ECONOMY-INDIA: Traders Make a Killing, as People Starve

By Ranjit Devraj Reprint | | Print |

Ranjit Devraj

NEW DELHI, May 10 2002 (IPS) - In India’s continuing paradox of overflowing granaries and starving populations, the only smiling faces these days are of those of traders.

At the moment private traders are slavering over government’s grain procurement policies, which have the laudable motive of supporting farmers but which will result in government grain stocks swelling to a record 75 million tonnes — with nowhere to store it.

“The only buyers of wheat in post-harvest wholesale markets of (northern) Punjab and Haryana states at the moment are the Food Corporation of India (FCI) and other state agencies,” said Banwari Lal, a grain exporter based in Delhi.

“We will buy only when the government offloads the stocks at subsidised rates,” said Lal.

For traders like Lal, it is a simple waiting game and the longer they are patient, the better because there seems no end to the glut of grain.

But neither the farmers, many of whom are already in debt, nor the government can wait to get rid of perishable stocks.

Already, open-market prices for rice and wheat, the main staples, are way below the minimum support prices announced by the government in a patter depressingly similar to that in the previous years, when traders rather than starving people benefit from a massive three billion dollar subsidy.

“This is a crazy situation — the government is actually subsidising the grain trade instead of ensuring that food supplies reach vulnerable people,” says Jean Dreze, visiting professor of economist at the prestigious Delhi School of Economics.

She is a close associate of Amartya Sen, the Nobel prize-winning economist who showed the real relationship between poverty, entitlements and famines.

Sen’s celebrated theory — that famines could be caused by economic factors other than changes in food supply – seems to have special relevance to the current Indian situation, one where enormous strides in food production have not dented shortages.

Last year, several hundred starvation deaths were reported from eastern Orissa state despite the fact that granaries were creaking with rotten stocks. That prompted rights activists to petition the Supreme Court to get grain released to people who desperately needed it, but could not afford it.

Officials in disaster-prone Orissa, which has special relief mechanisms, quickly identified the problem as on of “rapacious traders and moneylenders cornering subsidised grain leaving the intended beneficiaries to grub on roots and poisonous seeds”.

This is the third year that the phenomenon of continuing bumper harvests and overflowing granaries amidst food shortages has been both a topic of academic discussion and newspaper reportage, but the problems seems only to be worsening

Even India’s Planning Commission has admitted that more than 30 percent of grain, meant for the public distribution system (PDS), is misappropriated yearly by private traders and contractors.

So entrenched is the nexus of traders and the FCI bureaucracy that it thwarted a National Storage Policy announced three years ago, which invited foreign investors with modern technology to help move grain from farm gates to consumers efficiently.

Economists from the left-wing political parties, such as Biplab Dasgupta, have argued that it was pointless trying to get the right-wing, trader-friendly Bharatiya Janata Party (BJP)-led government to crack down on the nexus in favour of the starving poor.

Last year, some of the grain was exported as cattlefeed at prices lower than That fixed under the heavily subsidised, but corruption-ridden, public distribution system (PDS). Iraq and Indonesia, groaning under problems of their own, rejected Indian grain as being of poor quality.

Over the last decade, grain distributed through the PDS had dropped from 20 million tonnes to less than 10 million tonnes, a fact that economists have attributed to increasing poverty levels and the decreasing capacity of ordinary people to buy food.

India’s Agriculture Minister Ajit Singh, an engineer trained in the United States, admitted publicly that the countries granaries were brimming only because “our people do not have the wherewithal to purchase foodgrain”.

By November the Supreme Court, acting on public interest litigation filed by the People’s Union of Civil Liberties (PUCL), which argued that the right to life included the right to food as fundamental right, ordered as an interim measure the conversion of existing public nutrition schemes into legal entitlements.

Fresh directives from the court are expected this month.

In a separate petition to Prime Minister Atal Bihari Vajpayee, Dreze and his colleagues at the Delhi School of Economics pointed to massive public resources of up to two billion dollars being used annually to actually procure, handle and then store food out of the reach of the poor.

According to the government’s own National Family Health Survey, released last year, about half of all Indian children are chronically undernourished and half of all adult women suffer from anaemia.

The Food and Agricultural Organisation (FAO) says a fifth of India’s billion people are “chronically food insecure”.

Dreze calculated that if all the sacks of grain lying in FCI godowns were lined up in a row, the line would stretch for a million kilometres — more than twice the distance from the earth to the moon.

In the recently passed budget for this year, the government has earmarked four billion dollars under food subsidy. But actual spending may far exceed that, going by the current trend in which nobody but the government is picking up grain pouring into the market.

Although India is the world’s seventh largest exporter of wheat, even wheat exporters are missing from the markets.

“When the government is ready to buy wheat at prices higher than that in the open market and also store it, no trader can be expected to block capital buying stock,” Lal said.