutional Provisions:

Article 21 of the Indian Constitution: It deals with the right to safe food.
- Recently, the Gujarat High Court today observed that the right to free trade in food items like meat, or any such food has to be subserving to the public health and food safety requirements.
Article 47 of the Indian Constitution: This article states that it is the duty of the State to raise the level of nutrition and the standard of living and to improve public health.

Sustainable Development Goals:

SDG 2: It focuses on ending hunger, achieving food security and improved nutrition and promoting sustainable agriculture.

India’s Initiatives for Food Security:

Integrated Child Development Services (ICDS), 1975: It is one of the Government of India’s flagship programs for its children and nursing mothers, as a response to breaking the malnutrition food cycle, morbidity, reduced learning capacity and mortality.
Targeted Public Distribution System (TPDS): The scheme was launched in 1997 to identify the poor for delivery of foodgrains and for its distribution in a transparent and accountable manner.
Antyodaya Anna Yojana (December, 2000): The scheme is for poorest citizens to provide 35 kg of food grains at subsidized prices of ₹3 for rice and ₹2 for wheat.
National Food Security Mission (2007-2008): The mission worked with the goal of increasing rice, wheat, and pulses output through expanding land and increasing productivity, as well as offering job possibilities and initiatives to help farmers regain confidence.
Rashtriya Krishi Vikas Yojana (2007-2008): This scheme worked with the goal of increasing public investment in states.
- Several technology packages for enhancing agriculture production have been distributed in the states.
The Integrated Scheme of Oilseeds, Pulses, Oil Palm and Maize (ISOPOM): The scheme was launched in 2010 for the production of oilseeds, maize and oil palm to serve as a tool for crop diversification.
National Food Security Act (NFSA), 2013: To provide subsidized food grains to approximately two-thirds of the country’s people.
- It includes the Midday Meal Scheme, Integrated Child Development Services scheme and the Public Distribution System.

International Organisations for Food Security:

Food and Agricultural Organisation (FAO), 1945, Rome, Italy: A specialized agency of the United Nations that leads international efforts to defeat hunger and improve nutrition and food security.
World Food Program (WFP), 1961, Rome, Italy: It is the world’s largest humanitarian organization addressing hunger and promoting food security.
International Fund for Agricultural Development (IFAD), 1977, Rome, Italy: It is an international financial institution and a specialized agency of the United Nations that works to address poverty and hunger in rural areas of developing countries.

News Source: The Hindu