Chiefminister Speech, New Delhi - 06 February 2010
At the outset I wish to thank Hon. Prime Minister and Hon. Agriculture Minister who have taken the initiative to organize this conference to provide us with an opportunity to exchange views on this important problem affecting common citizens of the country. There is a close nexus between the state of agriculture and the prices of essential commodities. Prices are likewise dependent upon the policies of the Government and various factors that affect the market. I am happy that this conference provides an opportunity to me to share the initiatives taken by us in Chhattisgarh and our expectations from the Central Government.
It is well known now that in Chhattisgarh we have taken innovative measures to strengthen the public distribution system. Central teams and expert teams from other States have studied these measures from time to time. We have also taken steps toward food security in the State, which has, in the present phase of unbridled price rise, provided significant relief to the poor in our state who constitute almost half of our population.
You will agree that the only way to insulate our poor and the poorest of the poor against rise in price of essential commodities lies in the public distribution system. But it is unfortunate that we have not yet been able to determine the number of poor in the country, whereby we are unable to reach the benefit of schemes to the poor and the needy. Presently, the Planning Commission has fixed the percentage of poor at 42.5% of the total population in Chhattisgarh for the purpose releasing food-grains under the public distribution system. This, despite the fact that Dr.N.C.Saxena’s report has clearly fixed the ratio of poor families in Chhattisgarh at 73%. Failure on the part of the Planning Commission to correctly define the percentage of poor in Chhattisgarh has constrained the State Government to supply rice @ Rs.2/- per Kg to the additional poor families, whereby my Government is bearing a burden of Rs.1200 Cr annually! Dr.N.C.Saxena’s report appears to be quite close to the true state of poverty in the country. It is therefore my plea to you to get the quota for BPL families under public distribution system fixed on the basis of this report. Apart from this, the quota for APL families should be fixed at 35 Kgs of food-grains per month, and the monthly quota of 61,000 tonnes of rice for Chhattisgarh should forthwith be restored. Further, the proposed Food Security Bill of the Government of India must provide for a minimum quota of 35 kgs of food-grains per month for every BPL family.
The Government of India has released in January an additional quota of 44,110 tonnes of food-grains for APL, BPL and Antyodaya families. However, FCI has fixed for the State the price of wheat at Rs.10.80 per Kg, and the price of rice at almost Rs.15 per Kg. When you add the cost of transportation and the FPS commission to these base prices, the final consumer price goes very high. You are requested to please make this quota available at APL prices, and keep the supply going throughout the year.
In the current year, till end-December, the State had lifted 99% of its quota of rice under BPL and Antyodaya schemes. The State Government of Chhattisgarh has implemented several measures to strengthen the PDS. I would like to briefly mention these. We have banned private persons from operating the FPS, and allotted these instead to Gram Panchayats / Cooperative Societies and Women’s SHGs. We have granted working capital loans of Rs.75,000 to each Gram Panchayat and Women’s SHG. The total amount of loan disbursed is Rs.42 Cr. Food-grains are delivered at doorstep to all of 10,518 FPSs in the State. FPSs in all 18 districts in the State are enjoying one month’s credit on food-grains. From January 2008 onwards, the allotment of food-grains to FPSs is displayed online. Further, the particulars of all 36.16 lac card-holders are likewise displayed online for the information of general public. Food-grains are delivered in advance to the FPSs by the 7th day of every month. Under “Chawal Utsav” the distribution is subjected to social audit. This year, after due investigation, 1.16 lac fake Ration Cards were cancelled. Through the PDS, the State Government every month is distributing rice @ Rs.2/- a Kg., and salt free of cost to 36 lac poor families in the State. The process of procurement of paddy and rice is computerized. People can access information relating to PDS through SMS on their mobile phones. Call Centers have been set up for recording complaints and suggestions. Out of 3,920 complaints received so far, 3,668 complaints have been redressed. A public participation website has been hosted, dedicated to PDS matters. Impressed by the measures initiated in the State to strengthen PDS, the Government of India has identified three districts in Chhattisgarh for a pilot project relating to total computerization of PDS. In the current financial year, till end-December, FIRs were registered in 44 cases of diversion and abuse of PDS food-grains. Essential commodities worth Rs.5.4 crores have been seized, and permits to 65 defaulting FPSs have been foreclosed.
Sugar is exempt from VAT in Chhattisgarh, and Entry Tax levied formerly has now been withdrawn. Prior to July 2002, APL families received Sugar alongside BPL families. This provided sugar to a large part of the State’s population. In the backdrop of the recent spurt in the price of sugar, it is important that APL families should be included for allotment of sugar under the PDS.
I would like to draw your attention to the matter of supply of sugar through PDS. Chhattisgarh requires 4600 tonnes of levy sugar every month. But sugar mills in the country have not been regular in providing levy sugar to PDS. Between April 2009 and January 2010, against a total allotment of 62,875 tonnes, the sugar mills in Maharashtra have supplied only 39,481 tonnes of sugar. Due to this, the PDS families are constrained to buy sugar in the open market, thereby pushing up further the demand and price of sugar. To check this trend, the Government of India should revise its Sugar Control Order, 1966, and raise the limit of levy to 40%.
Hon. Prime Minister, this year the target for procurement of paddy in Chhattisgarh under the price support scheme is 42 lac tonnes. To date, 38.50 lac tonnes of paddy have been procured. Out of this, 14.50 lac tonnes of paddy have already been milled. I would like to draw your attention to major issues relating to procurement of paddy under PSS and its custom milling. Due to inadequate cooperation of FCI, the milling of paddy is adversely affected. I therefore request that as in the past, FCI be directed to receive and organize milling of at least 10 lac tonnes of paddy in Chhattisgarh. In the Central Pool, 75% of rice accepted should be par-boiled and 25% should be raw. FCI should transport out of the State 4 lac tonnes of rice every month, so that adequate warehouse space is ensured for fresh inflow of stock. For Chhattisgarh, the raw milling charges should be raised to Rs.45 a tonne, and the out-turn of rice under raw milling should be fixed at 65% instead of 67%.
Due to weak monsoon, the production of paddy in the country this year has been low, and the requirement of the Government of India is higher. Chhattisgarh can help the country in this regard. If FCI raises its off-take of par-boiled rice, then 40 lac tonnes of rice can be sourced from Chhattisgarh. Further, if FCI accepts the raw rice produced from the summer paddy, it can obtain additional rice in substantial quantity.
Decentralized procurement mechanism is very essential to ensure food security in the country. However, it is unfortunate that there is no real decentralization in the PSS. The time-frame for milling of paddy, interest and warehousing charges, transport and custom milling charges, the procedure for administering food subsidy, the norms for computation of the final economic cost of rice etc are all in the sole hands of Government of India. This year, such centralization has been carried further and the right to fix the quantity of rice to be procured by FCI and the ratio of par-boiled and raw rice is also being controlled by Government of India. Consequently, the system holds no decentralization for the State Government, and our voice carries no weight. The average period fixed for rice milling is two months, whereas in my State it is practically impossible to complete procurement in such short time. It should therefore be extended to at least four months.
Hon. Prime Minister, the success of the decentralized procurement system depends upon efficient financial management and prompt release of food subsidy to the States. However, there is chronic delay in receipt of food subsidy in advance from the Government of India. This results in needless burden of interest on the States. My State is yet to receive from Government of India Rs.781 Cr as food subsidy for the year 2009-10. It is very important therefore to revise and simplify the procedure for release of food subsidy. Since State Governments are directly involved in procurement and distribution of paddy and rice, they should be compensated for losses in this process in the same manner as FCI is compensated when doing the same job.
Hon. Prime Minister, you would be aware that Government of India releases upto 95% of food subsidy, the balance being released only after submission of the audited account of paddy and rice. The audited accounts and final economic costs of paddy/rice procured upto 2006-07 have been duly submitted to the Government of India. GOI is disallowing interest, warehousing, transportation and other such actual costs included in the economic cost of rice. This is transferring the burden of these costs to the State Government. Our final claims against the residual 5% for the years 2001-02 onwards aggregating to Rs.330 Cr are pending with the Government of India. Since the time our State was formed, we have incurred accumulated losses of over Rs.2296 Cr on procurement of paddy and rice. This clearly indicates how the States are under the huge pressure of mounting interest costs due to the policy-failures of the Government of India in the matter of decentralized food procurement. This obviously cannot go on endlessly, and the Government of Chhattisgarh may ultimately be constrained on sheer economic grounds to dissociate itself from the procurement process.
Hon Prime Minister, the Reserve Bank of India has been extending credit for food procurement exorbitant rate of 11.25% interest! To make matters worse, this interest is compound interest, and the compounding is done on monthly rests! The high interest rates of RBI are pushing up the economic cost of rice, which is a major factor for price spurt in the open market. It is also a major cause for the losses that State Governments suffer in food procurement. If we are earnest about ensuring food security, RBI will first have to provide soft credit at 4% simple interest.
Hon. Prime Minister, in respect of the valuation of food stock, I wish to submit that due to the delay in release of food subsidy by the Government of India, the RBI should allow inclusion of the receivable amount against paddy/rice stock. This, however, is not done. On the other hand, due to this reason alone RBI labels the valuation of paddy and rice stocks by the State agency as irregular, and imposes penal interest! The penal interest so levied on Chhattisgarh by RBI is Rs.62 Cr! Either such unjust terms should be excluded by RBI from its food credit, or the Government of India must compensate the State for the penal interest so levied by RBI.
In Chhattisgarh, the State Warehousing Corporation has a warehouse capacity of 10.4 lac tonnes, which includes its own and also that obtained on lease. FCI has a capacity of 5.12 lac tonnes, and Central Warehousing Corporation has created a capacity of 2.46 lac tonnes. The aggregate capacity for stocking food-grain in the State is thus around 18 lac tonnes. However, under the Reservation Guarantee Scheme of FCI, only a nominal capacity of 5,000 tonnes is provided. I propose that Chhattisgarh be supported for creation of an additional warehouse capacity of 5 lac tonnes for food.
The State Government has launched several measures for increasing food production. A significant step is the decision of the Government to extend agricultural loans to farmers at 3% interest per annum. Six years ago, this rate was 14% per annum. This year, farmers have been granted a total of Rs.1200 Cr as agricultural loan at interest rate of 3% per annum. The number of irrigation pump-sets in the State has doubled in the last four years. All these are electric pump-sets and have been granted adequate power supply. Pump-sets upto 5 HP are given 6000 units of power free of cost. These measures have enhanced the economic viability of agriculture, as evidenced by the fact that the State has risen to be the fourth largest contributor to the Central Pool under rice procurement.
To expand the area under irrigation in the State, the Government has launched the Shakhambari Scheme for providing well and pump for small and marginal farmers. In the last five years, 1,20,000 irrigation pump-sets have been energized, around 45,000 tube-wells have been sunk and farmers have been granted subsidy for around 35,000 irrigation pump-sets. The State Government has abolished VAT on farm equipment. Subsidy to the extent of 80% is granted on select farm equipment like Power Tiller, Rotavator, Zeroseeddrill, etc. The State Government provides subsidy upto 25% on improved farm equipment, in addition to the 25% subsidy provided under the Centrally sponsored macro-management scheme. Likewise, to promote cash crops and better use of irrigable water resource in the State, small and marginal farmers are being given 30% subsidy and other farmers 10% subsidy over and above the Central subsidy. Supply of fertilizers for kharif crop has also been stepped up. Agricultural Sciences Centres have been set up in all districts. Farmers in the State are receiving technical inputs and timely advice through Farm Call Centres and Community Radio service. VAT has been abolished on cattle feed in the State.
Thanks to the special measures of the State Government for stepping up food production and productivity, the area under dual crop has expanded by 85% in the last five years. The area under cereals has expanded by 44%, and the area under oilseeds has increased by 122%. Production of soyabean has increased by 44% to 1.36 lac tonnes in the State. Seed production and distribution in the State have increased by 574% and 614% respectively. The consumption of fertilizers has increased from 54 Kgs a hectare to 95 Kgs a hectare.
When the State was formed, there was not a single sugar mill in Chhattisgarh. Because of our special efforts, three sugar mills have been set up and are functioning now. To promote the area under cultivation and enhance the productivity of sugarcane in the State, the my Government grants transport subsidy and a bonus of Rs.25 a quintal, over and above the support price fixed by the Central Government.
Our suggestion is that to expand the irrigation facilities in the State, the benefit of 90% subsidy under the Centrally sponsored Rapid Irrigation Scheme must be extended to the non-scheduled areas also.
To curb hoarding and black-marketing of essential commodities in the State, we have in place since August 2009 the Chhattisgarh Essential Commodities Traders (Licence and Restrictions on Hoarding) Order, 2009. In terms of this order, the maximum stock limit fixed for rice is 2000 quintals, for cereals and oilseeds it is 1000 quintals each, for edible oil, it is 500 quintals and for sugar it is 2000 quintals. Since the time this order was promulgated, 46 cases have been registered against offenders, and 86,751 quintals of dal, 6,345 quintals of edible oil, and 9,497 quintals of sugar have been seized and confiscated.
The system of forward trading allowed in essential commodities also poses problems for the State Governments in controlling prices. We therefore propose that forward trading should forthwith be banned in respect of essential commodities like wheat, rice, cereals, edible oil and sugar.
It is generally observed that a fall in wholesale prices is not immediately reflected in a corresponding fall in the retail prices. A major reason for this is the lack of an effective law to check the retailers’ greed for undue profiteering. We therefore propose that the Government of India issue, or authorise the State Governments to issue, a control order to prescribe maximum profit margins on wholesale and retail trade in essential commodities. The Government of Chhattisgarh has already sent a proposal in this regard to the Government of India.
In the current financial year, till end-December, 751 raids were conducted in the State and 36 offenders were taken into custody. 80 persons have been prosecuted and 66 persons convicted. 1,16,092 quintals of food-grains have been seized during the raids. The State Government proposes that in respect of essential commodities covered under the PDS, an offence under section 10(a) should be made non-bailable. The State Government has already sent a formal proposal to the Government of India in this regard.
I would also like to comment on the schemes of the Government of India to curb price rise of essential commodities in the open market. To check the price of wheat and rice in the open market, the Government of India has decided to release in the open market the wheat and rice stocks available with FCI. After taking into account transportation and other costs, the consumer cost of FCI’s wheat and rice is Rs.14 and Rs.17 respectively. Because of low parity of these prices with the prevailing prices of wheat and rice in the open market, there are problems in sale of FCI food stock in the market. Government of India’s strategy can prove effective only if wheat and rice are made available to the States at Rs.8 and Rs.10 a kilo.
The State has in the past availed the benefit of the subsidized edible oil scheme of the Government of India. During 2008 and 2009, the State Government lifted and distributed through the PDS 7,209 tonnes of Soyabean edible oil. But presently due to the fall in the price of Soya oil in the open market, the sale of GOI’s subsidized oil is posing challenges. The State had proposed to GOI to enhance the subsidy component, but this proposal was not approved. Subsequently, the State Government had to extend from its funds a subsidy of Rs.40 a litre to dispose of the stock. The Government suffered a loss of Rs.6 Cr as a result of this. Rs.5 Cr of the State Government is pending with PEC, a Central Government Undertaking. This amount should forthwith be released to the State Government. Nafed and NCCF should be advised to open retail outlets for edible oil in Chhattisgarh, as they are doing in other States.
Under the subsidized cereal distribution scheme, the Government of India is providing yellow chic gram @ Rs.26 per kg. This is available for sale in the open market @ Rs.20 a Kg. Furthermore, this cereal is not preferred in Chhattisgarh. Under these circumstances, we are finding it hard to sell it through the PDS or any other system. The prices of cereals have registered a fall in the recent weeks. While fixing the price of cereals for allotment to the States, the Government of India will have to bear in mind the corresponding prices in the open market. Subsidy levels will have to be modulated accordingly to enable easy sale of cereals through the PDS.
Before I close, I would like to strongly plead that the financial management of the decentralized procurement scheme needs to be urgently revamped, and greater powers should be delegated to the State Governments in the administration of PSS. For effective control over rising prices of essential commodities, the legal provisions have to be strengthened and PDS reformed to make it consumer-centric, so that it can truly serve the interests of masses. Only then will we be able to provide every citizen with a wholesome, meal with human dignity. Only then will the system of food subsidy be justified.
Jai Hind! Jai Chhattisgarh!!
