NEW DELHI:
THE government is all set to dismantle the present grain procurement system and considering income support for farmers, instead.

The food subsidy bill for the current year would be Rs 20,000 crore and yet, the government finds, it has benefited neither the majority of consumers nor anyone outside an elite section among the farming community, food minister Shanta Kumar told ET.

If the government succeeds in at least reforming the system of procurement by limiting procurement to the buffer stocking norm, private trade would have to play a major role in buying the grain from farmers and in storing it throughout the year. Entirely new business opportunities would be thrown open for the private sector in food, apart from in food processing.

Two-thirds of India's 100 crore population live in rural areas and live off farming and related activities. Of these, just 2 crore produce a marketable surplus. The government, by its own estimate, procures at most from just 68 lakh farmers. In other words, the government's costly procurement policy helps just 5 per cent of rural families and one-third of surplus producing farmers.

Even this benefit is regionally skewed. According to food minister Shanta Kumar, 80 to 90 per cent of the procurement takes place from just three states: Punjab, Haryana and Andhra Pradesh in the case of rice and Punjab, Haryana and Uttar Pradesh in the case of wheat.

Because of a policy of ratcheting up the minimum support price year after year and procuring every grain of cereal offered to the government, the government has pushed up food costs and become an enormous hoarder of grain.

Even with distress sales - 18 million tonnes sold at half the cost to traders and flour mills - the government's stocks amount to 60 million tonnes. The current policy is so costly that the Food Corporation of India's 'economic cost' of foodgrain is way above the open market price and makes the government the best buyer. So all grain is dumped on the government.

The government is reduced to a situation where it exports grain at a price equivalent to the price at which food is sold to families below the poverty line through the public distribution system.

Since the bulk of India's grain available for export is of inferior quality, cattle feed manufacturers figure prominently among the buyers. The net result of the present policy is for the government to subsidise foreign cattle and those who eat them, even as it jacks up the cost of food at home. The sole beneficiaries are some rich farmers.