Ok, quick question: how many people rely on the PDS today? 67% of our population - that’s right. Over 900 million people. Anything that affects this is pretty terrifying, right?
Read on
+
Read on
+
(Remember that in addition to the PDS, all of us rely on some sort of price control over food. That’s why we are all conditioned to protest to the government about rising onion prices.)
But how exactly does the government manage the PDS and control prices?
+
But how exactly does the government manage the PDS and control prices?
+
First, procurement and MSP. Originally, this covered only rice and wheat - this now covers a series of other food crops, including pulses and oils. The state procures specified produce at a “minimum support price” announced at the beginning of each season.
+
+
The farmer is (and always has been) free to sell his produce elsewhere. The MSP, where provided, acts as a sort of floor price for the market.
+
+
The government uses the produce procured to do two things: it distributes a portion of the stock through the PDS/other welfare schemes and retains a portion as “buffer stock” or strategic reserves.
+
+
This buffer stock is super important - it acts as insurance against a food scarcity event, but it also acts as a price regulation tool. When prices in the market spike, the government releases a portion of these surplus stocks to bump up supply and bring down price.
+
+
The very existence of the surplus protects us from hoarding - no one wants to hoard when they know the govt can always flood the market and control price.
+
+
Second, they used to impose stock limits under the essential commodities act. If prices spiralled, they could order everyone to sell any stock over a set limit into the open market. The increase in supply would then reduce price.
Still with me? Great!
Still with me? Great!
Now what do the farm bills do to this system?
First, they restrict the ability of the government to impose stock limits under the ECA to extreme situations, and also exempts what are called value chain participants entirely from these limits.
+
First, they restrict the ability of the government to impose stock limits under the ECA to extreme situations, and also exempts what are called value chain participants entirely from these limits.
+
Who are value chain participants? Well, it’s a broad definition and includes any private player involved in processing distribution etc.
+
+
What does this mean? Well, it means that the essential commodities act can’t really be used anymore to effectively control food price.
Ok, but we still have procurement, and the buffer stocks to control price? Well, it’s complicated.
Ok, but we still have procurement, and the buffer stocks to control price? Well, it’s complicated.
Now the government has said it intends to retain procurement and MSP but this could be challenging.
+
+
First, the shaky future of the APMCs- the state relies on these physical marketplaces called mandis to procure from farmers. But a mandi, like any other marketplace, needs a certain level of transactions to survive.
In Bihar, after the 2006 laws, mandis gradually shut down.
+
In Bihar, after the 2006 laws, mandis gradually shut down.
+
They had 9000 mandis in 2016. By 2020 they had just 1619. Without sufficient mandis, most farmers couldn’t reach their produce to one, and had to accept whatever a private purchaser would give him. MSP went from being the floor, to being a premium.
+
+
And without the mandis, state procurement dropped off dramatically. Today 80% of the foodgrains disbursed under the PDS in Bihar is procured from other states.
+
+
Second, remember what we said about prices being cyclical? Without price controls, the government will not be able afford to acquire at the peak of the price cycle.
+
+
Now that doesn’t matter if the government can aquire enough at the lower end of the cycle. I mean, that’s when the private players won’t buy and the farmers will need MSP, right? Right?
Well, not necessarily.
Well, not necessarily.
First, all buyers may not see the produce as an end product. Which means that for a biscuit manufacturer, low wheat prices are an asset. Without limits on stockpiling, they might prefer to buy and stock up.
+
+
Second, exporters. Suppose you’re acquiring to process, package and export, then low prices would be seen as an advantage.
And without the Mandi infrastructure in place, the government might struggle to acquire even when the prices are low.
+
And without the Mandi infrastructure in place, the government might struggle to acquire even when the prices are low.
+
This now starts to get a bit scary. Without adequate procurement, or a Bihar sort of drop off in procurement, first the surplus stocks will have to be used for PDS.
The reduction in surplus stocks will reduce the governments ability to control market price by releasing stocks.
The reduction in surplus stocks will reduce the governments ability to control market price by releasing stocks.
And if low procurement continues, then the govt won’t have enough to run the PDS.
That’s right- the same PDS on which 900 million people rely.
+
That’s right- the same PDS on which 900 million people rely.
+
So it might just be the farmers protesting, but remember that they’re also protesting against a system that puts millions at risk of extreme hunger and spiralling food prices. This is not just a farmer issue, it’s an issue that affects all of us.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
