A few days ago, an empowered group of ministers (EgoM) headed by the finance minister decided to release an additional 2.5 million tonnes of rice and wheat to those who are below the poverty line (BPL).
Swap deals and grain trading with international markets could help India get over its storage hurdle and the grievous problem of rotting food. This radical suggestion was made by chief economic advisor to the finance ministry, Kaushik Basu. “Foodgrains sold to another country can be bought back when needed,” he said.
According to Basu, India should immediately cut a deal with countries like Russia and Ukraine, where wheat crop had recently failed. “Sell the excess wheat, which is at the risk of rotting in Indian granaries. It can be sold back to India when it needs it,” he said, while addressing the 12th Dharm Narain Memorial Lecture on ‘Does Economic Theory Inform Government Policy’ on Saturday.
The chief economic advisor added that through this route, “if you cannot store the food grains here (in India), store it elsewhere”.
Basu said that grain trading with international markets was a better alternative than distributing it at near zero price to contain inflation. But he also added that “the world of policy making was very complex”.
A few days ago, an empowered group of ministers (EgoM) headed by the finance minister decided to release an additional 2.5 million tonnes of rice and wheat to those who are below the poverty line (BPL) through the public distribution system (PDS).
This was in the wake of the Supreme Court order directing the government to distribute its excess food stock for free or at very low prices instead of letting it rot due to lack of proper storage.
Incidentally, in a working paper of the finance ministry, Basu has argued that poor food grain storage is not the primary cause of soaring food prices.
“The simultaneous occurrence of high food inflation and large food grain stocks in our granaries has been a matter of widespread concern in India,” Basu had stated in his paper.
“Inspired by the sight of food grain going waste, it is often made out to be that our central problem is that of poor food grain storage,” he said, adding, “This paper disagrees with this popular view.”
According to Basu, a comprehensive food policy is required to rectify the problem.
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