Expanding the leaky public distribution system wont deliver food security 

(by Arvind Panagariya )

Perhaps the most powerful argument used by the proponents of the so-called Food Security Bill to further expand the highly inefficient,corrupt and leaky public distribution system (PDS) is adult hunger and malnutrition.Serious flaws exist,however,in both the diagnosis and prescription the proponents offer.

Civil society groups and international organisations such as the World Health Organisation,Food and Agricultural Organisation and World Bank contend that one-fifth or more Indians suffer from hunger and many more from malnutrition.But this contention is principally based on the steadily declining trend in calorie consumption in India during the last two decades.The trend has been observed among all classes of consumers whether rich or poor,rural or urban.

But when asked in the nationwide expenditure surveys whether they have had enough to eat throughout the year,the responses of Indians have shown exactly the opposite trend.Those replying in the negative to the question were 17.3% in 1983 but fell to 5.2% in 1993-94,3.6% in 1999-2000 and just 2.5% in 2004-05.

Some,who reject these numbers as implausible,argue that the household heads answering the question in the survey are too proud to admit hunger in their families.Quite apart from the fact that the same household heads have rarely let their pride come in the way when applying for belowpoverty-line or BPL cards and associated benefits,this argument cannot explain the declining proportion of households reporting hunger.Surely,households in the 1980s could not have been any less proud than those in the 2000s! 

Several factors have been at work to reduce the need for calorie consumption and hence decline in it among all income classes.In the rural areas,farming has been getting progressively mechanised.Fewer and fewer people rely on long walks or bicycles and more and more on motorbikes and buses to get from one point to another.The proportion of population engaged in farming has been declining as well.With more and more children in school,midday meals are providing calories that do not get counted in the household expenditure data from which the above-mentioned calorie consumption trend is derived.

Similar factors have been at work in urban areas.Improved means of transportation,both private and public,have reduced the need for more physically challenging modes of transportation.Heavy machinery has reduced the need for physical labour in activities such as construction.Workers have increasingly shifted to desk jobs.

Finally,better absorption of calories due to improved epidemiological environment and access to healthcare has reduced the need for actual calorie consumption.Increased access to piped water combined with water purification systems in urban households and proliferation of handpumps and tube wells in the rural areas have greatly improved the access to safe drinking water.In turn,this has helped reduce the incidence of diarrhoea,a common cause of poor absorption of food.Greater availability of medicines has further helped calorie absorption.

The height and weight trends and improvements in vital statistics further contradict the inference that the decline in calorie consumption represents increased malnourishment.The National Nutrition Monitoring Bureau surveys reveal that the proportion of those having below normal Body Mass Index fell from 56 to 33% for men and from 52 to 36% for women between 1975-79 and 2004-05.Data also show both men and women steadily gaining in height.Vital statistics such as life expectancy,death rates,infant,child and maternal mortality rates have steadily improved.

For these reasons,the focus on the decline in calorie consumption when the real problem may be a lack of balanced diet that goes well beyond cereal consumption is misguided.But even accepting increased calorie consumption as the goal,an expanded PDS is not the answer.If individuals are choosing to consume less foodgrains despite rising incomes,making foodgrain available in larger quantity at lower prices will not change the outcome.Households will pick their share of subsidised grain and simply sell the portion not consumed for a higher price on the market.

Recent work by economist Nisha Malhotra on child malnutrition in India shows that informing mothers on proper feeding practices rather than just access to food is what helps improve child nutrition.The same prescription is bound to apply to adult nutrition that requires a balanced diet.
This evidence and analysis notwithstanding,the proponents of the Food Security Bill insist that universalising the PDS will ensure that the poor receive more foodgrain,consume it and become better nourished.
While i have already questioned the second and third links in the argument,the available evidence brings into question even the first link.In a recent article,economist Peter Svedberg makes the point thus: The evidence in support of universality as an efficient method for eliminating,or even notably reducing,exclusion errors is not altogether convincing.Before 1997,the PDS was in principle universal,but large proportions of poor households were either effectively excluded,or purchased very small amounts of subsidised grains. 

It is disappointing that having decided to move to cash transfers while also facing severe pressure to cut fiscal deficit,the cabinet has cleared an entirely flawed Bill in the name of food security.Genuine reform requires a shift to cash transfers,public-information campaigns on balanced diet and reforms in agriculture and food safety and health instead.Massive food distribution is neither the comparative advantage of the government nor promises to raise calorie consumption,let alone promote a balanced diet.

Source: The Times of India

Farmers club Inauguration by district officials in LIFE project villages-Mundari on 15/10/2012 at Mundari-Banswara. Inauguration has been attended by more than 100 community members, PRI members, NABARD and KVK officials, SJVS-Banswara ( LIFE project implementing partner) Director and staff.  95% ( 19 farmers club out of 20) of the farmers club formed under LIFE project are been approved by NABARD and KVK is an official technical partner to support farmers club in LIFE project villages. Its intresting for community that now they have an approved community based and manged institution in the form of farmers club to sustain the LIFE project sustainable agriculture initiatives! 

LFE project team at Banswara creating awareness amongst Bhli tribes on Right To information Act through Nukkad nataks (Street Play)

Grameen Bhandaran Yojana!

1.                  BACKGROUND

It is well known that the small farmers do not have the economic strength to retain the produce with them till the market prices are favourable.  There has been a felt need in the country to provide the farming community with facilities for scientific storage so that wastage and produce deterioration are avoided and also to enable it to meet its credit requirement without being compelled to sell the produce at a time when the prices are low.  A network of rural godowns will enable small farmers to enhance their holding capacity in order to sell their produce at remunerative prices and avoid distress sales.  Accordingly, Grameen Bhandaran Yojana, a Capital Investment Subsidy Scheme for Construction / Renovation of Rural Godowns was introduced in 2001-2002 and extended upto 31.03.2007. The Scheme has now been approved for implementation during the years 2007–12, with modifications in its operational guidelines for new projects to be sanctioned after 26 /06 /2008. Accordingly, revised operational guidelines of the scheme are applicable for new projects sanctioned on or after 26 /06 /2008 to 31.03.2012.

2.         OBJECTIVES

The main objectives of the scheme include creation of scientific storage capacity with allied facilities in rural areas to meet the requirements of farmers for storing farm produce, processed farm produce  and agricultural inputs; promotion of grading, standardization and quality control of agricultural produce to improve their marketability; prevention of distress sale immediately after harvest by providing the facility of pledge financing and marketing credit;  strengthen agricultural marketing infrastructure in the country by paving the way for the introduction of a national system of warehouse receipts in respect of agricultural commodities stored in such godownsand to reverse the declining trend of investment in agriculture sector by encouraging private and cooperative sectors to invest in the creation of storage infrastructure in the country. 

3.         SALIENT FEATURES

Eligible Organizations

i)          The project for construction of rural godowns can be taken up by individuals, farmers, Group of farmers/growers, Partnership/ Proprietary firms, Non-Government Organizations (NGO’s), Self Help Groups (SHGs), Companies, Corporations, Co-operatives, Local Bodies other than Municipal Corporations, Federations, Agricultural Produce Marketing Committees, Marketing Boards and Agro Processing Corporations in the entire            country. Assistance for renovation of rural godowns will, however, be restricted to godowns constructed by cooperatives only.

Location

ii)         Under the scheme, the entrepreneur will be free to construct godown at any place, as per his/her commercial judgment except for  the restriction that it would be outside the limits of Municipal   Corporation area.  Ruralgodowns constructed in the Food Parks    promoted by the Ministry of Food Processing Industries shall also be eligible under the scheme for assistance.

Size

iii)         Capacity of a godown shall be decided by an entrepreneur.  However, subsidy under the scheme shall be restricted to a minimum capacity of 100 tonnes and maximum capacity of 10,000 tonnes.  No maximum ceiling on subsidy in the case of projects of rural godowns of Cooperatives assisted by NCDC.

iv)        Rural godowns of smaller size upto 50 tonnes capacity will also be eligible for subsidy under the scheme as a special case based on viability analysis depending on the topography/special requirement of the State/Region.  In hilly areas*, rural godowns of smaller size upto 25 tonnes capacity will also be eligible for subsidy.  For this,  NABARD will issue appropriate guidelines.

*where the project site is located at a height of more than 1000 meters above mean sea level.

Conditions for Scientific Storage

v)     Godowns built under the scheme shall be structurally sound on account of engineering considerations and functionally suitable to store the agricultural produce. The general conditions for scientific construction will be as follows:

       a)       The construction of godown shall be as per Central Public  Works Department/State Public Works Department   specifications or any other standard     
       specifications laid down in this behalf.   The godown shall be properly     ventilated, shall have well fitted doors, windows and ventilators and shall be   

                waterproof (control of moisture from floor, walls and roof etc.)

       b)    The godown structure shall have protection from rodents.

       c)    The godown shall have protection from birds (windows / ventilators with jali).

       d)    The openings of godown such as doors, windows etc. shall    be     designed in such a manner that the godown can be  sealed for effective fumigation etc.

        e)   The godown complex shall have an easy approach road, pucca internal roads, proper drainage, arrangements for effective control against fire and theft and 
     also have arrangements for easy loading and unloading of stocks.

vi)        The entrepreneur may obtain a license to operate the godown, if so required by the concerned State Government, under the State Warehousing Act or any other relevant laws.  All Rural Godowns to be constructed under the Scheme in future, should be confirming to the technical specifications relating to the implementation of the Negotiable Warehouse Receipt System (NWRS). The rural godowns of 1000 tones capacity and more shall be considered as eligible for assistance under the Scheme, only on giving an undertaking alongwith the application that they would be implementing the Negotiable Warehouse Receipt System. DMI in consultation with the Department of Food and Public Distribution and NABARD shall modify godown specifications to meet the requirements of implementation of Negotiable Warehouse Receipt System and NABARD shall ensure that these specifications are in-built in the eligibility criteria for giving subsidy to the rural godowns of any size under the Scheme.

Credit Linked Assistance

vii)                 Subsidy  under  the  scheme  is  linked  to  institutional  credit  and  will be   available to only such projects as are financed by Commercial Banks, Regional Rural Banks, State Cooperative Banks (SCBs),  State Co-operative Agricultural and Rural Development Bank (SCARDBs), Agricultural Development Finance Companies  (ADFCs), North Eastern Development   Finance Corporation(NEDFI), Urban Cooperative Banks etc. Loan to the entrepreneurs from banks for the  construction of godowns would carry an adequate long-term repayment period.

viii)       Assistance under the scheme shall be available on capital cost of construction of godown including the cost of allied facilities like boundary wall, internal road, platform, internal drainage system, weighing, grading, packaging, quality certification, warehousing  facilities which are functionally required to operate the godown.

Pledge Loan Facility

ix)   The farmers keeping their produce in the godowns shall be eligible to avail pledge loan on hypothecation of their produce. The terms and conditions governing pledge loans viz. margin, rate of interest, period of pledge, amount etc. will be as per the guidelines issued by RBI/NABARD and as per normal banking practices followed by the financial institutions.

Training

x)       A general awareness programme on the scheme for the farmers and a training programme for the entrepreneurs for construction, maintenance and operation of rural godowns will be organized by the National Institute for Agricultural Marketing, Jaipur (NIAM) and other National/State level Institutions.

Implementation Period

xi)        Implementation of the scheme shall be continued beyond 31.03.2007 upto 31.03.2012.

xii)       The modified scheme will be applicable to all new projects for construction / renovation of rural godowns in respect of which loans are sanctioned on or after 
26/06/2008  upto 31/3/2012.

Nodal Agency

xiii)        The scheme shall be implemented by the Directorate of Marketing and Inspection (DMI), an Attached Office of Department of Agriculture & Cooperation.  A list of Regional/ Sub Offices of DMI is enclosed at Annexure-VI.

Target

xiv)       Under the Modified Scheme, creation of new 85 lakh tonnes and renovation of 5 lakh tonnes of  rural storage capacity is targeted.(Total 90 Lakh M.T.)

xv)       The sanction of projects in a State would be restricted to a maximum of 18  lakh tonnes (20% of the total capacity of 90 lakh tonnes envisaged during the XI Plan), but in specific circumstances the unused quota of a State can be diverted to another State by a conscious decision taken by a Committee to be constituted in the Ministry of Agriculture for this purpose.     

xvi)      5 lakh tonnes  would be reserved for  small  farmers  and  5 lakh tonnes for cooperatives during the XI Plan but a conscious decision for diverting this 
            reserved quota to other categories can be taken by the Committee to be constituted in the Ministry as stated above

Insurance

xvii)      It will be the responsibility of the owner of the godown to have the insurance for the godown.

Subsidy

xviii)     Rate of subsidy shall be:-

(a)     33.33% of the capital cost of the project in case of projects located in North – Eastern States,  hilly areas and those belonging to Women Farmers/ their self help groups / co-operatives and SC/ST entrepreneurs & their self-help groups/ Co-operatives subject to a maximum ceiling on subsidy of Rs.62.50 lakh.  No maximum ceiling on subsidy in the case of cooperatives assisted by NCDC;

(b)        25% of the capital cost of the project      to all categories of farmers (Other than Women Farmers), agriculture graduates, cooperatives and State/ Central Warehousing Corporations subject to a maximum ceiling on subsidy of Rs. 46.87 lakh.  No maximum ceiling on subsidy in the case of cooperatives assisted by NCDC;

(c)        15% of the capital cost of the project to all other categories of individuals, companies & corporations etc., subject to a maximum ceiling on subsidy of

Rs. 28.12 lakh; and

d)         25% of the capital cost of the project for renovation of godowns of cooperatives with assistance from NCDC.

xix)       Capital  cost  of  the  project  for  the purpose of subsidy  under the scheme shall be calculated as follows:

a)         For godowns up to 1000 tonnes capacity – Project cost as appraised by financing Bank or actual cost or Rs 2500/- per tonne of storage capacity, 
            whichever is lower;

b)         For godowns exceeding 1000 tonnes capacity – Project cost as appraised by Bank or actual cost or Rs 1875/- per tonne of storage capacity, whichever is 
            lower.  However, for godowns exceeding 10,000 tonnes capacity, the subsidy would be restricted to that admissible for capacity of 10,000 tonnes only, subject  
            to the relaxations made under para 3 (xviii) above for projects of the cooperatives;

c)         For renovation of godowns by cooperatives with assistance from NCDC - project cost as appraised by Bank / NCDC or actual cost or Rs.625/- per 
            tonne of storage capacity, whichever is lower.

xx)        No beneficiary shall draw subsidy for the godown project or any of its component  from more than one source.

xxi)       The capacity of godown shall be calculated @ 0.4 M.T. per cu. mtr.

Release of Subsidy

xxii)            Subsidy for the projects under the scheme shall be released through NABARD for projects financed by Commercial, Cooperative and Regional Rural Banks, 
            ADFCs, SCBs, SCARDBs, NEDFI and scheduled PUCBs and other institutions eligible for refinance from NABARD and through NCDC for projects 
            financed by NCDC or by Cooperative Banks in accordance with its eligibility guidelines.

Adjustment of subsidy in Borrower's Account

xxiii) The subsidy released to the bank / NCDC for an individual project will be   kept in a separate borrower-wise account. The adjustment of subsidy will be back ended. Accordingly, the full project cost including the subsidy amount, but excluding the margin money contribution from the beneficiary, would be disbursed as loan by the banks. The repayment schedule will be drawn on the loan amount in such a way that the total subsidy amount is adjusted after full bank loan component net of subsidy with interest is liquidated but not before 5 years from the date of disbursement of first instalment of loan.

No interest chargeable on subsidy portion

xxiv) The subsidy admissible to the promoter under the scheme will be kept in the Subsidy Reserve Fund Account (Borrower-wise) in the books of the financing banks. No interest would be charged on this by the Bank.  In view of this, for purposes of charging interest on the loan component, the subsidy amount should be excluded.  The balance lying to the credit of the subsidy reserve fund account will not form part of demand and time liabilities for the purpose of  SLR/CRR.

4.       INSTITUTIONAL LENDING

A.      Eligible Financing Institutions

          The eligible financing institutions under the scheme are:-

i)        Commercial Banks, Regional Rural Banks (RRBs), State Cooperative Banks (SCBs), State Co-operative Agricultural and Rural Development Banks (SCARDBs), Agricultural Development Finance Companies (ADFCs), Scheduled Urban Coop. Banks, North Eastern Development Finance Corporation (NEDFI), and such other institutions eligible for refinance by NABARD. 

ii)       NCDC and Cooperative Banks recognized by NCDC in accordance with its eligibility guidelines.

B.      Term  Loan

i)  Minimum 50% of the project cost (46.67% in case of NE States, hilly areas, Women Farmers/ their self help groups / co-operatives and SC/ST entrepreneurs & their self-help groups/ Co-operatives ) is to be raised as term loan from the financing banks. As the subsidy is back-ended, eligible amount of subsidy would be initially allowed as term loan to the beneficiary. The repayment schedule will be drawn on the total loan amount (including subsidy).  The subsidy amount will be adjusted after liquidation of bank loan (net of subsidy) but not before 5 years from the date of disbursement of first instalment of term loan. 

ii)       Depending upon the cash flow, the term loan would carry an adequate long term repayment period, not less than 5 years including a grace period of one year.

iii)      Rate of interest to borrowers on term loan shall be as per RBI guidelines.  Interest will be chargeable from the date of the first disbursement of loan.

iv)      The   financial   institution   may   also provide working capital separately for undertaking business by entrepreneurs.

v)       NCDC may follow its own norms for period of term loan, its  repayment, moratorium, interest rate etc.

  

for more information log on to: http://www.agmarknet.nic.in/amrscheme/ruralhead.htm#BACKGROUND#BACKGROUND 

Rajasthan

 Rajasthan: It is currently the largest State of India covering nearly 10.4 per cent of total geographical area of the country. The state is spread over an area of 342239.74 sq. km and situated between 23° 3' and 30° 12' North Latitiude and 69° 30' and 78° 17' East Longitude Rajasthan is divided into 33 districts (and has 10 agro-climatic zones.), 188 Subdivision, 241 Tehsils, 237 panchayat Samitis and 41353 villages. It has a population of 56.5 million, out of which 43.2 million lives in villages.

Community: The population of Scheduled Tribe and Scheduled Caste is 17.29% and 12.44% respectively against the national average of 16.33 and 8.01%. The sex ratio of Rajasthan is 921 as against 933 in India and has a population density of 200 person / sq. km.  The Bhils are largely concentrated in the area around Chittorgarh, Udaipur and Dungarpur in the south corner of the state constituting a formidable 39 percent of the state's tribal population. Regarded as warriors with fine inherent guerilla tactics, their archery skills find mention in the Hindu epics of Mahabharata and the Ramayana. With improved communication and rapid growth in the economy, the Bhil's of living is slowly changing from their original hunting and gathering existence to one near the mainstream. After the Bhils the Meenas are the second largest tribal group and the most widely spread throughout eastern Rajasthan. Most Meenas are cultivators and worship Lord Shiva. Another nomadic community is Rabari or Raika, of which there are two groups - Camel breeders (Marus) and the sheep breeders (Chakias). The Gurjars in the eastern part of the Rajasthan including Jaipur, Alwar, Bharatpur and Kota region dominate.At the Census 2011, Rajasthan had a literacy rate of 67.06% (80.51% male and 52.66% female).  Rajasthan's literacy rate is below the national average of 74.04% and its female literacy rate is the lowest in the country[1]

 Economy of the state: Present economic growth rate of Rajasthan is 4.3%[2]. Per capita income in Rajasthan is 768USD. Rajasthan’s growth rates in Gross State Domestic Product (GSDP) compare favourably with the national averages, although there has been some slippage over time. In the 1980s Rajasthan had the highest GSDP growth rates in the country, while in the 1990s, partly due to higher decadal growth rates in population, its rank has dropped to fourth place.

Status of agriculture: Agriculture in Rajasthan is primarily rainfed covering country’s 13.27 per cent of available land. Groundwater is getting depleted as well as polluted. In general, every third year is a drought year. The average rainfall of the State is 575 mm, out of which about 532 mm precipitation occurs in the rainy season i.e. June to September. The average rainfall of eastern Rajasthan is about 704 mm and that of western Rajasthan is about 310 mm which reflects a vast variation.[3]

Nearly 65 percent of its population (56.5 million) is dependent on agriculture. The class-size distribution of landholdings is highly skewed: 50 percent of total numbers of landholdings are marginal or small, measuring less than two hectares in size. These cover only 10 percent of total area under cultivation. The poor quality of land and the scarcity of water resources for irrigation are additional constraints even for holdings that are larger in size. Thus, land inequality is compounded by ecological fragility.

The economy of state is mostly depended on agriculture. 22.5 percent of state’s GDP comes from agriculture. Recognized as the largest state of India, Rajasthan has cultivated area of almost 20 million hectares but due to some unavoidable circumstances on 20% of the total cultivated area is irrigated.

70% of the agriculture land have only single crop in a year. In terms productivity and input cost on an average rabi production (gram) is 450 kgs per bigha, where as in kharif the average production is 450 kgs (soyabean) per bigha. And the input cost on an average is 70 % of the total income from the agriculture. In terms of inputs in agriculture, synthetic fertilisers mainly UREA and DAP are being used by 99.6% of the farmers.  Usage of urea and DAP has lead to increase the input cost and in recent scenario usage of hybrid seeds and has add an increase in the input cost, where as the productivity remains same. On an average there is increase in inputs (amount of input) by 10-12% every year and the increase in input cost by 25-30%. Low productivity of agriculture and the dimension of ecological risk make food security and subsistence the primary concern of farmers. Horticulture faces an impasse due to repeated market failures owing to lack of information and absence of co-operative action. Given the high levels of ecological stress upon land, water and forests in the State, compounded by the problem of encroachment by the more powerful interest groups, community response has often taken the shape of protest movements for control over land, water and forest.

Status of Entitlements (NREGA)

In terms of entitlements related to Livelihood NREGA is the main one. And the status of NREGA in Rajasthan[4] is as ( in 2012-12):

• In total 3.70 million ( out of how many?)  people have received work under MGNREGA in the year 2012-12
• 17.89% of SC households have received work
• 25.4% of ST household have received work
• 69.74% of the women have received work
• Only 9% of HHs availed 100 days of work in 2012.
• 10% of households submit written application for the work

In terms of social audit  in the year 2012-13 only 31 social audit has been taken place and officially reported and only in 2 districts out of 33 districts in the state[5]. Overall the status and accessibility of NREGA in the state is decreasing in last 3 years ( the no. of working days has reduced from 65 days to 36 days in a year 2012) and the key reasons behind this are: delay in payment ( average payment days is about 80-90 days) , less number of banks to facilitate the payment for the workers in rural area

---

[1] Rajasthan Hunman Development Report 2008 and Census report 2011

[2] ppp.rajasthan.gov.in/PWCreport/KD1/kd1-vol-II.pdf

[3] Rajasthan Draft agriculture policy  2011

[4] Source: www.nrega.gov.in ( upaded information based on 2012-13 NREGA work)

[5] Source: http://164.100.112.66/Netnrega/writereaddata/state_out/s_dist_27_1213.html