Dr Amrit Patel

Improving food management efficiency in India

This year’s theme for World Food Day – which is observed every year on October 16th in more than 150 countries – is “Sustainable Food Systems for Food Security and Nutrition”. Our author Amrit Patel looks at the measures needed to achieve this in India.

Farm output in India increased from 208 million tons in 2005–06 to an estimated 263 million tons in 2013–14. Accounting for population growth during this period, experts say that the country would probably need around 225 to 230 million tons to feed its people if food wastages are significantly minimised. Thus, while focusing on increasing food productivity and output, the Government must prioritise its policy and programmes to drastically reduce food wastage to minimise the incidence of hunger and malnourishment. 

The most striking ground reality is that a significant percentage of food produced never reaches the consumers for a plethora of reasons. The former minister of agriculture, Sharad Pawar, once said that India was wasting food products worth Rs. 50,000 crore (500,000,000,000 Rs.) each year, accounting for nearly 40 per cent of total production in terms of value. These figures of wastage, however, do not reflect the true picture, since they are only in terms of aggregated economic costs. For example, meat accounting for about as little as four per cent of food wastage represents 20 per cent of the wastage costs, as against fruit and vegetable losses accounting for as much as 70 per cent, while representing around 40 per cent of economic costs.

India ranks number one in terms of food losses. High wastage rates are often responsible for doubling prices of fruits and vegetables and a 50 per cent increase in the cost of milk. Apart from perishable food, wheat and rice are also abundantly wasted. Annually, around 21 million tons of wheat rots or is infested by insects and pests because of inadequate or inappropriate storage facilities accompanied by inefficient management practices of the Government-managed Food Corporation of India (FCI) with no accountability. To ensure food security, while the Government’s priority to increase food productivity per unit area should be to optimally utilise available land, water and energy, the country cannot afford the luxury of wasting 33 50 per cent of all food produced. The need of the hour is to have adequate concern, commitment and accountability to minimise significantly, if not eliminate totally, the current level of food wastages. The solution to the country’s future hunger problem lies in formulating a strategic action plan to lower these losses by 90 per cent by 2016-17.

 

The high food prices/food inflation in the country can partly be attributed to these high wastage rates. High food inflation considerably impacts on the poor since food accounts for 31 per cent of their average monthly household expenditure. Major factors responsible for wastage of perishable food include, inter alia,

  • absence of modern supply chains that can efficiently link the food grown by farmers to consumers, 
  • lack of adequate financial investments in cold storages and refrigerated vans, erratic electric supply, 
  • poor road connectivity  and lack of investment-friendly  policies that discourage the private sector to invest in creating this infrastructure. According to the Indian Institute of Management, Kolkata, the country has estimated cold storage facilities for only about 10 per cent of perishable food products, whereas there is a pressing need for another 370 million tons of facilities for perishable products.

 
Gross mismanagement in storing wheat and rice has rendered the FCI itself a part of the problem rather than a solution. Even former Food Minister K V Thomas had once described FCI as a “white elephant that needs to be revamped from top to bottom”. This transformation, however, never happened. Thomas also led a delegation to China to study the country’s impressive system of food production, procurement, storage and handling food-grains, which could have been, or could still be, evaluated, modified and emulated to suit our situation.   

The Government spends nearly one per cent of its GDP on its mismanaged public food distribution system. Past experiences reveal that cost of food production, procurement, transport, storage and distribution has significantly increased and the inefficient food management system has resulted in huge wastage, pilferages and deterioration in food quality, so that it is not even acceptable as cattle-feed. How can this be explained? The Government of India is procuring food grains from the farmers by paying Minimum Support Prices, which are higher than ruling market prices. The procured food grains from villages are transported to several warehouses owned by the Food Corporation of India at far-off locations throughout the country. As the storage space is limited, an appreciable amount of food grains is stored in open places, where it often gets spoilt or damaged. After storing, the food grains are dispatched to far-off villages to make them available to the poor – urban and rural – population under the Government’s Public Distribution System through thousands of Fair Price Shops. But as the food is supplied at a very subsidised cost, around 60 per cent is sold on the open market rather than going to targeted poor.  The Independent Evaluation Office has revealed that the Government pays Rs. 3.65 for every Rupee spent to deliver food, while 57 per cent of subsidised food-grains does not reach the intended beneficiaries and close to 36 per cent of food-grains is siphoned off in the supply chain. 

According to one expert, grains trade analyst, grains procured at Rs. 13.50/kg would ultimately cost Rs. 39.50/Kg since additional costs would be incurred towards [i] procurement incidentals, viz. local taxes, bagging, transport to local warehouse, [ii] storage costs, viz. interest, warehousing and transport cost for distribution, [iii] Central Government or the FCI paying mandi taxes or market charges to major States, viz. Punjab, Haryana, Andhra Pradesh and Madhya Pradesh, [iv] significant costs during food distribution under the public distribution system (from warehousing to fair price shops to households), [v] establishment costs of FCI, and [vi] each State having its own administrative infrastructure and fair price shops seeking additional commission as retailing expenses. Thus, the subsidy amount just doubles at 192 per cent.

It is therefore necessary to develop effective food management system, methods and procedure through policy intervention and programmes that can&nb

  • produce food grains as expected, annually, and even under frequently unpredictable conditions of drought and floods in some parts of the country,
  • formulate a strategic action plan to minimise food wastages/losses by 90 per cent by 2016-17,
  • facilitate the estimated level of only need-based procurement, preferably at major district places in each State with complete safe storage,
  • create additional facilities for quick and cost-efficient transport, processing and storage and 
  • redesign the public distribution system and transparent grievance redress mechanism.

In short, the problem of persistent inadequate storage facilities including unsafe storage leading to huge wastage of precious food accompanied by the most mismanaged public distribution system leading to black-marketing and food inflation has to be seriously addressed by policy-makers emphasising policy implementation with total commitment, good governance, accountability and a grievance redress mechanism. 


Dr Amrit Patel

Consultant - New York/USA

dramritpatel(at)yahoo.com

About the author: Dr Amrit Pratel works as international consultant on “Rural Credit & Micro-finance” in India, Azerbaijan, Tajikistan, Kazakhstan, Bangladesh and Uganda, with projects funded by World Bank, Asian Development Bank and International Fund for Agricultural Development. He previously worked as research officer with the Department of Agriculture and as Assistant Professor with Gujarat Agricultural University. He also served the international Commercial Bank of Baroda for 25 years and retired as Deputy General Manager (Rural Banking & Credit).