Press Information Bureau
Government of India
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Speech for MoCAF&PD for the Conference of the Food Ministers on 19.8.2009
New Delhi: August 19, 2009
I welcome all Ministers of Food, Civil Supplies and Ministers of Sugars of various State Governments and Union Territory Administrations as also officials of various States/UTs to this important conference.
2. As you are all aware, due to deficient monsoon in many States, there are concerns regarding production of foodgrains in kharif 2009-10. The cumulative seasonal rainfall for the country this year has been about 29% below the long period average. North West India has a deficiency of 43% while North-East India and Central India are deficient by 36% and 19% respectively. South Pennisula is also deficient by 23%. This shortfall in monsoon may result in shortfall in area coverage of paddy by about 5.7 million hectares as compared to last year and production of rice may be reduced by 10 million tones. Some shortfall in production of oilseeds and sugarcane is also expected.
3. Thus, we are faced with a drought situation in many States. Effective management of the drought situation demands well-coordinated implementation of drought management strategies by the Central Government as well as State Governments and UT Administrations. In order to sensitize the State Administrations, we discussed important aspects of this subject with State Chief Secretaries on 8th August, 2009. This discussion was attended by most of the State Food Secretaries as well. Various aspects of the drought mangement strategy have also been discussed with the Chief Ministers of the States on 17th August, 2009. During these two meetings, a number of valuable suggestions and inputs have been received. As part of the drought management strategy, the role of the Department of Food, Civil Supplies and Consumer Affairs assumes great significance. It is in this context that I was looking forward to meet all of you, share with you various actions/decisions taken by the Government of India and seek your full involvement so that the adverse impact of the drought situation can be minimised, particularly on the weaker sections of the society.
4. I would like to assure you that the Central Government is committed to ensuring food security for all the citizens of the Country. Highest priority has been accorded to increasing foodgrain production in the country and National Food Security Mission and Rashtriya Krishi Vikas Yojana were launched by the Government to increase production and productivity of foodgrains. To encourage farmers to produce more, MSP of wheat has been increased by 71.4% while MSP of paddy increased by 63.6% since 2003-04.
5. In this background, however, I am happy to tell you that the present stock of foodgrains in the Central Pool is quite comfortable. Procurement of rice and wheat for the Central Pool during the current marketing seasons has been at a record high level. We have procured 253 lakh tones of wheat and 326 lakh tonnes of rice which has been possible with the help of all of you. As a result of good stocks, full allocations for 6.52 crore BPL and AAY families are being made to all the States & UTs @ 35 kg per family per month. Allocations of foodgrains for the APL category are also being made @ 10 to 35 kg per APL family per month. As you would appreciate, the higher availability of food grains in the Central Pool has enabled us to increase the APL allocations from about 11 million tons last year to more than 17 million tons during the current year.
6. However, due to expected reduced production of rice during this year's Kharif crop, there could be a pressure on availability and market prices of rice. If required, Government would not hesitate to undertake open market intervention and release of wheat and rice under Open Market Sale Scheme to State Governments. State Governments should in turn gear up and put in place appropriate mechanism to sell wheat and rice to consumers and ensure these releases check inflationary trends in the food economy. During 2008-09, Government allocated 9.09 lakh tonnes of wheat to State Governments under OMSS. However, only 0.74 lakh tonnes of wheat was lifted by the State Governments. Only the UTs of Andaman & Nicobar Islands, Dadra & Nagar Haveli and Chandigarh and State Governments of Andhra Pradesh, Assam, Bihar, Maharashtra, Meghalaya, Mizoram, Nagaland, Tamil Nadu and Orissa lifted wheat under OMSS.
7. Almost all the State Governments have been requesting for additional allocation of foodgrains to meet the situation arising out of deficient rainfall. It is, however, a matter of concern that when we requested State Governments to indicate their requirement of wheat under Open Market Sale Scheme, only the State Governments of Delhi, Jharkhand, Jammu & Kashmir, Lakswadeep and Andaman & Nicobar have responded and except Jammu & Kashmir and Lakswadeep, all of them have conveyed that they do not require any foodgrains under OMSS for distribution through the State Governments. The Central Government proposes to allocate wheat to State Governments at Minimum Support Prices plus railway freight. The same principle is being adopted in case of rice where MSP derived price and equated freight will be the cost at which rice will be provided to the State Government. The Government of India is thus incurring subsidy on distribution of wheat and rice under the scheme. It is expected from the State Governments that they will effectively use this tool to cool down inflationary trends in food economy.
8. It is also essential that in order to ensure increased availability of foodgrains for distribution to the needy under PDS, maximization of procurement of rice needs to be ensured. State Governments should impose a minimum 50% levy on rice millers. Appropriate mechanisms to record purchases of paddy by millers should be put in place by the States and the levy orders should be effectively enforced. States like Kerala, Tamil Nadu, Assam and Puducherry have not collected any levy rice during KMS 2008-09. It is also suggested that all required arrangements for KMS 2009-10 should be ensured by State Governments including sanctioning of cash credit limit, distribution of mandis between FCI and State Governments, finalization of milling contracts etc. Milling of paddy procured by State agencies should be completed by 31st March, 2010.
9. Due to record procurement of wheat in RMS 2009-10 and of rice in KMS 2008-09, storage constraints are being experienced by FCI and State agencies. A scheme for creation of storage capacity under the PPP mode has been formulated by the Government wherein State warehousing corporations are required to play a very important role. Further, income tax benefits have been announced by the Government to encourage private investment into this sector. State Governments should ensure that the scheme is accorded highest priority. Further, Decentralized Procurement States should make all efforts to hire additional storage capacity.
10. Food subsidy has grown manifold in the last few years and in 2009-10, it is estimated that it will cross Rs.60,000 crores. My request to State Governments of Punjab, Haryana and Andhra Pradesh is that they need to review the high taxes levied by them on procurement of foodgrains by Government agencies. Commission to arthias has been fixed as a percentage of MSP and any increase in MSP results in payment of higher commission to arthiyas. The Department has already circulated the report of the Committee constituted to study the various incidentals allowed to the State agencies. It is expected that State Governments will make all efforts to implement its recommendations, so as to reduce their procurement incidentals.
11. Several evaluation studies undertaken by the Government of India to study the functioning of PDS have shown that there is high level of diversion and leakage of subsidized foodgrains in various States. Even if we take into account the comparatively small sample size of the studies, it is a matter of great concern that subsidized foodgrains meant for poor people in this country are not reaching the targeted population. I would like to stress that Government is incurring huge subsidies to ensure food security for the poor. In case of wheat, the subsidy is 87% for AAY, 72% for BPL and 59% for APL. In case of rice, the level of subsidy is 84% for AAY, 70% for BPL and 56% for APL. It is, therefore, the imperative for the State Governments to ensure that the fair price shops function in an efficient and transparent manner so that the benefits of Public Distribution System reach the targeted population.
12. State Government should continuously review BPL and AAY lists to eliminate bogus ration cards and to ensure coverage of only eligible BPL and Antyodaya families.
13. The Government has decided to revive the scheme for distribution of subsidized imported edible oils through State Governments/ UTs in 2009-10 upto March 2010. It is expected that the State Governments will make full use of the availability of subsidized edible oil, so that the benefit of the scheme reaches the people and the edible oil prices are kept in check.
14. Sugar production in the current sugar season has declined from 263 lac tons to about 150 lakh tonnes as against the domestic requirement of 225-230 lakh tonnes which has put pressure on sugar prices. Sugar production prospects for the next sugar season are also not bright. In order to augment domestic stocks of sugar, the Central Government has taken a slew of measures. Duty free import of raw sugar has been permitted upto 31.03.2010. Duty free import of white/refined sugar upto 1 million ton which was permitted to designated agencies of the Central Government has also been opened to other Central Government, State agencies and private trade upto 30.11.2009. These measures are likely to improve supply of sugar in the current as well as next sugar season. However, some of the states have put sales tax/VAT on imported sugar. These states are advised to do away with such sales tax/VAT/ other such taxes in the interest of consumers.
15. The Government is also considering increasing the percentage of levy sugar to make more sugar available through the PDS. We will have to collectively think as to how can we ensure that this sugar really reaches the intended beneficiaries.
16. In order to check hoarding and black-marketing of sugar, stockholding and turnover limits have been imposed on sugar trade upto early January, 2010. So far only, 16 States/UTs have put in the necessary licensing mechanism to operationalise these limits. However, the rest of the States/UTs are yet to implement the limits. It is imperative that immediate steps are taken to implement and vigorously enforce the stockholding and turnover limits on sugar so that unscrupulous persons do not exploit the situation.
17. In the past few weeks, the overall rate of inflation measured by the Wholesale Price Index (WPI) has been negative. However, what has been causing us concern is the high rates of inflation in food articles. In particular, the commodity groups of pulses, vegetables and sugar have shown a sharp increase. This has caused widespread distress and we are keen to ensure that these increases are contained so that the hardship to the consumers is minimized.
18. In general, we have been adopting a more liberal regime for imports of essential commodities. Thus, in the case of pulses, the import duty has been kept at zero up to March, 2010. In case of edible oils, the duty is zero on crude oil and 7.5% on refined oil. Last year, we introduced a scheme for distribution of imported edible oil and pulses through PDS. Government of India support was to the extent of a subsidy of Rs. 15 and Rs.10 per kg. respectively. The scheme in respect of edible oil concluded in March 2009 and we have again restored it with certain refinements on the basis of our earlier scheme. While the scheme now has built in some more flexibility in so far as subsidy is concerned to allow a price correction if necessary. It also provides for safeguards to prevent States from defaulting. The scheme for pulses is coming to an end on 30th September, 2009 and we are considering extending this Scheme beyond this date.
19. While every effort would be made to increase imports and availability of essential commodities, it is equally important to use the Essential Commodities Act and the Prevention of Blackmarketing & Maintenance of Supplies of Essential Commodities Act. It would greatly help if the provisions of these Acts are fully utilized and enforced to deter hoarding, misuse of the Public Distribution System and other such offences. This would also go a long way in controlling prices of essential commodities.
20. As you all know, the Central Government has made a commitment to enact the National Food Security Act to provide by law, food security to the citizens of the country. It is proposed to entitle Below Poverty Line families to certain minimum quantities of foodgrains per month at subsidized rates. The proposed law will have implications in terms of food subsidy to be provided, ensuring availability of required foodgrains and organizing their efficient distribution to identified poor families, including compensation to be paid in case we are unable to ensure it. This commitment can be realized in practice only through joint effort of the Central and the State Governments, through a commonly agreed strategy to target the poor under PDS, especially in terms of the number of BPL families to be covered and their proper identification.
21. At present, we are going through the consultation process on this subject. A number of valuable suggestions/inputs have also been received from experts and other sources. Some of them have been included in the Agenda notes circulated to you. I would welcome your frank views in this regard which I am sure will enable us to prepare a draft of the proposed law for further consultation with the State Governments at the earliest.
Thank you.
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