Scrapping of targetted PDS sought

NEW DELHI: Removal of targetting in public distribution system (PDS) and the lowering of MSP of wheat and rice to curtail fresh procurement are among the major recommendations of the Abhijit Sen panel on long-term grain policy, which submitted its report to Union Food Minister Sharad Yadav here on Wednesday.
The other key suggestions are abolition of levy on millers, a special two-year programme to bring down excess food stocks with the Centre, larger role for the private sector in the grain trade and accompanying, enabling changes in the Essential Commodities Act, revamp of MSP and procurement to encourage diversification away from rice and wheat in cereal-surplus states like Punjab and Haryana and output boost in the grain deficit states.
The committee has also recommended that the states where farmers are adversely affected by the recommendations should be compensated by the Centre, saying such relief would still leave the Centre better off in terms of expenditure on food stocks.
The panel has recommended a cap of 4% of the MSP on statutory levies and other non-MSP elements in the procurement price. On open market sales, the panel has said that prices should be based on the corresponding CIP plus the full cost of transport and storage as well as market conditions.
The panel is of the view that international trade would boost farm incomes and that MSP should be reformulated to meet the requirements of an open economy.
Export and import, it felt should be based on the system of variable tariffs and exports should be entirely on private account.
Agencies like FCI should not be engaged in exports, Mr Sen said. The current export drive should be reviewed as soon as the stocks come down to 17 million and 22 million tonnes for rice and wheat respectively.
The panel has said that the targeted PDS (TPDS) started by the UF government in 1997 be done away with immediately and replaced, as it has tended to erode the original purpose of stabilising prices without increasing consumption of food by the poor.
The panel has rejected the income support scheme proposed by the ministry and underlined that the insurance scheme must be on commercially viable lines, based on actuarial calculations.
The compensation package to states for the reduction in MSP has been worked out to a total of Rs 3,915 crore.
The compensation thus paid to states should be given to farmers in the form of direct per hectare transfer, subsidising premiums on insurance schemes on crop incomes/prices, specific crop diversification schemes and/or other credit or input linked schemes to offset cost, including electricity. Insurance should not be limited to paddy and wheat.
The MSP should now be given statutory status forthwith (and the Commission on Agricultural Costs and Prices made a statutory body), the panel has said, adding that strict quality control should govern the central stocks in order that the focus stays firmly on getting rid of stocks.
Poor quality grain should not be procured and, if such grain is produced on account of weather conditions, the state should be compensated separately but the lower grade cereals should be kept out of the central stocks, putting a brake on the quantum entering the pool.
In the longer term (with a 20 year time frame in mind), the panel has recommended that the central stocks be kept at only 50% above the buffer stock. Steps should also be initiated to ensure that the distribution costs for foodgrains are borne by the states in the longer term.
The uniform central issue price for rice and wheat under the new unified PDS should be around Rs 4.50 per kg of wheat and Rs 6 per kg of rice.
For this, the states should be compensated at a transfer rate of Rs 0.35 per kg of grain offtake in cash, conditional on lifting and accounting. The CIPs should be raised in a phased manner so that quality stocks have been reduced to 17 m tonnes and 22 m tonnes respectively for rice and wheat.
In order that consumers are not abruptly affected by higher prices, the Centre has to announce a sequence of phasing at the earliest.
States should be allowed to use the compensation cash transfer “in any manner for strengthening the PDS and expanding offtake including offering all consumers the old BPL prices. Grain transfer, if opted for by the states, could be used for any poverty alleviation or employment scheme.
“Prof Sen justified this stating that “the stabilising role played by the universal PDS has weakened given the TPDS.�
Diversification of crops forms another focus area of the long-term grain policy.
With a view to encouraging the entry of the private sector into grain trade, and not just in storage and transportation, the committee has suggested that trade barriers be eased.