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‘We’ll Have To Import More’

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Minister of State (independent charge) for consumer affairs, food and public distribution K.V. Thomas feels that the drought situation in India is manageable and there will not be any shortage in food supplies. Talking to BW’s Joe C. Mathew and Chitra Narayanan, Thomas says the Centre will release 9 million tonnes of foodgrain and subsidised pulses into the domestic market to counter price rise. Excerpts: 

How serious is the drought threat and how will it impact the food buffer situation?
We are continuously monitoring the situation. We have just had two review meetings: one called by me, and the other by the  agriculture minister (Sharad Pawar) — with scientists from the meteorological department and officials from the ministries of agriculture, consumer affairs and food. Our assessment is that the monsoon is 22 per cent lower than normal. And that it will affect almost all of Karnataka, parts of Maharashtra nearer to Karnataka, parts of Rajasthan and Gujarat. However, it will not have any major impact on foodgrain (rice and wheat) production. The production of sugar will also be normal. Last year, when the production of sugar was predicted to touch 24.5 million tonne, we got 26.2 million tonne. This time, they are predicting 25 million tonne and I am very confident that whatever may be the bad condition, it will be above 25 million. We have got enough buffer stock as well. 
Experts are not predicting any shortfall in foodgrain production. The concern is the decline in pulses and oilseeds production and increasing prices. How does the government plan to ensure the availability of pulses at reasonable prices?
I agree. In the case of pulses and oilseeds, the production will come down. But what we need to understand is that we are already importing pulses and edible oil. So we may have to import a little more. We are already making some calculations on the quantum of requirement. In order to cushion the prices, pulses will be distributed through the public distribution system (PDS) at a subsidised price. 
We had been doing this earlier; for example, we gave a subsidy of Rs 10 per kilo on pulses that were distributed through PDS to above the poverty line (APL) and below poverty line (BPL) families. Only four or five states took interest in it, so we dropped it. Now we intend to provide a subsidy of Rs 20 per kg of pulses to BPL families. In the case of edible oil, we will step up our imports from Malaysia and Indonesia. We will have to import more, but things will remain under control.
Food inflation is already a matter of concern. Are we expecting drought to further add to 
the worries?
Food inflation is mainly because of price rise in vegetables, fruits, edible oil and pulses. In the case of foodgrain and sugar, the prices are under control. In the past week, the price of sugar has gone up slightly; we are now releasing more sugar into the market. We are very confident that we will be able to manage the price situation.
Vegetables and fruit prices are not under our control as these are all seasonal products. Effective management of the prices of such perishables can happen only by setting up effective cold storage chains and the agriculture ministry has a number of projects on which the states have to act. 
Similarly, Agriculture Produce Marketing Committee (APMC) Act has to be amended so that farmers can bring their products into the markets in the cities. This is an issue that is before the state governments. So, the situation can be managed very comfortably provided the state and central governments work together. That’s what we are trying to do. There can be a scarcity of water, there can be scarcity of electricity and all these factors are being looked into. The Prime Minister is very alert. The group of ministers headed by agriculture minister Sharad Pawar is looking into all these aspects and we are sure to find a comfortable solution. 
Has any state government approached the central government for aid?
So far no, but they may. We already have a disaster management mechanism. In the budget itself, some amount is earmarked for every state for natural calamities and if additional funds are required, we send a team of central experts; based on their recommendations, we give the assistance. 
When onion prices shot up some time ago, there was a widespread allegation of hoarding and cartelisation. What is the government’s preparedness to face a similar situation?
Our granaries are full and the PM has given instructions to release more foodgrain into the market. In case of PDS, what I need is 55 million tonne of foodgrain. I have got 82 million tonne with me. So I am releasing another 9 million tonne in the internal market. Five million tonne under BPL, 1 million under APL and 3 million under the open market supply scheme to the millers and others.
So I am pumping in an additional 9 million tonne. Around 64 million tonnes is what I am selling in the open market to ease the prices.
Cartelisation has always been there. I don’t blame the people who do it. It is for the government to take action. We have lot of control mechanisms like bringing down the stock-holding limits, invoking Essential Commodities Act, etc. But I prefer self-regulation. Legal recourse should come last. I have told the millers that we (the government) are supplying foodgrain at a very reasonable rate, so they have to bring down the price of atta. 
Are any export curbs in the offing?
We don’t want to take any abrupt decisions. One of our problems is that we start exporting, and then we ban it. So let us have a scientific mechanism for both export and import. In the case of foodgrain, the export of both wheat and rice is under open general licence (OGL). We export about 5.5 million tonne of rice and about 2 million tonne of wheat. Out of 4 million tonne of sugar under OGL, 1.5 million tonne has been going out. So we are in a comfortable position and only surplus stocks are being exported. Our farmers should also get a better price. All said, if the situation so warrants, we will consider export-control measures. 
Can you give an update on the food security bill? Do you expect the government’s PDS food procurement cost to go up substantially in case of drought-related crop failure?
To implement the food security bill, I need 62 million tonne. For the existing PDS supplies, I need 55 million tonne of foodgrain (on the basis of 2000 census). Now, according to 2011 census, the requirement is 60 million tonne. So the additional requirement of foodgrain post-implementation of food security bill will only be 2 million tonnes. If somebody says that we don’t have enough foodgrain, the answer is that if we have to run the PDS system, we need 60 million tonnes; then why can’t you find another 2 million tonnes? 
The other apprehension is about the subsidy burden. At the moment, we need Rs 88,000 crore towards food subsidy (on the basis of 2000 census). On the basis of 2011 census, my subsidy burden is going to be Rs 1 lakh crore. And when the food security bill comes, it will be Rs 1.2 lakh crore. This is something which the country can afford. 
You are increasing the minimum support price (MSP) for foodgrain. Will it have an impact on the subsidy bill?
Our MSP price is going up. In addition to this, states are announcing a bonus; so naturally the impact on subsidy will increase every year. Central MSP has doubled in the last five years. But I am supplying one kilo of rice to a state like Kerala for Rs 4.73; my subsidy component is to the tune of Rs 18. We have to find out some solution for this problem. I believe that if we ensure that the subsidised foodgrain is strictly limited to the designated people, the problem can be solved. Today, there is a complaint that at least 10-15 per cent of subsidised foodgrain is being siphoned off. Strengthening the PDS and targeting the real beneficiaries through Aadhar and a computerised biometric system should help.
How do you respond to the demand for distribution of excess stock to minimise storage losses?
It is true that there used to wastage of grain stored in Food Corporation of India godowns due to problems related to the management, procurement, storage and transportation. Fortunately, we have been able to control it. Five years ago, if my damage was 2.5 per cent (of the total stock), today it has come down to 0.00061 per cent. That is, when I am handling about 82 million tonnes, my damage is less than 100,000 tonnes.
(This story was published in Businessworld Issue Dated 13-08-2012)