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Export of wheat is a temporary solution, arranging storage space is permanent

posted May 23, 2012, 4:49 AM by Puneet Goyal

Monday, May 21, 2012 - 10:30
By Harish K. Monga
CHANDIGARH: Punjab and Haryana are known as the food baskets of India but this season’s bumper harvest and wheat procurement in both the states have left happy and concerned as well.
With 12.4 million tones of wheat already procurement in Punjab, the highest procurement in the last five decades, the Punjab government and its agencies are wondering where to store the foodgrain.  The target for wheat procurement for the current year was set as 11 million tonnes.
Similar is the situation in the Haryana, where the procurement has gone upto.5 million tonnes as against the target of 7 million tonnes.wheat export not a solution
With monsoon likely to hit the States at the end of June, the old and new stocks might be exposed to rain and ultimately thousands of tonnes could end up rotting.
It is pertinent to mention that Punjab which has just 1.54 per cent of the country’s geographical area, alone supplies to the national food grain basket over 60 percent of the wheat and rice.
During the current wheat procurement season, at the start of the session, Punjab was having 6.8 million tonnes opening stock of foodgrain as against the much more than the last year of 5.1 million tonnes.  It was in fact due to slow movement of the stocks from Punjab during the year 2011-12.
Last year, a little more than two million tonnes was stored on unscientific manner and exposed to the natural calamities.  Wheat and rice are perishable items and cannot be stored in the open.  
This year, the expected storage on unscientific plinths or godowns is around d 3 to 3.5 million tonnes of wheat.
It is observed that the FIFO (First In First Out) system in dispatching the stocks to the deficit states is not adhered to with the result the longer storage stocks are damaged and ultimate loss to the nation. 
The procurement during the current year has also exceeded of 11 million tonnes target. Punjab has a storage capacity of over 20 million tonnes, out of which there is capacity of ten million tonnes under covered space which the rest is stored on unscientific open plinths covered with plastic tarpaulins, which cannot be retained for a longer storage.
The decision to export wheat following excess wheat production this year is a temporary solution for the current season whereas creating the storage space is only the long term strategy to save the stocks from rotting from natural calamities while stored in the open.
The government has to seriously thing over switching over from procurement to scientific storage on war footing.  
Another reason for non construction of covered space by the private sector is the less storage charges paid to the godown owners to repay the bank loans and also to save for personal living.  With the high cost of landed property and construction cost, the construction of godown is not viable with the existing storage charges as if the equivalent amount of investment on construction of godowns including the landed value is kept in bank in fixed deposits, the interest is much higher than the storage charges.  Even if the life of the building is taken 50 years, the rent paid is not economical and this is the reasons, the people are not coming forward to construct the godowns.
The government should serious think over revising the storage charges so that covered scientific godowns are prepared to save the stocks atleast for the two-three years.  
Construction of Silos as per the recommendations of Dr.Swaminathan at 150 places in India is also not feasible because of heavy investment and also affecting the jute industry in the south which will be shut down as in the silos, there is no need of gunny bags and the stocks are stored in containers and also moved in the containers to the deficit states.
The other alternative for making storage arrangements, to keep the bumper crops in scientific godowns, is to motivate the people or government itself construct the scientific godowns in the deficit states to accommodate the foodgrains from Punjab by tying up with the railways to move the stocks within the April-May itself at the time of purchase direct from the mandis to save the double storage and transportation charges.  
The government has to be serious about storage problems, by making it a study case, for long term planning to avoid the wastage of thousands of tonnes of foodgrain stored in the open on unscientific brick plinths.  
Punjab Newsline Network

Simplifying the National Food Security Bill

posted Mar 14, 2012, 12:28 AM by Puneet Goyal

A) The Problem 

In its current form (let us call it "Plan A"), the National Food Security Bill (NFSB) is confusing, impractical and divisive. It rests on an artificial division of the population into three groups ("priority", "general" and excluded), without any clarity as to how these groups are to be identified. 

All recent attempts to devise a sound methodology to identify priority households have failed. The Socio-Economic and Caste Census ( SECC) is unlikely to perform much better than earlier BPL Censuses in this respect. Exclusion errors are likely to be large, and the entire process is very divisive. Also, Plan Alacks simplicity and transparency - these are essential for the success of this crucial legislation. 

B) Proposed Solution 

The proposed solution ("Plan B") is essentially a simplification of the Bill, as follows: 

1. Use "exclusion criteria" only. 
2. Merge the general and priority groups (let's call them "aam log"). 
3. Give every "aam" household a "national assured minimum entitlement" (NAME) of 25 kgs per month at Rs 3/2/1 per kg for rice/wheat/millets. 
4. Retain and strengthen the Antyodaya programme, as it is. 

C) Advantages of this Solution 

It is eminently feasible. 
Relatively easy to implement. 
A sound and durable framework. 
Poor households will be well protected from exclusion errors. 
Simple and transparent entitlements that everyone will understand. 
Avoids the divisive effects of "targeting". 
Antyodaya households are protected from any possible loss of entitlements. 
End of the poverty line controversy. 
D) Clarifications 

1. The NAME is a national minimum guaranteed by the central government under NFSB. It does not prevent state governments from providing more, eg by giving more than 25 kg to aam households, or by giving something to excluded households. 

2. In principle, the NAME need not be the same everywhere, eg it could be different in rural and urban areas, or higher in the poorer districts. But the simpler, the better. 

3. The Antyodaya programme would be retained and strengthened, either under the NFSB, or simply as a "scheme". The SECC's "automatic inclusion" households (eg released bonded labourers) could be automatically added to the Antyodaya list. 

If entitlements are in per-capita terms, the NAME would be "5 kgs per person" instead of "25 kgs per household". 

If food entitlements are replaced with cash transfers under Section 18(2)(h) of the Bill, the NAME would be (at least) the monetary equivalent of these food entitlements at local prices. 

E) Resource Requirements 

If 25% of rural households and 50% of urban households are excluded (as in Plan A), the annual resource requirements (including the required provision for the Antyodaya programme) are as follows (for details see Annexure 1). 

Grain requirements 
(million tonnes)
Food subsidy 
(Rs crores)
Plan A

The grain requirements of Plan B are marginally lower than those of Plan A, and the financial requirements are marginally higher. Even after adding a provision for "other welfare schemes" (about 8 million tonnes of grain), these figures are well within the bounds of feasibility, especially if the National Food Security Act is "rolled out" over, say, two years. 

F) The Main Hurdle 

The main hurdle is that BPL households are currently supposed to be getting 35 kgs per month. So those who are actually getting 35 kgs would seem to be "losing" from Plan B, compared with what they are getting today. However: 

1. Only some states are actually giving 35 kgs per month to BPL households. Many states have already reduced BPL entitlements to expand the coverage of the PDS, to 25 kgs per month or less (see Annexure on next page2). BPL households in these states would gain from Plan B. 

2. Even a BPL household currently getting the official quota of 35 kgs per month at the official "central issue prices" (Rs 6.15/kg for rice and Rs 4.65/kg for wheat) would get roughly the same subsidy under Plan B - because the reduction of price would compensate for the reduction of quantity. This applies, for instance, in UP and Maharashtra. 

There is still a possible issue in a few states where (a) BPL households get 35 kgs, and (b) the issue price has been reduced (by state governments) substantially below the "central issue prices". The main examples are Chhattisgarh and Jharkhand (where BPL households get 35 kgs at Rs 2/kg and Re 1/kg respectively).

Note, however, that these states will "save" large PDS subsidies once the central government itself reduces issue prices to Rs 3/2/1 for rice/wheat/millets. And these saved subsidies could be used by the concerned states to protect the entitlements of households currently getting 35 kgs.

Alternatively, a provisional "supplement" of 10 kgs per BPL household could be provided by the central government to all states that currently give 35 kgs to BPL households, for a limited period of (say) three years. This would be easy to do, since the government has large excess stocks at the moment.

In short, this "hurdle" is not a major concern. It seems much better to find a way around it than to give up Plan B, which is much more likely to succeed than Plan A.

Annexure 1: "Plan A" And "Plan B" Compared


Proportion Covered (%)

Plan A Plan B

Rural Urban Rural Urban Excluded 25 (4.2) 50 (3.6) 25 (4.2) 50 (3.6) General 29 (4.9) 22 (1.6) 0 (0.0) 0 (0.0) Priority/ 'Aam Log' 46 (7.7) 28 (2.0) 75 (12.6) 50 (3.6) Total 100 (16.8) 100 (7.2) 100 (16.8) 100 (7.2)

In brackets, absolute number of households (in crores).


Entitlements ( kg/month/ household )

Plan A Plan B Excluded General 15 Priority/'Aam Log' 35 25

Grain Requirements

Grain Requirements ( million tonnes )

Plan A Plan B Excluded General 11.7 Priority/ 'Aam Log' 40.7 48.6 Additional provision for Antyodaya2.9 Total 52.4 51.5

Summary of Resource Requirements

Plan A Plan B Grain requirements 52.4 51.5 Total subsidy a

(crores/year) 77,927 81,524 Additional Subsidy

(over and above current subsidy of approx Rs 60,000 crores) 17,927 21, 524

a)Based on the following assumptions: economic cost = Rs 20.43/kg for rice, Rs 15.46/kg for wheat; issue price = Rs 3/2 per kg for rice/wheat for Priority/Aaam category, and half of MSP for General category; and rice/wheat ratio of 60/40.

Notes: (1) The estimated requirements are actually overestimates, based on "100% offtake". (2) The subsidy requirements can probably be reduced through decentralized procurement and/or inclusion of millets in the PDS. (3) These figures do not include provision for "other welfare schemes" such as Mid-Day Meals, ICDS, etc. In the NAC proposal, a provision of 8 million tonnes was made for other welfare schemes.

Annexure 2: Current PDS Entitlements of BPL Households

State Foodgrain entitlements of BPL households (kgs/month) Wheat/atta Rice Total Andhra Pradesh 0(4 kg per capita) 20 (max) Assam 35 35 Bihar 10 15 25 Chhattisgarh 10 25 35 Gujarat n/a n/a 20Haryana 25 10 35 Himachal Pradesh 20 15 35 Jammu & Kashmir n/a n/a 35 Jharkhand 35 35 Karnataka (1 kg per capita) (4 kg per capita) 20 (max) Kerala n/a n/a 25 Madhya Pradesh 17 20 Maharashtra 10 25 35Orissa 25 25 Punjab 35 35 Rajasthan 25 25 Tamil Nadu 20 20 (max) Uttar Pradesh 15 20 35Uttarakhand 10 10 20 West Bengal n/a n/a n/a c

a) In Andhra Pradesh and Karnataka, PDS entitlements are "per capita" (4 kgs and 5 kgs per person per month, respectively), with a maximum of 20 kgs per household.

b) 12 kgs for single-person households and 16 kgs for two-person households.

c) West Bengal has individual PDS cards with a weekly entitlement of 2.625 kgs (1.5 kg rice and 1.125 kg wheat), but the average number of individual cards per BPL family is not clear.

Sources: Khera, R. (2011), "Revival of the Public Distribution System", Economic and Political Weekly, 5 November 2011; websites of concerned governments; personal communications from knowledgeable persons, state-wise. Figures do not include temporary "bonuses" distributed in some states in response to recentSupreme Court orders.

Foodgrain stocks stood at 54 million tonnes on 1 March 2012 (the highest-ever level for that date, just before the rabi harvest). They are expected to rise to 74 million tonnes by 1 June 2012.

Scientists create salt-tolerant wheat

posted Mar 13, 2012, 11:17 PM by Puneet Goyal

Sydney, March 12: Salty soil may no longer come in the way of planting wheat but could actually improve its yield by 25 percent, a study reveals.

Using 'non-GM' crop breeding techniques, scientists from the CSIRO Plant Industry have introduced a salt-tolerant gene into a commercial durum wheat, with spectacular results in field tests.

The salt-tolerant gene works by excluding sodium from the leaves. It produces a protein that removes the sodium from the cells lining the xylem, which are the 'pipes' plants use to move water from their roots to their leaves, said the research paper.

Researchers at the University of Adelaide's Waite Research Institute have led the effort to understand how the gene delivers salinity tolerance to the plants, the journal Nature Biotechnology reported.

The research is the first of its kind in the world to fully describe the improvement in salt tolerance of an agricultural crop - from understanding the function of the salt-tolerant genes in the lab, to demonstrating increased grain yields in the field, according to a university statement.

CSIRO scientists Rana Munns, Matthew Gilliham Richard James and University of Adelaide student Bo Xu, co-authored the study.

"This work is significant as salinity already affects over 20 percent of the world's agricultural soils, and salinity poses an increasing threat to food production due to climate change," Munns said.

Gilliham said: "With global population estimated to reach nine billion by 2050, and the demand for food expected to rise by 100 percent in this time, salt-tolerant crops will be an important tool to ensure future food security."

FCI steps up measures for storage of wheat

posted Mar 3, 2012, 10:16 PM by Puneet Goyal

Vikas Sharma / Chandigarh Mar 03, 2012, 00:32 IST

The Food Corporation of India (FCI), the country’s largest grain procurement agency, has adopted a number of measures to create space for the new wheat stocks in Punjab and Haryana, India’s two leading producers of the foodgrain.

Apart from direct supply of wheat from the procurement centres to consuming states like Maharashtra and Gujarat, the public sector agency has encouraged private investment in warehouses through the Private Entrepreneur Godown (PEG) Scheme. Under this scheme, FCI ensures full occupancy of warehouses until the investor achieves breakeven level. The scheme received good response in Haryana and Punjab as FCI estimates two million tonnes (mt) of new storage capacity will be created by March.

While investors in Punjab are building 1.2 mt of storage space, which would be handed over to FCI soon, in Haryana, too, 0.49 mt of new capacity is scheduled to be created by the end of this month.Currently, the two states have storage capacities of 20.5 mt and 2.7 mt, respectively, under FCI’s supervision, in both covered godowns and open plinths.

Additionally, the grain procurement agency has also intensified direct milling of paddy, chiefly in order to create space for fresh wheat stocks. Instead of paddy storage, FCI plans to stock rice, which occupies one-third space compared to paddy. “The situation would be difficult for handling procured foodgrain during this season as Punjab and Haryana are estimated to reap a bumper crop this year. Various efforts are underway to tackle the situation,” said an FCI official in Chandigarh.

Foodgrain stocks in Punjab are estimated to be 1.4-1.5 mt higher than the mandatory buffer norm in the state as on April 1. Thanks to good paddy production in the state last year, the situation has turned even more serious.

FCI’s foodgrain management policy received all-round condemnation last year due to spoilage from water logging of nearly 100,000 tonnes of paddy stored in open plinth. The corporation is making efforts to avoid a repeat this year.

In an intensified milling effort, FCI has milled around 37.7 per cent of the total paddy procured as on March 1 this year, compared to 24.2 per cent milled until the same time last year. The agency has directly transported 0.75 million tonnes of wheat to various consuming destinations from procurement centres in Punjab.

However, they maintain measures are underway to ensure adequate storage is available for wheat in the coming season.

Besides faster transportation of stored foodgrain through rail and road, FCI officials maintain they are eyeing the space with rice millers, available after milling of paddy.

Since storage required for rice is almost one-third that of paddy, faster conversion of paddy to rice would ensure more space for storage of wheat . Till April, FCI plans to mill another 20 per cent of the stored paddy, thus, creating additional space for wheat. Offtake of existing stock has also improved.

FCI officials in Haryana say the offtake for storage stock of paddy and rice has increased in the past few months. Compared to offtake of 1.09 tonnes of wheat and 0.03 tonnes of rice in February, the total offtake was 0.58 tonnes of wheat and 0.02 tonnes of rice in November.

Similarly, in Punjab, 1.42 mt of stock till now has been liquidated as against an average of 1.2 million tonnes in the past three months preceding February.

While Punjab is eyeing production of 16.7 mt, wheat production targeted by Haryana is 11.8 mt. FCI is looking to procure 11.5 mt of wheat in Punjab this year, as against 10.95 mt procured last year. In Haryana, FCI officials maintain the target is seven mt. FCI officials estimate total inventory to be 2.2 mt on April 1, against 1.87 mt last year.

Centre to solve food security bill 'issues': Minister

posted Mar 3, 2012, 10:12 PM by Puneet Goyal

SME Times News Bureau | 03 Mar, 2012
The central government Friday said it will solve "most of the issues" raised by the states on the National Food Security Bill, which is currently before a parliamentary standing committee.

"The state governments have raised about ten points regarding the food security bill and many of them can be discussed and solved. The standing committee is now discussing the issue with the states," union Minister of State for Consumer Affairs, Food and Public Distribution K.V. Thomas said on the sidelines of a programme here organised by the Federation of Indian Chambers of Commerce and Industry (FICCI).

"The first (issue) is that there should be flexibility in the distribution of food grains under the Targeted Public Distribution System (TPDS) on a weekly and monthly basis, for which we have no objections. And the issue of cost should be prescribed in consultation with the states," the minister said.

The final shape of the bill will come up after consultation with the states, Thomas said adding that the states might have to bear some cost after the implementation of the bill, aiming at enhancing food security provisions.
He said the citizens will get a legal entitlement when the bill comes out and it could be implemented with full cooperation of the states.

The minister said West Bengal had asked for a Rs.10 billion assistance for food grain procurement and that the Centre was holding talks with the state government to work it out.The centre has already signalled that it is committed to roll out the Food Security Bill in the next fiscal. The government has proposed to cover 75 percent of the rural population and 50 percent of the urban population.

Surinder Sud: Fighting wheat rust

posted Feb 20, 2012, 11:48 PM by Puneet Goyal

The Indian Agricultural Research Institute is leaving no stone unturned to fight this crop disease with gene deployment
Surinder Sud / Feb 21, 2012, 00:37 IST

Outbreaks of different forms of rust, the most destructive wheat disease, have frequently lowered wheat production. Wheat scientists have no doubt successfully overcome this peril every time it emerged, especially after the green revolution, by breeding disease-resistant varieties. But the combat seems endless.

This menace has surfaced again in the form of yellow rust that took a considerable toll on the crop in the key north-western wheat bowl last year and is threatening to do so this year as well. The disease has already been spotted on the standing wheat crop in parts of Punjab and Haryana, jeopardising wheat output. The main worry is that one of the most dominant wheat varieties, PBW 343, grown on about 10 million hectares, has succumbed to this rust.

The silver lining, however, is that New Delhi-based Indian Agricultural Research Institute (IARI, or Pusa institute) seems prepared to tackle the disease. The institute has contributed enormously in fighting wheat rust in the past too. A new wheat variety, HD 2967 – bred and released for cultivation last year by this 107-year old citadel of agricultural research – has been found resistant to yellow rust and is deemed an advantageous replacement to the PBW 343 variety in the main wheat-growing belt. This highly productive strain, yielding about 5.5 tonnes of wheat a hectare against 4.8 tonnes of PB 343, carries several genes that provide wide-spectrum immunity against yellow rust. Moreover, its grains are excellent for making “chapattis”, the main end-use for wheat in India, and are comparatively more nutritious with high iron and zinc content.

Many farmers in Punjab and Haryana, who had access to limited quantities of seeds of the new HD-2967 variety last year, affirm that their crop remained free of yellow rust while other varieties planted by their fellow farmers suffered heavy losses. This strain has also proved immune to Ug99 rust — a new form of stem rust first discovered in Uganda in 1999 (hence the name Ug99) that is rapidly spreading in Africa and Asia to become the potential enemy number-one of wheat worldwide.

IARI is in the process of producing some 20,000 quintals of HD 2967 seeds in the current rabi season. Besides, large-scale multiplication of the seeds is also being undertaken through the agriculture ministry and private seed producers. The aim is to have enough seeds to cover vast areas with this high-yielding and rust-resistant variety in the next wheat season. IARI Director H S Gupta maintains that this variety is capable of ushering in another wheat revolution.

IARI has also bred a few other wheat varieties that apart from being immune to rust, have an innate capacity to cope with climate change. Among these, the HD 3043 variety is meant specifically for farmers in intensive wheat-growing states like Punjab, Haryana, Rajasthan and western Uttar Pradesh who have limited means of irrigation. Another variety, HD 2985 (also named Pusa Basant), is suited for the eastern plains comprising east Uttar Pradesh, Bihar, West Bengal and adjoining areas.

Another new strain, HD 2987 (christened Pusa Bahar), has been bred for cultivation in rainfed areas of the southern peninsula. These varieties are expected to fit well in IARI’s well-judged, long-term strategy for managing wheat rusts through “gene deployment” in different parts of the country. This approach essentially involves introducing improved wheat varieties with area-specific, rust-tolerant genes in different agro-climatic zones that will serve as genetic barriers to rust infection and prevent it from spreading from one part to another. This strategy, notably, had proved its worth during some of the worst rust outbreaks in the 1980s when most wheat varieties responsible for the green revolution had succumbed to this malady.

In fact, since 1980, IARI has released over 70 wheat varieties for cultivation in different parts of the country. As a result, nearly 40 per cent of the country’s present wheat output comes from IARI varieties. These strains, moreover, are reckoned to have helped wheat productivity increase annually by an average of one quintal a hectare. However, since new and unforeseeable challenges cannot be ruled out in future, it can be hoped that IARI will, true to its tradition, come up with technologies to meet them as well.

FICCI seeks reduction in Cenvat on food processing in pre-budget memorandum

posted Feb 20, 2012, 11:47 PM by Puneet Goyal

Monday, February 20, 2012 08:00 IST 
Akshay Kalbag, Mumbai

The Federation of Indian Chambers of Commerce and Industry (FICCI) has prepared a pre-budget memorandum eliciting demands for the food processing and agriculture sectors in view of the presentation of the Union Budget 2012-13. The Budget will be presented by finance minister Pranab Mukherjee on March 16 this year.

With regard to the food processing sector, on top of the FICCI agenda is reduction in the current 10 per cent rate of central value-added tax (CENVAT) on a number of categories of items produced by the sector.

Further, FICCI wants the finance minister to put packaged drinking water, a common man's product, in the nil category, and exempt biscuits from VAT, or at least lower the rate of VAT on them.

It opines that a total macro view is necessary instead of focussing on the revenue-generating potential of levying excise duty on products. But if the government is unable to do away with the excise duty completely even after taking the revenue aspect into account, it must reduce the excise duty in a calibrated manner. This, it says, should be done in two phases: it should be brought down to four per cent in the first phase and reduced to zero in the second.

FICCI believes that biscuits should be treated as merit goods and therefore be secured in a more rational manner, as is done in the case of bread. After all, biscuits are a product of mass consumption across India and cut across all economic groups and geographical boundaries. They are eaten in larger quantities in the rural areas of the country and the brands that are sold at lower price points find more takers in the lower-income group.

In India, the value that accrues to consumers from the money spent on food products is an area to which a great deal of attention needs to be paid. Agriculture being the country's mainstay, there are obviously a number of natural products which offer a good value for the money spent on them (and a number of health benefits as well), but they have a very short shelf life and become unfit for consumption after a point. This results in collosal wastage of precious resources for the lower-income group, the memorandum points out.

Biscuits are one of the few manufactured food products that offer as much, if not higher, nutritional and calorific benefits as these agricultural products and at price points that are equivalent or lower than them. Moreover, they have a long shelf life and are more hygienically packed. 

According to FICCI, biscuits are a highly price-sensitive product. In the past, whenever the person holding the finance portfolio has levied a higher tax on them or whenever their prices have increased, it has resulted in a sharp fall in their consumption. Over the years, biscuit makers have done well to keep the price-sensitive profile of biscuits in mind and sought to maintain their prices at uniform level. Lower consumption obviously leads to lower production and this in turn results in a lower capacity utilisation within the industry. This leads to inefficiencies in the capital deployment in the industry. 

More than 3.5 million people have a direct or indirect association with the biscuit industry in India. A majority of those involved in the production process are either non-skilled or semi-skilled workers, who are bound to be adversely (and immediately) affected by the fall in production and consumption. In the biscuit industry, people are also employed in such functions as storage, transportation, distribution, marketing and retail. These functions are not localised.

The biscuit industry and the agricultural sector are directly linked. Wheat flour, sugar and vegetable oil, the raw materials required to manufacture biscuits, are either agricultural products or are manufactured in agro-based industries. In fact, more than half the retail price of biscuits is contributed by the costs incurred to acquire the agricultural raw materials required to make biscuits.

A number of state governments, in a bid to find analogous groupings of food products to fix the rate of taxation, seem to have lost their way, and their attempts to formulate a VAT structure for biscuits is case in point. Biscuits come closest to bread, another item of mass consumption that cuts across all strata of the society, in terms of health benefits and value, but biscuits score over bread as far as their shelf life is concerned. Therefore, the biscuit makers' contention is that the VAT on biscuits is in the range of 12.5 to 15 per cent, while bread is virtually exempt from VAT.

What also seems to be a matter of great concern to the biscuit industry is that foods that have significantly lower nutritional and calorific values, are perhaps eaten less and cost far less than biscuits are subject to four cent VAT in several states, which is a lot less than the tax rates for biscuits. 

Another area Mukherjee must look into is the soy processed food products sector. Currently, the excise duty being levied on these products, whose nutritional value is high, is between eight and 12 per cent. This is severely affecting the domestic consumption of these high-protein products. The World Health Organisation (WHO) has recommended that the consumption of soy processed food products be accelerated, which will only happen when the finance minister decides to do away with the excise duty on them totally.

The basic customs duty (BCD) on infant foods in India is 30 per cent (and the effective duty comes to about 36.14 per cent), which is quite high when compared to the BCD rates in other Asian countries. It is nil in Singapore and Malaysia, five per cent in Nepal and Indonesia, six per cent in Sri Lanka, and seven per cent in the Philippines. On the other hand, the BCD for preparations for infant use in India (under Chapter Heading 1806 90 of Schedule I of the Customs Tariff Act 1975) is only 17.5 per cent. The customs duty on preparations for infant use, put up for retail sale (under Chapter Heading 1901 10 90 of the aforementioned Act) should be treated on par with those under Chapter Heading 1806 90. Not only would this be in accordance to the accepted principle of natural justice, but it would also not violate the canon of formulation of customs duty which states that all classes of the same good should be treated equally.

The exemption clause under Notification 10/96 dated July 23, 2006, should be amended and aligned with the Indian Customs Tariff. It should read, “Fruit pulp and fruit juice-based drinks.” A notification to this effect under Section 11 C must be issued, so that the industry's interests for the past period are protected. 

Hulled, rolled and flaked oats must not be subject to any customs duty, under Chapter Headings 1104 22 00 and 1104 12 00 of the Tariff.

FICCI would appreciate it if the finance minister did away with the steep customs duty on the import of the plant and machinery used by them, said the memo. If the plant and machinery used by the food processing sector are exempt, the industry will flourish.

A majority of the ready-to-serve beverages are subject to excise duty on their maximum retail price (MRP), but iced tea is still subject to duty on its transaction value. Iced tea is classified under Chapter Heading 2101 2090 of the Excise Tariff Act and subject to 10 per cent excise duty. Neither the beverage nor the tariff heading is included in Notification Number 49/2008-CE (NT) dated December 24, 2008, which prescribes the rate of abatement in respect of the goods which are subject to excise valuation on MRP basis. The valuation of the said products for the purpose of paying excise duty is done under Section 4 of the Central Excise Act, 1944 (i.e. the transaction value) as against other goods which are evaluated on the basis of MRP under Section 4A. It is submitted to include the aforementioned tariff headings in the MRP abatement. 

Sugar-boiled confectionery in India is defined by rigid price points. Most sugar-boiled sweets are sold at either 50 paise or a rupee. Of late, the industry has been facing a high rate of inflation, both in terms of cost of inputs and distribution costs. In order to provide some much-needed relief to the industry, it is recommended that the central excise duty be realigned to one per cent, which is the rate imposed on other food products, including instant noodles, potato chips, conserves and chutneys, ready-to-eat packaged foods and instant mixes. Value-added dairy products such as Milkmaid and other processed packaged products should be exempt from VAT.

As for the agricultural and allied activities sector, FICCI has stated that it hopes the minister will grant value-added tax (VAT) and excise duty exemption on agricultural equipment and machinery but will like it to be applicable only when agricultural produce is physically transferred to warehouses. It also wants the import duties on laser land levellers and their components, such as transmitters and equipment related to water-saving techniques such as drip irrigation to be removed.

SPV for grain movement on cards

posted Jan 27, 2012, 12:16 AM by Puneet Goyal   [ updated Jan 27, 2012, 12:17 AM ]

Food ministry plans special purpose vehicle with railways for smooth transportation dedicated corridors to be set up
Sanjeeb Mukherjee / New Delhi Jan 27, 2012, 00:01 IST

As the government plans to enact a food security law from the next financial year, the food ministry and the railways are working on setting up a special purpose vehicle (SPV) to finance faster movement of foodgrain from producing states to consuming ones.

The SPV will have equity contribution from both departments. It will work towards the establishment of dedicated corridors and procurement of trains and rakes for grain transportation.

Officials said the need to smoothen problems in transportation, particularly during the peak procurement season for wheat and rice, had become more important in view of the proposed Food Security Act. The law, which will give legal entitlement for foodgrain to 75 per cent of the rural population and 50 per cent of the urban population, will necessitate adequate quantities at all times to the consumer.

The proposal for a national foodgrain movement plan was initiated by Food Minister K V Thomas in June last year, following his meeting with Prime Minister Manmohan Singh. The idea was to avoid delays in the movement of foodgrain from producing states to consuming ones, due to long distance and lack of good transport facilities.

In 2010-11, railways transported 28.35 million tonnes (mt) of foodgrain inter-state, 12.3 per cent more than the previous year.

It handled 12,322 rakes, 11 per cent more than the previous year, according to Food Corporation of India (FCI) data.

The officials said as the foodgrain surplus was mainly confined to the northern states of Punjab, Haryana and Uttar Pradesh, transportation involved long distances.

Stocks procured from markets and purchase centres are first kept in the nearest depots and from there, dispatched to recipient states. Figures show FCI moves 25 mt of foodgrain annually over a distance of 1,500 km by rail, road and sea. The highest quantity is transported by the railways.

However, the movement gets difficult during the peak procurement season, as the quantum of arrivals far outnumbers the quantity that can be carried by railway wagons over long routes.

The peak season for wheat starts from April and goes up to June-July. For rice, it stretches from around October to December-January.

The officials said the creation of a dedicated division in FCI and the Railway Board, both at the Central-end and state levels, to deal with operational aspects of movement of foodgrain, like availability and development of railway wagons, could also be considered at a later stage. India targets to produce a record 245 mt of foodgrain in 2011-12, two per cent more than the previous year.

Will India's poor remain hungry?

posted Jan 27, 2012, 12:12 AM by Puneet Goyal

Will India's poor remain hungry?
A proposed Food Security Act would help - but not solve - the nation's food insecurity.
Last Modified: 26 Jan 2012 09:51

Salina, KS - As India's proposed new Food Security Act hovers in political limbo, the nation remains hungry. Prime Minister Manmohan Singh made headlines in early January when he labelled the fact that 44 per cent of children less than five years old were underweight and 65 children die each day of malnutrition "a national shame". In all, 21 per cent of all Indians are undernourished.

Indeed, India ranks among the 15 hungriest countries in the world according to the Global Hunger Index - a grim fact made even grimmer when one recalls that one out of every six people on Earth lives in India.

There is much talk these days about a human right to food. Even the governments that don't recognise such a right are aware of the political and social turmoil that erupts when food becomes too scarce or costly. Since the 1950s, many nations have, in effect, purchased revolution insurance by buffering their food supplies against the sometimes devastating gyrations of world markets.

So-called public food distribution systems (PDS) have operated for years in dozens of countries around the globe. Governments buy up grains from farmers at a guaranteed price, maintain national grain stocks, and distribute grains and other foods through their PDS to consumers at subsidised prices.

India's PDS has been selling subsidised food through "fair price shops" on a national basis since the 1970s. The government in Delhi provides grain stocks to the states, who, in turn, supply the networks of fair price shops. The Food Security Act would increase the amount of grain going through the system by more than 75 per cent. That would raise the total to 66 million tonnes, or more than one third of India's entire grain production. If it were loaded into rail cars, it would occupy a train more than 5000 miles long that would stretch from Delhi to Casablanca.

Under the act, a family living below a specified low-income threshold would receive a new food-ration card, allowing each family member seven kilograms of grain each month at ultra-cheap prices: three rupees (about six US cents) per kilogram for rice, two rupees for wheat and just one rupee for sorghum and millet. That programme would serve 46 per cent of the population of rural India and eight per cent of urban residents. Another 27 per cent of Indian households, ones with somewhat higher incomes, would be eligible for three kilograms of grain each month at a higher, but still subsidised, price.

When governments intervene through a PDS to help both the farmer and the consumer, there's no free lunch. If the farmer is to stay economically viable and the consumer is to have affordable food, public funds have to fill the gap. And that's something that gives ulcers to those who truly believe in India's market makeover.

The pitfalls of targeting

The rise of neoliberal economics in recent decades has prompted policymakers to call for the curtailment or elimination of the PDS in many countries, most notably in Egypt, Iraq and India. The intent is to save money, but the risks include runaway food inflation and hunger - risks that few governments are willing to run. Therefore few, if any, programmes have been ditched completely. Instead, as a compromise, most PDS are now "targeted" only at low-income households.

Targeting sounds wise, but it turns out that the more effort governments put into purging ineligible households from any subsidy programme, the greater is the likelihood that eligible people will be excluded as well. A survey of PDS in eight countries concluded that, in places where a large proportion of the population is poor, targeting generally causes more problems than it solves and can cost more money than it saves.

Until 1997, all Indians could participate in the PDS. Since then, the system has been targeted at households that live below the official poverty line. One result is that millions of low-income Indians have lost access to subsidised food. Now, one-half to three-quarters of all families living below the poverty line in the country's poorest states have no ration card at all. In the first seven years of the targeting era, per capita calorie consumption declined in India, and age-adjusted body weights for children younger than three years old also dropped. 

The states of Tamil Nadu, Andhra Pradesh and Chhattisgarh have bucked the targeting trend by maintaining near-universal coverage of the PDS, augmenting grain stocks at state-government expense, computerising distribution and "de-privatising" fair-price shops. That has not only improved people's access to food, but also reduced waste and fraud.

But rather than learn from success stories such as those, drafters of the Food Security Act moved to reverse such gains with a provision that would prohibit states from extending coverage of their PDS to people not designated by the central government as eligible.       

Economist and hunger expert Jean Dreze, a member of India's National Advisory Council, has written that the Food Security Act's continuation of targeting "prevents the emergence of a cohesive public demand for a functional PDS". He calls targeting "an ugly business" and argues that it turns "a purely statistical benchmark, the 'poverty line', into a permanent social division".

In need of an overhaul

That's not to say that India's PDS doesn't need a good overhaul. The biggest complaint from critics is that huge volumes of rice and wheat stocks never make it into the hands of consumers in some states. The share of PDS food grains that disappear from the system nationwide reached a peak of 53 per cent in 2005, but the government claims that losses have since declined. Some of the loss is the result of spoilage, but a greater amount is illegally diverted into the cash market, where it earns a hefty profit.

The most enthusiastic free-market fans among India's leaders have proposed replacing the PDS with distribution of food stamps - or even cash payments - to below-poverty-line households. A provision of the Food Security Act would allow such changes at the discretion of individual states. That would mean the end of the fair-price shop; recipients would buy at private food stores or supermarkets instead. The cash would be automatically deposited in bank accounts (which most of the poor don't currently have), or if food stamps were used, they would be distributed in the form of a "smart card" as they now are in the United States.

"The Food Security Act would go some way toward strengthening the faltering PDS - kind of like a repair job on an old '86 Oldsmobile that's a pain to drive but still runs."

Neoliberal theory says cash is a more efficient form of assistance than food. But studies in country after country have shown that in practice, subsidised food distribution improves nutrition more than an equivalent amount of cash aid. Cash benefits can very quickly be eroded by inflation, and even poorly nourished people can find themselves spending much of the money they receive on something other than food. Debt collectors, shady salespeople and out-and-out cheats have ways of knowing which families have extra cash coming in and will set out to relieve them of it. 

Whatever mode of delivery is settled upon, the PDS entitlement could end up merging with another political hot potato: the proposed Unique Identification Document (UID) or card that the government envisions will be a requirement of every Indian. The card would include not only a photograph but also electronic records of iris scans and all 10 fingerprints. An eyelash would be collected from each person as well, for archiving DNA. Civil-liberties advocates, not surprisingly, worry that the card could be used as a means of privacy invasion and repression.

Missing the irony

Those who would integrate the PDS more fully into the global marketplace seem to be missing the irony of the current situation, in which rural India's increasing exposure to the global market helped make expansion of the PDS necessary in the first place. Today, most people poor enough to be eligible for food rations live in rural areas where people once grew what they ate. Where diverse food crops once covered the landscape, there are now vast monocultures of cotton, wheat, rice, maize and other crops to be sold for cash - and often not enough cash to pay the debt amassed to grow them.

The PDS, originally aimed at cities as a subsidy to manufacturers (to keep the workforce fed on cheap food and allow wages to stay low), is now a lifeline for landless workers in the faltering farm economy, who sow and harvest crops they don't eat, only to then consume low-quality wheat and rice that's been trucked into the village fair-price shop from far away.

The Food Security Act would go some way toward strengthening the faltering PDS - kind of like a repair job on an old '86 Oldsmobile that's a pain to drive but still runs. And the government will continue to have to step in and fill the gap between the price the farmer needs and the price the low-income consumer can pay.

Meanwhile, the only long-term solution, not just in India, but in every hungry country, is to build an agricultural economy that not only produces enough nutritious food for everyone, but also provides good work for all rural people and rewards them sufficiently in return.

Stan Cox is research coordinator at The Land Institute in Salina, Kansas, USA. He is currently writing a book on the past and future of rationing.

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.

India’s Food Security Bill: A Waste Or Win For The Hungry? – Analysis

posted Jan 21, 2012, 5:48 AM by Puneet Goyal

India’s Food Security Bill: A Waste Or Win For The Hungry? – Analysis

Home to over 25 per cent of the world’s hungry poor, India faces major food security challenges and the situation has barely improved in two decades. Will the National Food Security Bill that the Indian Parliament is expected to pass this month alleviate the country’s food insecurity?

By Sally Trethewie

THE INDIAN Parliament is expected soon to pass a bold but polarising National Food Security Bill which pledges to deliver the ‘right to food’ to its people. Undertaking to provide subsidised grains and food assistance to 64 per cent of its population, the ‘Food Bill’ is expected to be popular with voters ahead of a key election year, but critics argue that it will do little to address food insecurity and may even exacerbate the country’s food woes.



Few would question that urgent and drastic measures are needed to address India’s food insecurity. The Global Hunger Index recently positioned India in the ‘alarming’ category, with 21 per cent of the population undernourished, more than 43.5 per cent of children under 5 being underweight and child malnutrition rates worse than sub-Saharan Africa. Poor infrastructure, transport and storage facilities typically lead to 30-40 per cent of total food produced being spoiled between harvest and retail.

Food insecurity

However, with India currently being a strong producer of food, the main barrier to achieving food security for its masses is lack of physical and economic access to an adequate and nutritious food basket which includes grain, vegetables and pulses. The Food Bill stands to primarily address just one aspect of India’s food insecurity: access to grain. The Food Bill aims to reach 75 per cent of India’s rural population and 50 per cent of the urban population. For a period as yet undefined, priority households will receive 7kg of grain per person each month and free meals will be received by lactating mothers, children, the destitute and the homeless. While the Bill’s right to food mandate is encouraging, there are concerns regarding the government’s capacity to deliver it.

Critics of India’s existing food welfare programme – the Public Distribution Scheme (PDS) – argue that grain currently distributed is of low quality, inopportunely delivered, stored in unhygienic conditions, lacking in micronutrients, known to contain pesticide residues, and is subject to onselling to rice traders by beneficiaries and corrupt PDS officials. Commentator RupaSubramanya laments that the PDS’ involvement in Food Bill operations will result in it providing “the right to rotting food, inefficiently delivered”.

Public debate on the Food Bill is, however, mostly focused on its economic implications, with many concerned that India simply cannot afford the US$20 billion required to implement it. Others – including the Governor of the Reserve Bank of India – warn that the Bill will contribute to growing inflationary pressures. Pundits also question the rationality of heavy-handed government interventions on both the supply and demand sides of the food equation through the bill in combination with other welfare policy measures.

Indian farmers face hardship

Flaws in the application of previous centralised schemes suggest that the Food Bill may also lead to uneven outcomes within certain demographics, regions and industry sectors. Many of India’s millions of smallholder farmers, for example, may become increasingly geographically disadvantaged by the new legislation. Grain for public distribution has typically been sourced from the country’s north-west. This has been detrimental to many farmers in India’s south and east, who have not been able to compete with cheap and free food distributed in their localities. Despite subsidies to support farmers in these areas, many have left the food production sector and become reliant on food hand-outs after finding farming no longer profitable, while the more fortunate have planted non-food or cash crops – further reducing local food supplies.

An early push for local sourcing and cash payments to farmers was not reflected in the Food Bill currently tabled, and even India’s Minister for Agriculture has admitted that the Bill will likely be harmful for many farmers. A lack of synergy with agricultural development more broadly is a glaring shortfall of the Food Bill, particularly given that production will need to increase substantially in coming decades to meet growing demand for food.

Despite these concerns, the Bill – which arose out of a 2009 election promise and perhaps would have been more aptly named the National Food Welfare Bill – has hurriedly moved through the parliamentary process. After all, it would have taken political gall for constituents to oppose a relatively straightforward and immediate proposal to safeguard the poor’s right to food given the election year ahead. It has, however, faced apprehension from at least six of India’s state governments, which will be required to fund and deliver much of the programme. After being passed in Cabinet in December 2011, the bill is expected to be implemented in mid-2012 after likely parliamentary approval this January.

From commodity to public good

Beyond concerns about India’s administrative, logistical and economic capacity to deliver the Bill’s promises, the implications of transforming food from ‘commodity’ to ‘public good’ on such a scale in a competitive (and developing) economy are significant. At the very least, market distortions seem likely. Some critics pointed out that improving access in a market-based food system calls for enabling and incentivising policies rather than a paternalistic approach such as that which defines much of the Food Bill.

There were also calls for safety nets based on cash and vouchers instead of food hand-outs. The bill does contain several provisions that could be used to address potential future problems such as the Bill’s as yet unspecified time-frame, the scale of entitlements and the cost-sharing arrangements. But it will take immense political will after the implementation of such a weighty programme to tackle the structural issues facing India’s food system.

Whatever the Food Bill delivers in the short-term for the desperately hungry must be seen as a positive outcome. But just like a pile of grain rotting in an ill-equipped warehouse, it seems tragic that such an exceptional wave of political will and resources will not be utilised to its potential to alleviate India’s longer-term food insecurity.

Sally Trethewie is Senior Analyst at the Centre for Non-Traditional Security Studies, S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, and explores both food and environmental security issues throughout Asia. She holds a Master of International Politics from the University of Melbourne.

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