Excess Rice For Hand Sanitizers - But Not The Starving - By Jean Dreze

Word has it that some of the surplus rice stocked by the Food Corporation of India (FCI) is to be used to make ethanol for hand sanitizers. In fact, this is more than a rumour - an official press release posted yesterday by the Indian government's Press Information Bureau puts it in black and white. When I heard about this, I thought that perhaps some rotting rice was being disposed off as a matter of routine. But the press release does not suggest that the rice is going waste, it merely refers to a "projected over supply of food grains". Even if the rice is actually rotting, making its disposal unobjectionable, the question remains - why is it rotting in the first place? Could it be that the FCI is exceeding its safe storage capacity?

The saga of excess foodgrain stocks has generated much interest recently, but also some confusion, so it is worth a quick recap. First, the excess stocks are humongous and growing. The FCI's foodgrain stocks stood at 77 million tonnes in March 2020 - higher than ever at that time of the year, and more than three times the official buffer-stock norms. The stocks are likely to rise even higher during the next few weeks as rabi procurement (34 million tonnes last year) picks up.

Second, the excess stocks are crying to be used for emergency food assistance, especially to reach out to poor households with no ration card. Under the National Food Security Act (NFSA), the public distribution system is supposed to cover about two thirds of the population: 75 per cent in rural areas and 50 per cent in urban areas. The actual coverage of the PDS, however, is around 60 per cent, because the central government is using 2011 population figures to calculate state-wise allocations. That leaves out 40 per cent of the population - more than half a billion people.

Among the excluded 40 per cent, many households are now exposed to food insecurity. There are many possible reasons why poor people may not have a ration card today: they were missed by the 2011 Socio-Economic and Caste Census (the basis of the ration-cards list in many states); they formed a new household after the SECC was completed; their card was cancelled for lack of timely Aadhaar linkage (as happened on a large scale in Jharkhand); they were not eligible at the time of the SECC but have now been pushed into poverty by the lockdown, and so on. Even if just one fourth of the excluded 40 per cent are in need of food assistance today, that would mean 10 per cent of India's population or more than 130 million people.

Third, there is no simple way of singling out these food-insecure households for assistance in this crisis situation. Nothing is easier than recognising a poor person when you meet him or her, but making a comprehensive and reliable list of poor people is very difficult at the best of times. Available databases, such as the SECC 2011, are of little use not only because of the passage of time but also because people's circumstances have dramatically changed with the coronavirus crisis. A house-to-house survey would be very difficult to carry out at this time, and the results would take months to emerge. All this reinforces the case for universalizing the PDS during this crisis, at least in rural areas and urban slums. It would require around 20 million tonnes of extra foodgrain (less than half of the surplus stocks) to do that for an entire year. This is not a high price to pay for ensuring that no-one goes hungry. In fact, reducing the excess food stocks would save resources.

Fourth, if the central government were to release 20 million tonnes of excess stocks to the states free of cost, or at NFSA prices (Rs 3 per kg for rice and Rs 2 per kg for wheat), it would do little more than make up for short-changing them in the last few years. As mentioned earlier, the central government insists on using population figures from the 2011 census to calculate state-wise PDS allocations based on NFSA norms. Meanwhile, going by the Sample Registration System's estimates of birth and death rates, India's population has grown by more than 150 million. In other words, PDS under-coverage is at least 100 million, compared with the NFSA's prescribed minimum of two thirds of the current population. At the standard NFSA rate of 5 kg per person per month, the corresponding under-allocation works out at 6 million tonnes per year. The cumulative under-allocation since the NFSA came into force, in 2013, would be well over 20 million tonnes.

To see these issues from another angle, consider Jharkhand. Millions of people there live on the margin at the best of times, and are now exposed to hunger and starvation. Eight lakh households have applied for a ration card, and chances are that most of them are poor households - one often meets them in the villages, sadly clinging to their crumpled application receipts. The Jharkhand government, however, is reluctant to issue ration cards beyond what the central government provides for - its finances are in bad shape and tax revenue is likely to crash this year. Covering all these households for a year or two, as an emergency measure, would make just a tiny dent in the FCI's food stocks. The Jharkhand government recently sent a request for additional foodgrain to the Food Ministry, but it was turned down.

The situation resembles what economists call a "chicken game": the states want extra grain for free, the centre wants to charge them some Rs 21-22 per kg, and both sides are digging their heels in the hope that the other side will budge. The poor are paying the price of this stalemate. Logic and fairness are on the side of the states: it would be quite hard for them to pay, while the central government would save money by releasing excess stocks that are expensive to maintain. This is not the time to squeeze the states - the centre should act in people's best interest and open the godowns.

(The author is Visiting Professor at the Department of Economics, Ranchi University.)

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