FNB News - “Recommendations will enable save vast amounts of funds”

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INTERVIEW

“Recommendations will enable save vast amounts of funds”

Monday, 30 March, 2015, 08 : 00 AM [IST]

The Shanta Kumar-headed High Level Committee (HLC), looking into restructuring of FCI, some time back submitted its report to the government. But many are opposed to the recommendations made by the panel for reviving the ailing body. In an email interaction with Abhitash Singh, Shanta Kumar, member of Parliament belonging to BJP, explains in detail the report, restructuring of Food Corporation of India (FCI) envisaged as per the report and resultant benefits. Excerpts:

One of the suggestions by your committee pertained to outsourcing of FCI storage facilities to the Central and state warehousing corporations and private players. But there is lot of opposition for this particular suggestion. Comment.
I feel one should analyse the report in its entirety. The main purpose of the report was to provide a basic structure by which changes in FCI could be brought about so as to make it adaptable in the evolving dynamics of the food sector. As mentioned in the report, the endeavour is to make FCI much leaner and nimble. Now we already have a two-tier warehousing structure in the form of Central Warehousing Corporation and State Warehousing Corporations apart from the FCI. I fail to understand why we need FCI in food grain storage, when there are already existing specialised warehousing corporations. Diversification of these activities by the FCI will lead to the financial as well structural improvement of the corporation. Further, the country needs to expand its bulk handling facilities than it currently has. The FCI’s old conventional storages that have been present for long number of years can be converted to silos with the help of the private sector and other stocking agencies. Infusion of new technology is imperative in all silos as well as conventional storages. The private sector which has done well in other sectors has constantly been left out of the food grain industry. Its current share in the market stands at a dismal 0.5 to 1 per cent. The opening up of storage will not only lead to the introduction of much-needed technological innovation but also increased competition and employment opportunities in the sector. It is thus very confusing and disheartening when one sees opposition to this novel idea that may eventually transform the food sector in the country.

You have asked for limiting the legal entitlement of food grains under the National Food Security Act to 40 per cent instead of earlier 67 per cent. But the government is not okay with the suggestion. What is your take on it?
As far as implementation of this suggestion is concerned, I feel that it is not my prerogative but that of the government, to decide whether it wants to apply it or not. However the suggestion to limit the entitlement under the NFSA to 40 per cent was arrived at only after taking into consideration various reports of the Planning Commission and the CACP discussion paper of 2012. It is not financially feasible for the government to extend support to 67 per cent of the population. All these reports have been stated in the recommendations of the committee and they point to the fact that there is a high leakage ranging from 40 to 90 per cent in the PDS through which implementation of the NFSA is to be done. The consequence of all these leakages is that individuals entitled to the benefits under the Act are suffering. The limit of 40 per cent will ensure that all the eligible beneficiaries, that is all the poor families will avail advantage of the Act and there is elimination of pilferage.

These recommendations along with that of computerising the PDS mechanism does not lead to the redundancy of the law, rather it ensures its streamlining and provides a platform for optimal implementation which will enable it to target the core individuals at which the legislation is aimed.

Till date, only 11 states have implemented NFSA. Then how has your committee reached a conclusion on the ill-effects of the Act?
The committee has undertaken a detailed study of the National Food Security Act and its implementation in 11 states. It has not so much as highlighted the ill-effects of the Act, but has given new much-needed concepts that need to be incorporated in the Act to ensure its efficient enforcement. As earlier stated by me, it is imperative to limit the beneficiaries to 40 per cent. The main objective is to rationalise the functioning of the Act and the PDS. If the steps recommended by the committee are not taken, the government’s subsidy burden will become unbearable. Hence when the NFSA is extended to other states it should incorporate these amendments which have been suggested only after extensive analysis of the 11 states in which the Act has been implemented.

How would cash transfers to farmers’ and consumers’ accounts help in sealing the leakages taking place now?
Currently the subsidy delivery system in India is highly wasteful, and inefficient. The main reason for this is that there are high degrees of complications in the system at every level. There is also heavy misrepresentation in the market. Of the total nine crore farmers in the country, only 6% are getting the benefit of minimum support price, that too mostly big farmers. Further, the market price of rice is Rs 40/kg, it is being provided at Rs 3 and Re 1 through PDS. In such circumstances, corruption and diversion is inevitable. The practical solution to all these leakages is providing income support instead of market support. Direct cash transfers to farmers will ensure that he thoughtfully uses fertilisers and organic manures on his land. Currently the benefit of fertiliser subsidy is being reaped by big fertiliser manufacturing companies. Urea is being used in excess which is resulting in loss of fertility of land. Thus the committee has decided to provide Rs 7,000 per hectare of income support to farmers. This will empower him to decide on what to cultivate as per his own wisdom and the prevailing market conditions. As far as DBT to consumers is concerned, they will get a greater choice in determining whether they wish to buy cereal or non-cereal foods. The government will end up saving huge amounts of funds which can then be diverted towards improving rural infrastructure.

How much can the government expect to save from cash transfers?
The expenditure of the government stands at Rs 16 lakh crore and the corresponding income is only 11 lakh crore. The total subsidy burden of the state covering all the subsidies is around Rs 3,78,000 crore. To ensure financial prudency, the government needs to cut its expenditure and subsidy liability. As far as fertiliser subsidy is concerned, the cash transfer of Rs 7,000 per hectare will result in the savings of Rs 15,000 – 20,000 crore. In the case of food subsidy, the government will save Rs 50,000 crore. Thus if implemented, the recommendations will enable the government to save vast amounts of funds which can then be pushed towards developmental activities.

In FCI there are lot of issues related to internal working, inefficiencies and corruption. Your committee has not dealt with them. Comment.
The committee has made recommendations that will ensure a leaner and nimble FCI, low cost of operations and higher economies of scale. We have already recommended diversification of storage operations to Central and State Warehousing Corporations and the private sector. There is a recommendation to move out of procurement from certain states and focus on east Uttar Pradesh, West Bengal, Bihar and Assam. We have also recommended mechanisation of operations which will reduce manual labour requirements. There is also a suggestion to reduce the number of zonal and regional offices and if possible simply outsource of hire contractual labour. Only when the workload of the corporation is reduced can there be a pruning of the staff.