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Why the govt has more cash, less grain to give?

Conext : Financial constraints hindered cash transfers during lockdowns, but surplus grain stocks allowed distribution.....Why the govt has more cash, less grain to give?

Conext : Financial constraints hindered cash transfers during lockdowns, but surplus grain stocks allowed distribution to millions. Now, limited stocks and government funds raise concerns for future provisions.

Grain Distribution and Export Scenario

Grain Distribution:
  • The government provided 10 kg of free grain per month to 813.5 million people during the pandemic lockdowns.
  • The PDS facilitated distribution of free grain to support vulnerable households during lockdowns.
Offtake of Grains:
  • In 2020-21, the offtake of wheat and rice reached 92.9 million tonnes, exceeding the annual average since the NFSA implementation.
  • 2021-22: The offtake further increased to 105.6 million tonnes.
  • 2022-23: The offtake remained high at 92.7 million tonnes.
Grain Exports:
  • Rice: In 2021-22, India exported 21.2 million tonnes of rice, valued at $9.66 billion. In 2022-23, rice exports reached 22.3 million tonnes, valued at $11.14 billion.
  • Wheat: Wheat exports accounted for 7.2 million tonnes ($2.12 billion) in 2021-22 and 4.7 million tonnes ($1.52 billion) in 2022-23.

Karnataka Case: Shift from Grain to Cash Transfers

  • Change in Financial Situation: With the resumption of economic activities, GST revenues increased, improving the financial situation for the Centre and states.
  • Reduction in Grain Quota: Starting January 2023, the monthly grain quota under NFSA was reduced to 5 kg per person.
  • Additional grain demand: Karnataka government requested extra grain from FCI for fulfilling its election promise of providing 10 kg free rice monthly to BPL households.
  • Centre’s Refusal: The Centre did not allow the state government to distribute the extra rice beyond the 5 kg provided under the National Food Security Act (NFSA)
  • Resort to Cash Transfers:Karnataka government replaced extra rice with cash transfers of Rs 170 to BPL family heads’ bank accounts.

Implications of cash transfers 

  • Inflationary Pressures:
    • Cash transfers offer households flexibility to utilize the funds for purchasing rice or other goods.
    • Increased demand for rice in the market can lead to higher prices, potentially contributing to inflationary pressures.
  • Deflationary Impact of Free Grain Distribution:
    • When surplus grains are distributed without a monetary transaction, it can help stabilize or reduce the prices of grains in the market.
    • This can mitigate inflationary pressures and ensure affordable access to essential food items for vulnerable populations.
  • Budgetary Considerations:
    • This allocation needs to be carefully managed to ensure that it aligns with overall fiscal goals and priorities.
    • Sufficient financial resources play a role in deciding between cash transfers and free grain distribution.
  • Flexibility for Beneficiaries:
    • Instead of receiving a predetermined amount of grain, households can decide how to allocate the cash according to their priorities.
    • Households can use the flexibility of cash transfers to meet various needs beyond food, like healthcare and education.
  • Market Dynamics:
    • Cash transfers stimulate local economies by injecting money, leading to positive multiplier effects and benefiting various sectors.
    • On the other hand, free grain distribution may limit the market demand for grains, potentially affecting the livelihoods of farmers and traders.
Depleted grain stocks and uncertain monsoon
  • Depleted Grain Stocks:
    • The total stocks of wheat and rice in the Central pool today stands at a five-year-low.
    • Concerns arise over monsoon impact on rice crop, procurement, and future stocks despite current stock levels being above minimum requirements.
  • Monsoon Impact on Production:
    • Erratic rain distribution led to reduced rice cultivation with only 123.18 lakh hectares sown, 6.1% lower than the previous year.
    • Insufficient rainfall in the monsoon’s second half can impact not only the kharif rice but also the upcoming rabi wheat crop.
Difficulties in Export
  • Record Export Quantities: Despite the imposition of restrictions on grain exports, India witnessed record-breaking exports of rice, wheat, and other cereals. Specifically, total exports amounted to 32.3 million tonnes in 2021-22 and 30.7 million tonnes in 2022-23, valued at $12.87 billion and $13.86 billion, respectively.
  • Inflationary Pressures: Rice exports and global price hikes fuel inflation. Increased rice demand, limited domestic supply, result in higher prices for consumers.
  • Limited Import Capability for Rice: India’s major rice exporter status makes it challenging to import rice during domestic production shortfalls. Rice imports are limited compared to wheat due to global supply abundance.
  • Price Volatility and Potential Export Restrictions: The rising rice prices globally, indicating potential price volatility. To ensure enough grain for domestic consumption and stabilize prices, the government may impose additional export restrictions.
Way forward
  • Targeted Cash Transfers: Implement focused cash transfer programs to support the most vulnerable households affected by economic hardships.
  • Strategic Stock Management: Develop effective strategies to balance grain distribution for immediate consumption while maintaining sufficient reserves for emergencies.
  • Continuous Monitoring and Evaluation: Establish robust monitoring and evaluation systems to track the effectiveness of cash transfer programs, grain procurement strategies, and food security initiatives.
  • Enhance Food System Resilience: Improve supply chain efficiency, reduce food waste, and enhance coordination among stakeholders for a resilient food system.
  • Diversify Food Sources: Explore diverse food options, such as millets, pulses, and vegetables, to reduce reliance on a single crop and enhance food and nutritional diversity.
  • Optimal Grain Procurement: Strengthen grain procurement mechanisms to ensure an adequate supply of grains for the Public Distribution System (PDS) and strategic reserves.
  • Managing depleted grain stocks, monsoon uncertainties, and cash transfers for vulnerable households poses a challenging balancing act for the government to sustain food security.
FAQs related with Grain Distribution
Ques 1: What is grain distribution?

Answer: Grain distribution refers to the process of providing grains, such as rice or wheat, to individuals or households to ensure food security and meet their nutritional needs.

Ques 2: Who is responsible for grain distribution?

Answer: Grain distribution is primarily the responsibility of the government, which implements various schemes and programs to distribute grains to vulnerable populations through the public distribution system (PDS) or other welfare programs.

Ques 3: How does grain distribution benefit people?

Answer: Grain distribution ensures that people, especially those from economically weaker sections, have access to affordable and nutritious food. It helps alleviate hunger, improve nutrition, and contribute to overall food security in the community.

Why the govt has more cash-less grain to give?,Why the govt has more cash-less grain to give?,Why the govt has more cash-less grain to give?

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