A mountain of grain.

Seems that the government is sitting on  66.7 million tonnes of food grain as of 1 January this year. TOI 19 January. This is not due to a bumper harvest of Rabi crops because the average for the whole of last year was 67.1 million tonnes, rising to a high of 80.2 million tonnes in June. Apparently the government has to maintain a strategic reserve of 5 million tonnes and buffer stocks of 20 million tonnes. These rules were probably enacted after the disaster of the sixties when millions would have died of famine if the US had not helped us with wheat under the PL 480 program. Since then every government has tried to maintain buffer stocks in case of climatic disasters such as drought or floods. India does not have an open market for food grains. Instead the government sets a price for procuring grains from farmers called the Minimum Support Price which is much higher than would have been the case if farmers had to sell their produce in the open market. In 2005-6 the government paid Rs 640 per quintal of wheat, Rs 570 for rice paddy and Rs 600 for Grade A rice. Last year it was Rs 1120 for wheat plus a bonus of Rs 50 per quintal, Rs 1080 for rice and Rs 1110 for Grade A rice. This year the price has been set at Rs 1285 for wheat, Rs 1250 for rice and Rs 1280 for Grade A rice. The good thing about this is that it encourages farmers to produce wheat and rice and not divert their land to other cash crops for greater gain. The problem is that by giving a very high price the government encourages too much production leading to a grain mountain and enormous waste because there has been no attempt to build requisite storage space. Thus tonnes of grain are stored in the open where they are eaten by rats or rot if there is rain. A bigger problem is that this has led to a stubborn inflation which the RBI is unable to control. By paying double the price compared to 6 years ago the government has increased prices of all foodstuffs. To pay for the ever rising expense the government borrows vast sums of money from the market pushing up borrowing costs for industry and increasing headline inflation. The big mystery is why the government does not export part of the mountain of stocks. That would earn precious foreign exchange helping reduce the Trade Deficit and prevent large amounts of waste. There can be only one explanation. The Congress wants to use food to win general elections in 2014 by distributing vast amounts at low cost to poor people who are designated as the " vote bank ". This is a very cynical ploy at enormous cost to the nation. Interestingly the Congress is holding a " Chintan Shivir " or a brainstorming session in Jaipur. The entire discussion is about how to win the next elections. There is no time for the nation, for patriotism or for the people. Only self interest. The enemy is within.