Food Security- The procurement of food grains

Today food grains are provided to beneficiaries under numerous schemes, like PDS, AAY, APY, Mid Day Meal for students, NFFWP etc. The work of Food grain distribution to the beneficiaries is the last stage of the entire supply chain. It would be worthwhile to understand the whole process as it actually takes place i.e. beginning with procurement. As an example, I would discuss the procurement process for rice. This is meant to understand the entire supply chain along with the various stake holders involved at different stages. The supply chain begins with the procurement of paddy, its transport to the rice mills, its processing at the mill to extract rice from the husk and packaging and transporting to various parts of the country and the local stocking and distribution thereof for various schemes.

As with the other crops the freshly harvested paddy is stacked in the fields to begin with. The paddy has some moisture content present in it. The farmers are free to sell their product in the open market or to the Government which purchases it at the Minimum support price (MSP). The government procures its rice targets through the various cooperative societies and the state food and supply departments.

Normally the paddy sale occurs in the daily or weekly ‘haats’. Some learnings in the procurement are listed below:
o The cooperative societies were lax to begin the collection of the food grain. Lesser margins, political interests or understanding with the private traders could be the reasons behind this. Some cooperatives complained of initial cash disbursement from their own sources, in case if the allocation receipt from the state gets delayed to begin with. The competitors for procurement i.e. the traders make spot payments in cash and hence have a point in their favour unless the cooperatives carry sufficient cash allotment with them. This results in delay in making the MSP operational and the traders purchase paddy at a lower price

o Traders form procurement cartels to keep the procurement price down. Reasons learnt for low procurement price in free market are high moisture content, high dirt and husk content, high procurement cost from middlemen (who at times buy grains from the fields and sell them in haats and earn their commission) and high transportation costs (for sending rice to mill for processing) , poor grain quality etc. These factors may explain up to 10 % variation from the MSP but the market price without the Government procurement remains between 60-70% of MSP


o Even this purchase price gets driven lower if paddy from the neighbouring states, where procurement price could be about 50% of MSP, enters local market. Sadly, the market on its own it hopelessly inefficient without Government intervention. The reason being absolutely no bargaining power of the farmers, the poorer ones and their families living on the edge. If Government procurement is totally stop, it could invariably drive the procurement price so low that within a few cropping seasons it might lead to driving people out of farming. At times even cooperatives pay 5-10 % less than MSP as the rice mills don’t pay them 100% price and make deductions on accounts listed above. MSP, even in its distorted form, at least makes the farming sustainable for the small and marginal farmers.

o Presently barring a few states, most states are not able to produce paddy to meet their internal demand of rice. However, in the surplus states, where the availability of paddy makes procurement and transportation cheaper, numbers of large multinational companies are targeting the produce. This is affecting the FCI procurement in these places. In contrast, in the interior regions with no bulk availability of crop for purchase (making procurement costlier) not many players are entering for buying the produce of the farmers. This is further increasing poverty and dependence on the local traders. Ultimately, the Government procurement is the only hope of farmers in such areas.

o The performance of procurement of food grains by the Government agencies is dependent on the drive of the individuals involved therein and that varies hugely. At places individuals involved have developed close relations with the traders and act as their agents delaying the implementation of the MSP or even avoiding the start of the Government procurement (and thereby assisting the traders in procuring the crop cheaper).

o The procurement season continues for a few months after each harvest. Initially the poorest farmers sell their produce, followed by the medium farmers. Some large farmers do have financial capability to hold the crop for some time and wait for the excess to reduce and let the purchase price rise. Most of the traders also procure and stack the paddy in their godowns and release it for processing gradually so as to allow the market price to rise. Ultimately, most of the crop lands with the businessmen, traders or millers, who have the large financial power and resources and political connections. A part of the crop also enters the public Distribution System run by the Government.

In one of the procurement drives, when I had camped in a haat for the procurement of the food grains, I remember how I had to argue with the cooperative to open a procurement stall. The market price of paddy increased immediately by over a rupee per kg with the beginning of Government procurement, though the traders raised the price grudgingly. Some people still sold their paddy at a lower price to the traders instead of selling it to the cooperative as they explained that the cooperative had come due to official pressure and the next time the trader would harass the farmers in buying their produce. I remember one woman arriving with a bag full of paddy on her head while her 3-4 year old son was carrying some 2-3 kg of paddy on his head in a small bag. They had made unexpected gains that day and the mother had happily bought her son something to eat.

While I was astonished that such a small baby was carrying load on his head, my driver explained that the lady might have walked some 5-6 km with her son to sell her paddy. Her husband might be a day labour and the son was not only helping her in carrying paddy but was also protecting her (‘Maa-yer Rak-kha korche’ as he had said). That day I had something more to learn about our country

Solstice

Solstice is the home coming for the alumni, they are having party after party and the environment is electric. So I should not write about the words of wisdom we are gaining and am writing a bit about the evening itself.

I am just back from the Concert of ‘Indian Ocean’. Marewa, Kandisa, Bande, Kaun, the best songs of their collections were all there. From the melodies of the desert to the baul music of Bengal, almost everything was soul stirring (no jargon, I mean it).

Some generous souls had also sponsored free drinks and people had a good time. For the teetotalers, music itself was good enough to cause the intoxication. No wonder musicians accompanied armies to raise the tempo of the warriors during the war; some ragas can pump so much adrenalin into the blood.

I met someone from the first batch who has been coming at Solstice since then; it’s a wonderful home coming every time he said. Solstice is surely a great tradition for a young school; I hope it will strengthen over the years. And like yesterday, it seems the party will continue for the whole night.

Sorry for Interruption- Another Memoir

ISB is having ‘SOLSTICE- The Alumni Reunion’, beginning from today. I am back from the party to keep my promise, i.e. to blog on the party night. The DJ was playing some dull numbers when I was there and now he is playing some good songs (my Quad is closest to the new events lounge). So here is another of the memoirs, a long one, before I continue on the PDS in my next post.

Amit entered into the premises of the Cinema Hall. He was to conduct the training of the enumerators for the voter list revision work. The work at hand included revision of voter list of over 1000 polling stations of the Subdivision. Since hundreds of primary school teachers were being trained, the Cinema Hall was the only suitable infrastructure available in the town to conduct such a huge training in such a short duration.

During the training Amit explained to everyone that he would make it a point to visit each of the polling station area. So enumerators should ensure that they actually visit door to door to record the voters. After the training some of the teachers complimented Amit for the clarity in his Bangla and the pleasant surprise it caused. Some of them even requested Amit to visit their schools and address the students.

Very soon the enumeration work started. The initial few days were eye-opener. School teachers walking from house to house in the burning sun was a sight that made Amit appreciate the efforts his team was putting in that work. Political pressure and restlessness had started as rival groups had started commenting on the unexpected things that the revision could unearth.

However, the enumerators soon learnt that Amit was not only visiting their areas but also checking some of the houses for the accuracy of the enumeration work done. One of the visits was especially exciting. One of the enumerator had her polling station area close to her house. Once she saw Amit visiting her polling station area, she called her son from her home. ‘Babai, Dada ke paon choo’, was the order. By the time Amit could realize anything, the six feet tall Babai (who was in class XI as he told) was pushing the people around to reach the feet of Amit. That was embarrassing, some 6-7 years back Amit himself was in Class XI and here this boy was struggling to touch his feet. Though Amit tried to stop him, it was useless. The instruction of a mother to the son was the ultimate order for him. He would have beaten Amit had he tried to stop him from doing so.

The expected findings of the revision were written on the wall. Kalipur being an industrial town, people had been shifting across the housings once they got promoted or someone got transferred. There was huge duplication of names since people had not deleted their names from previous address. There had been some large closures of industries in the past and many people had left the place. But as the work was reaching its conclusion, it was clear that Kalipur had about 200,000 people on electoral rolls not present at their given address.

Once teachers had done their job, data was being entered into the computers at the SDO Office and a storm had been unleashed even before the draft roll was out. Rival political groups were accusing each other of large scale manipulations in the past and present. Senior leaders were giving interviews that they would not accept that severely truncated voter list. Senior officials were worried what that chaos was all about and if such a list could be published.

Amit had in the mean time been warned about possible constitution of a HC inspection committee against him for depriving some 200,000 voters of their right to vote. It was not clear how correct those rumours were. Then some people were arguing that roll revision was done every year, so how could 200,000 people vanish in one year. Others were laughing at the quality of the past work, when revision was done sitting under a tree and no one moved from house to house, and were congratulating Amit for his courage.

Some well-wishers suggested Amit to roll back the deletion and seek permission to revert back to the older roll and suspend the election clerk for the ‘mistakes’ and save his own skin. Amit’s election clerk was an old person, a perfect ‘bhadralok’, who had invited Amit some days back on his grandson’s birthday. Every evening he would remind Amit to go back to his home while he would volunteer to stay back at office during night to supervise the data entry. Ultimately both used to stay back and supervise data entry.

‘And they are advising me to suspend this person who has done nothing wrong, just as they are threatening me for an action for doing nothing wrong’, Amit would think.

‘Idi***’, he would smile.

He had also been called by senior officials to seek explanation on what was happening in Kalipur. Some of them were very generous and had advised to stick to his actions if he was convinced that there was no large scale blunder in the enumeration work. However, as the Electoral Registration Officer, the responsibility would be his and implications would be drastic if he were proved wrong.

‘Be very sure there is no error in your work, there is no harm in admitting a mistake if you have committed one’, some one would say.

‘I wonder you are still ok, it is not 500 or 1000; it is 200,000 voters gone in four Assembly constituencies’, some one else would remark.

After all the hard work in enumeration, those were weeks of sleepless nights. But Amit had done audit of all the booths where the deletion of non existent voters was huge. He was sure that whatever had been done was right. And there was no reason to betray all those teachers whom he had motivated so hard to visit each and every house thrice and who looked towards him. He only told people that if deleting 200,000 people was tough, to bring back the missing 200,000 people was impossible. They did not exist on those addresses, so there was no point of retreat whatever may befall.

Amit gave his charge as SDO of Kalipur on 1st of April upon his transfer. As a result of work of some 6 months, the final voter list of Kalipur was published on 7th of April, with some 200,000 voters less than the previous one.

Food Security and the Public Distribution System

In one of the previous posts I had written that I will discuss about the PDS. Since the topic is too exhaustive, I will break it down into parts covered over some posts.

(I) Public Distribution System is the physical implementation of the Government mission to provide food security for all. It is the means to the end i.e. the target of feeding over 1.1 billion people in India. Though many of these people are today self sufficient in managing ‘un-subsidized’ foodgrains on their own, a huge portion of Indian population is still dependent on the food subsidy.

(II) In opinion of a group of academicians, the subsidy and the corruption in the system of PDS actually distorts the free trade and thus harms the poor by indirectly raising the price of the food grains. The figures proposed by these people of allotted food grains actually reaching the right beneficiaries varies from 80% to as low as only 1 %. They opine, if left to market forces, the price of the food grains will adjust as per the demand and supply forces and elimination of corruption could even bring the prices down.
A fair point if it can be established by some mechanism.

(III) However, historically there have been few instances when such market forces have been efficient enough in case of food security to keep the prices low and distribution efficient. The reflection of this failure is evident in the famous Bengal famines during pre independence era where immense loss was caused by the failure of distribution system (and not lack of food grains). Going further down in history is the evidence of regional armies (corresponding to some state boundaries) attacking the neighbour to mitigate crop scarcity in their own region.

(IV) This points to the actual problem, which is the unequal distribution of food grain production, arising due to differences in rainfall across the country, differences in soil productivity and the differences in population density vis-à-vis local crop production.

(V) PDS, despite its weaknesses, has been able to transfer the grains from the surplus regions to the deficient regions. Not to mention that a major portion of the subsidy in the schemes is consumed in transferring the food grains from one region to another.

(VI) What could the prices of foodgrains look like without PDS is evident from the price ranges of Rs 15- 30 per kg for medium quality rice and from some Rs 30 per kg to as high as Rs 80 per kg for scented rice. However, the benefit of high prices rarely transfers to the cultivator i.e. the farmer, in our ‘free market economy’.

(VII) While working in the District and being involved in the procurement of food grains for the Government, I observed that the private purchasers or the middlemen delay the purchase of foodgrains from the farmers after the harvest of the crop. By this time, a vast majority of the small and medium farmers have spent their savings in cultivating the crop and many are under debt. Every passing day that delays the purchase of the crop from the farmer, also breaks the resistance of the farmers to avoid what is known as ‘distress sale’ of the crop. This purchase of the crop by the middlemen at throw away prices is avoided through the minimum support price of procurement declared by the Government.

(VIII) PDS not only provides food grains to the below poverty line people (through PDS) and the old people (Annapurna Yojana) and the poorest of the poor (Antyodaya Yojana) but also protects the poor farmers from distress selling their crop as they can sell it to Government at the minimum support price. (You are right if you are thinking of the demand and supply curves of Micro economics and the loss of the consumer surplus explained there)

(IX) However, the fate of the farmers growing cash crops (instead of food grains which have a support price) is evident in the form of occasional suicides by farmers when the market fails to buy their produce even at the break even point. The issue of loss of consumer surplus, to me, is also artificial. Since in the minimum support price some people who have surplus income are paying more for the Government procurement. This consumer surplus is much less than what people lose while buying the scented rice in the suggested ‘free market’. Certainly, the market price here is not a free market intersection of demand and supply curves. Instead it is a reflection of monopoly power of some in an unregulated market.

With this background in perspective, in my opinion, it is the PDS which has been the biggest binding factor of the Indian Nation State in the post independence period. We do see the rising tension between the states for distribution of river water during the sowing period, but the tensions are immediately subdued due to maintenance of the buffer stock of the grains and transfer of those before the situation aggravate.

So is this system perfect as it is? Is it really corrupt? And if yes, how does this corruption works and whether we can target it? Some of these questions have been pressing the Government, media and academicians consistently in the past and remain one of the prime agendas for Government for some time until a really workable solution is found. These and some more questions, like how have some large multinationals been able to tackle some of the issues involved through efficient supply chains?, I would discuss gradually over next few posts.

ISB's Sixth Anniversary

ISB had sixth Anniversary Celebrations on last Sunday. The young leader is six years old. Six years old amongst a large bunch of Indian and foreign B-Schools, and already counted amongst leaders on many fronts. That sounds great, and I am obviously happy for being here.

The acceptance of ISB’s importance is global and unequivocal. In the pre-placement talks of one of the top consultancy firms, the CEO sent a video recording addressed to ISB students, inviting them to join his firm. A good gesture undoubtedly, though not to overlook that similar address seems to have been made for three of the IIMs as well. In another pre-placements talk, the partner and the MD of another top consultancy firm expressed similar sentiments about getting the best recruits at ISB.

These things are exciting for us as the students of the current batch. I am sure that along with many other things what drives this passion for improvement is a small but mostly dedicated alumnus. ISB being a very young school we don’t have fortune 500 companies CEO as alumni but the level of commitment that many alumni have for this institution is exceptional. I am sure most of us will have something to pay back to the future batches too.

I spent one full year at IIMA (while I have spent some eight months in ISB) and have a lot of respect and fascination with that institution. People tend to compare IIMs with ISB, though there is hardly any similarity. IIMs admit students, a huge majority of whom are fresh pass outs of undergrad schools while ISB is as enormous pool of diversity and work-experience as one might get in India. But at the same time I feel that people who compare these B-Schools tend to compare ISB with the combined weight and impression that all the IIMs carry after their 35+ years of existence; that itself is a pointer to the success our school.

If I were asked to see IIMA and ISB as a neutral person (I am equally biased for both anyway), I would say they are perfect complementary sets. Academic brilliance and business aptitude respectively is the core of the admission processes, as I understand, for these organizations. Together, they can drive the world’s business in the days to come.

And if anyone doubts the synergies; please see the photographs of ex and current IIM wallahs at my quad in ISB, Gachibowli, Hyderabad.

The beginning of an end? or A new beginning

When I thought to write this post I pondered whether it is about exams, a new term or the auction of courses for the next term? Since those are the things we are doing here for most of the time, it appears that the remaining things have taken a backstage. Hence continuing with the ritual here I am. I plan to take 3 of the 4 marketing courses in the next term. With 5 FIN courses completed and a few available for the eighth term, I need to select some of the Marketing courses to work on the second specialization.

Moving ahead, I called this mail as the beginning of an end since as it looks now, sixth and seventh term will be mostly occupied with preparations and as they say here term eight is party time. Even today, I had a group meeting with the ELP client in the morning, had two classes, and attended a case preparation Video Conference session. What a nice way to begin the weekend, with a lot of assignments waiting to be done. But anyway, things move on.

For the information of believers of Indian Astrology, Jupiter moved from the Scorpio to Saggitarius towards the end of November. So now it is positioned in its 'own house', a place where the mightly planet loves to be. That should be immensely rewarding for people with a strong Jupiter on their horoscope. It means proud owners of their Golden Topaz should expect wonderful things to happen in the course of next 1 year. For the non believers, that should mean motion of a massive planetary body, in a different constellation of stars. And thus its Gravitational effect (remember Kepler's laws) on earth should still be different than what it was till some days back.

So it is the time to make a wish, if you have not already made one. Afterall, every changing phase of life takes us to a newer phase. And this is the right time to take the first step, just a bit to make that wish come true.

ISB Leadership Summit

Today we had the flagship event of the ISB, the Leadership Summit or the ILS. The event proved its prime importance, with various professional clubs at ISB participating in the 6 tracks that ran during the day. The who is who of industry was present ranging from the leaders in Retail and marketing, Logistics, Consultancy, IT, General Management, Real Estate, Energy and emerging markets. To make the audience have their choice of attendance, a total of six tracks were organized over three sessions through out the day.

The day began with the keynote address by the Chairman of BCG. That was followed by tracks whose topics ranged from Use of Technology in Education Sector, The Big Picture in Retail and Marketing, Talent as the Strategic Differentiator, Innovative and Affordable low cost housing, India’s Economic Growth: A Tale of Two economies, and Infrastructure Development: The Key to India’s Success. A key point in my opinion was the presence of a prominent communist political leader in one of the panels to bring in the diversity of the perspectives. I also got to meet two senior bureaucrats from the service: one accompanying his wife who happened to be a speaker on one of the panels and the other representing a development authority in the Real Estate track.

I enjoyed last few days assisting in the logistics, transport and protocol for the summit. So back to the good old ‘Protocol’ days making sure that the guest has the contact number of the liaison officer, the LO has the number of the vehicle, and the driver of the vehicle has the placard- so that the three ends meet at the same place.

Thanks God that every thing went well without a hitch.