Shrink FCI, use more futures, warehouse receipts

Jun 05 2014, 01:23 IST
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SummaryThe new NDA government will have to deal with the complex and critical challenges faced by the agricultural sector.

The new NDA government will have to deal with the complex and critical challenges faced by the agricultural sector. Ashok Gulati, Chair Professor Agriculture, Indian Council for Research on International Economic Relations (ICRIER), and former Chairman of the Commission for Agricultural Costs and Prices (CACP), spoke to FEs Sandip Das on measures the government must initiate to rejuvenate the critical sector.

What should be the key thrust areas in the food and agriculture sector for the Narendra Modi-led government?

First and foremost, the new government needs to tame food inflation. It should announce its strategy in this area and in the next 100 days, bring food inflation to below 5% levels. We have already suggested three steps in this regard: liquidate the 15-20 million tonnes of excess grain stock with the Food Corporation of India (FCI); reduce import tariffs on food products, especially fruits and vegetables, dairy and meat and fish to much lower levels (10-15%) from their current ones, as high as 100% as in case of chicken legs (cut pieces); and contain fiscal deficit.

On the agriculture front, the key challenge is not only to raise land productivity but also water productivity and simultaneously build effective value chains, especially for perishable commodities, and thereby avoid large wastages.

What should be the government policies towards the sharp rise in food and fertiliser subsidies?

I dont know what the governments plans are in this respect, but the time has come to bite the bullet. Currently, food subsidy is budgeted at R1,15,000 crore and fertiliser subsidy, at around R68,000 crore. However, we are told that the pending bills on account of food subsidy alone are roughly R49,000 crore, and for fertiliser subsidy, a further R38,000 crore. Together, they amount to R2,70,000 crore.

I feel that reorienting these subsidies towards conditional cash transfers, made directly to beneficiaries through the Aadhaar route, could save at least 30% of the current total, if not more. These huge savings can be achieved without sacrificing the ultimate objectives of helping poor consumers or farmers. And these savings can then be ploughed back in agriculture through investments, say, in the water sector. This will raise productivity and give long-term food security at affordable prices. But this cannot be achieved overnight, given that several poor people may not have bank accounts and financial infrastructure may be weak in remote areas. However, a beginning can be made, starting with the large cities, and then going

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