Here's
something to set your brains rolling amidst heights of reasoning
and creativity. We present to you a case and you are required
to track the core problem and suggest an optimal solution depending
upon your understanding of the case. The study and solution
can be in the following format:
- Summary
of the Problem
- Highlights
of the related Issues
- Alternative
solutions (with pros & cons)
- Final
solution
Two
best solutions will be selected by the panel of experts and will
be published in the forthcoming edition, along with the name of
the CaseCaders.
The
Paradox of Plenty: - Acute And Widespread Hunger Amidst Overflowing
Food Stocks
At a time when the country is poised towards a high-growth trajectory,
the masses suffer under the debris of poverty and hunger. At the
beginning of the millennium, India boasted of a food surplus of
65 million tonnes while 320 million people went to bed starving.
What an ironic situation that while the country incurred Rs. 6,200
crore to keep the food grains stacked in the open, it had no means
to distribute it to the deprived ones. Moreover, economists have
been telling that even if poverty increases in the short term,
the price has to be paid for long-term stability and growth. As
per NSS statistics, 42% of our rural population and 49% of urban
population receive less than the accepted daily calorie intake
norm - and these proportions have virtually remained the same
in the last decade. Hunger is the outcome of increasing poverty
and deprivation; hence it should not be a cause for fear. Yet,
with every passing year India has been sinking deeper into a quagmire
of despair. The wastages of agricultural produce for the FY 02-03
were estimated to an alarming extent of Rs.50,000 crore. The Indian
agricultural sector is beset with inefficiencies from the farm
gate to the end consumer. The sector lacks a strong marketing
network for agricultural produce.
The
entire sequence from harvesting to packing, transportation, storage
and wholesale to retail is too long. Around 40% of the value is
lost in the supply chain by the time the produce reaches the consumer.
The prime objective of the agricultural price policy is to assure
remunerative prices to the farmers so as to even out the effects
of seasonality and to provide price and market incentives for
diversification of agricultural products to meet the consumer
needs. Food supply management has been the cardinal element of
agricultural price policy and the Government has been fairly successful
in achieving self-sufficiency in basic staple food-rice, wheat
and sugar. The main anchor of food security policy of the country
have been the announcement of Minimum Support Price (MSP) for
farm produce and establishment of Food Corporation of India is
to guarantee price support to farmers. The entire edifice of Public
Distribution System depends on the premise that the public would
receive food grains at prices lower than the free market. Presently
there is no shortfall in supplies as domestic production has reached
a level much more than what the market or PDS can absorb. Moreover,
the market prices are lower than the Above Poverty Line (APL)
price under PDS. Therefore, on the one hand Government is faced
with the problem of carrying large surplus stocks and on the other
hand, the off take of foodgrains, particularly of wheat under
the PDS has been low during the last few years on the account
of narrowing differential between the PDS and open market prices.
The rise in stocks means a rise in storage costs and also losses
due to the deterioration of quality resulting in a rise in food
subsidy bill of the Government. So far, Government's food policy
framework has evolved against the background of inadequate or
uncertain supply situation. However, the situation has now reversed
and the country is faced with a large volume of surplus food stock.
But, if the surplus situation persists because of higher MSP and
inability of the domestic market to adjust to each year's change,
there may be a need to re-formulate the policy framework. Hence
making it more relevant in terms of the present domestic and global
market realities.
The
move of the Central government to create a new model in the management
of the food economy procurement to the State government has met
with disapproval. The point of concern is that when food procurement
and distribution operations are becoming an unsupportable fiscal
burden, the Central government has been chanting the mantra of
decentralization with increasing frequency and fervor. The main
impulse for the Central government's quest for a new model in
the management of the food economy is the embarrassment of riches
it confronts. Miscued market interventions over a number of years,
coupled with a parsimonious attitude towards distributing grain
to the needy, have led to an explosion in rice and wheat stocks
with the Food Corporation of India (FCI). Food subsidy bill is
no longer the direct outcome of the difference between prices
at which grains are procured and distributed, in the Union Budget.
By and far the greater factor is the carrying cost of the grain
i.e. the cost of financing the holding of stocks.
Consider
yourself as a middle-level manager in Food Corporation of India
(FCI). You have to analyze the situational problems, evaluate
the viable courses of action for their solution and have to present
the most optimal and practical solution to the Board of Directors
for their consideration.
|
