Input subsidy expenses not contributing to boost productivity
In its focus on food inflation in South Asia, the bank said that high stocks have led to high wastage due to inadequate storage capacity and technology. According to World Bank's estimates, the Food Corporation of India lost 10-16 million tonnes of grains in 2000.
“The FCI's inefficiencies not only lead to high losses of the grains it handles, they also drive up the costs of food handling. Comparisons show that the FCI's handling and storage costs are significantly higher than those of the private sector. The increase in procurement has led to a significant increase in the fiscal costs of the system,” the report said.
The FCI procures nearly one-third of wheat, rice produced in the country, besides coarse grains at the minimum support price fixed by the Government. The stocks are then transported to deficit States and sold through the public distribution system at a subsidised rate.
It said demand for food is undergoing structural shifts as incomes rise. Growth in consumption of pulses, fruits, meat, eggs, and dairy items is more than double the consumption growth in cereals. Inflation in these items has been higher than in cereals.
“Public intervention in agricultural marketing in India and Pakistan has high fiscal costs and narrowly supports cereal production, while high food inflation and continuing high rates of food insecurity are linked to an inadequate supply response in non-cereal food products,” the report said..............Read more
Source: Business Line