Surpluses run the risk of quality deterioration: Economic Times: Faceoff, 8th April, 2009

To address this question, three issues need to be kept in the background. The first is that agricultural production follows a cyclical pattern, with amplitude of just a year. The second is that while we normally refer to food, the allusion is to rice and wheat; we forget an important component of our food basket, i.e., pulses, where there is a perennial shortage. The third is that food policy has to be viewed, whether we like it or not, as working within certain objectives like ensuring fair price and income to farmers (procurement and MSP), protecting consumer through assured supplies and bearable prices (PDS), holding on to strategic buffer stocks and the maintenance of a cropping pattern with respect to wheat and rice. Hence, procurement cannot be closed ended nor can MSP be lowered.
Surpluses should be welcome anytime as anything in large quantities cannot be bad. But, surplus food entails a cost, cannot be supported by existing storage facilities and runs the risk of deterioration in quality especially if we have successive years of surpluses.
Now, given that surpluses do arise, the solution is in developing a framework to optimise the handling of these stocks. Firstly, we need to strengthen the warehousing facilities; and the private sector can be involved here. Secondly, the surpluses should be stored in deficit states to avoid the pitfalls of transportation in times of shortage. Thirdly, surpluses should be a part of the government’s foreign trade policy where the surplus grains are exported. Fourthly, surpluses should be aggressively distributed through the food for work programmes. Fifthly, futures trading should be encouraged where the storing authority manages to hedge the price risk. The ban on futures trading needs to be reviewed. Sixthly, stocks beyond the maximum tolerable limits should be given as aid to the poorer nations. Lastly, the private sector can complement the FCI’s efforts in handling procurement and buffer stocks which can reduce the burden on the exchequer.
Simultaneously, the MSP system needs to be revisited wherein farmers should be encouraged to migrate partly to growing pulses which will balance the cropping pattern at the macro level.