A novel way to tackle food inflation

MANIKAM RAMASWAMI


Food inflation is good for 70 per cent of India’s real poor as they are net food producers. The Central Government’s National Rural Employment Guarantee Act (NREGA) has ensured that farmers get a reasonable wage; good enough to lift them above the poverty line (BPL). The downside is the steep increase in the cost of cultivation, given the farm sector’s large dependence on manual labour.

If it is ensured that the benefits of the 20 per cent inflation in food articles actually reach the farmers, substantial poverty for 70 per cent of the very poor can be eliminated. Several successful models exist within the system for ensuring a good connect between the farmer and the consumer or end-user.

They have to be identified, documented and laterally implemented to ensure that the farmer gets the benefit of higher prices.

(1) Support price operations for crops where support prices are fixed; greater awareness of the support prices should be created; support price operators should have a telephone (SMS)-based complaint lodging mechanism in place to ensure proper functioning of the system. A few good, well-represented support price operators and their models need to be adopted in other cases too.

(2) ‘Ulavar Sandhai’ initiated by the Tamil Nadu Government is another good example that can be studied and finetuned for lateral adoption, probably with the addition of better hygiene and cold storage facilities.

(3) The market committee yards in Gujarat and parts of Andhra Pradesh are the other good examples to be adopted to connect farmers and users in a transparent way.

While connecting the farmer and the end-user, focus should not be lost on the other 30 per cent of the very poor who are non-food producing poor. It is here that the public distribution system (PDS) plays an important part; a well-run PDS, which is also inclusive, can substantially alleviate the impact of rising food prices.

Here again, Tamil Nadu needs to be complimented. The State government partnered Confederation of Indian Industry (CII) and studied possible improvements to the PDS system and implemented most of the recommendations. The recent experiment of selling vegetables through the PDS at 50 per cent of the open market price needs to be emulated.

This effort of the government will also help the farmer realise better prices when they sell the products to PDS outlets even as it brings down the vegetable prices substantially to consumers.

Instead of looking at food price increase as an inflationary evil, one should look at it as a belated recognition of the fact that those who produced food too need to come above the poverty line.

Look at other means to totally reduce the impact of higher farm gate food prices on that part of the society that is vulnerable to high food prices.

Remedy for inflation

Remedy for food price inflation is completely different from that for inflation stemming from other sources. Tight money policy is not an answer. A better connect between food producers and consumers or agro product users and a more compassionate policy of adding a larger number of items to PDS together with leakage elimination in the PDS system is the way out.

Organisations interested in doing charity can volunteer to help better connect farmers to users and be watchdogs at PDS outlets. Corporates too can include theses in their corporate social responsibility (CSR) activities and convert what appears to be dangerous cholesterol into good and desirable cholesterol. In the process, they can save themselves from tight money policy which becomes inevitable if food inflation is seen as bad cholesterol. Ensuring that the PDS becomes less prone to leakages too is in the interest of corporates as food subsidy will then come down, lowering the budget deficit and lessening the need for taxation.