No rice for Onam festival Wednesday, Aug 27 2008

FCI godown in Kerala

It is going to be a political fight between Kerala and the Centre (Central government) for rice. The Centre has drastically cut rice quotas to the State for public distribution. It soon turned into a political fight with the Union Minister for Agriculture and Civil Supplies Sharad Pawar taking umbrage for the absence of representatives of his party in the all-party delegation from Kerala that approached him for more rice. Though Prime Minister Manmohan Singh was initially sympathetic, the equations have now changed with the Left parties withdrawing support to his government.

Politics apart, let us examine the pros and cons of the decision of the Centre to cut quotas. Kerala has not been drawing the allocated quotas for the above poverty line cardholders for years as the APL cardholders had mostly stopped getting their supplies from the public distribution system (ration shops). With increase in price of rice, some have returned to the ration shops. However, current demand is not entirely based on demand from the cardholders. Many ration dealers sell rice in the black market where it fetches higher prices.  With increase in price of rice, black market deals have become more lucrative. By demanding large allocations, Kerala government is actually catering to those who divert ration articles. However, it is to be accepted that higher availability of rice whether in the PDS, open market or black market would have the effect of holding the price line.

The Centre had a good reason in limiting allotments when the buffer stocks were running thin. However, the situation has now changed with better procurement this year. The FCI godowns are now flush with grains. The Central government is even planning to auction off rice. So, there is little justification for denying reasonable quotas to the State. After all, statutory procurement of grains from the producers is noted intended for making profits. It should be distributed through the public distribution system itself. As Kerala is a food deficit State, it request for more rice merits consideration, if adequate steps have been taken to prevent its diversion. The special allocation given to the State (10000 tonnes of rice) is inadequate considering the cuts in regular quotas.

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Government should not be giving alms Wednesday, Jul 30 2008

The Kerala Government will be providing free Onam kits to about 20 lakh families living below the poverty line during the coming festival season. The total expenditure for this would be Rs. 10 crores. But each family will be getting only Rs. 50 worth of rice and other items. In other words, it could not even amount to a day’s holiday wages.

The imperative of the government in continuing with such scheme in an election year is obvious. However, the government should not be giving alms to the poor. (Let others do it.) It should devise programmes to increase the earning capacities of the poor. The Rs. 10 crore could be better spent for offering, say, scholarships to children of the poor as it did in the case of Muslim girls.

Alms create dependencies and demand will keep on increasing. It is true of even free housing for the poor. The beneficiaries often wait for the government to do the maintenance also. The best example is the One Lakh Housing Scheme. Nearly 50 years after the government gave those free houses to the poor, the government is running lotteries to raise funds for rebuilding the houses.

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US president, Indian middle class and food scarcity Monday, May 5 2008

The U. S. President George Bush’s statement that prosperity of Indian middle class has led to spiraling of global food prices have attracted strong criticism in India. The communists in Kerala were the most vociferous.

However, the critics of Bush’s statement have reacted somewhat superficially, ignoring some hard facts. The first point is that there is some truth in what Bush is saying. Second is that it is not just diversion of good grains for fuel production that is harming the world most, but subsidies for bio fuels.

It would be very difficult to stop a shift from food crops to bio fuel crops if bio fuel is cheaper (and not less efficient) than other fuels. Laws or policy prescriptions would have very little effect on such a shift worldwide. Ultimately, markets would determine the balance. What governments should do is not to subsidize bio fuel crops and subsidize food crops. Subsidy for food is important as survival of many depend on it. The Western nations are doing a grave crime against humanity by subsidizing production of fuel from grains.

However, it is to be noted that countries outside the US and Europe also offer subsidies that harm food production. Let us look at Kerala State for instance. What Bush says had happened here much before. People had gone for tapioca at times of poverty and scarcity. With prosperity and increased availability of rice, they switched back to rice. The State could have retained some of the area under tapioca and gone for fuel production (alcohol) without much effect on rice production. But that did not happen for want of viable technologies and investment.

On the other hand, rice paddies were steadily being converted from the seventies to garden lands with coconut, banana, areacanut, rubber or other crops. The Rubber Board subsidized replanting of rubber. There were subsidies for other crops also. But sufficient subsidies and work culture was not there to ensure the retention of paddy cultivation in many areas. So, the food deficit of the State kept on worsening. Higher prices for rice could make paddy cultivation increasingly profitable and stem the tide of conversion of the paddies. But the poor ought to get rice at affordable prices. So, targeted subsidies are justified. At the same time, there should be mechanisms to check price rise resulting from shortages and prevent the budget of the middle class from going haywire.

All subsidies, whether it is to the farmer or others, ultimately go to the consumer. Subsidy for rubber benefits the tyre manufacturer. Subsidy for biofuel benefits large consumers the most. Subsidy for food benefits all (and somewhat equitably since you cannot eat more than a stomach’s full), but the poor would benefit most.

Americans and most of the Westerners are heavy users of energy. They waste a lot of resources, ranging from energy to toilet papers. So, they are basically responsible for all the shortages in the world. To be more precise, all those who waste resources across the world are responsible.

Incidentally, Keralites have achieved quality of life on par with many Western nations by using comparatively lesser resources. (See Wikipedia article)

For further reading:

US eats 5 times more than India per capita

Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices (U. S. Economic Research Service; 05/01/08 )

Matters of scale: into the toilet
Toilet paper consumption in US and elsewhere

Food crisis payback for ’20 years of mistakes’: UN expert

UN Says US, EU Biofuel Production Irresponsible

Political parties criticize Bush’s remarks

Kerala Model

Why blame India
Interesting facts about projected increase in food consumption

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