Saturday, 10 September 2011

Decentralized Panchayati Ware houses: A Multipurpose Measure for Food Security with Huge Externalities.


Among the missing or grossly inadequate infrastructure support facilities for the rural economy, particularly for enabling its farming segment to  attain healthy growth,  highly conspicuous inadequacy of   warehouses  in the rural areas capable of providing safe and sound  storage for  the farm produce would  surely rank high. Among the factors responsible for it  one can consider  overall chronic mass poverty of rural India, small number of  farmers with a reasonably large  net marketable surplus, domination of the regulated market yards , numbering less than 8 thousand in a country with about  six lakh villages , by merchant  capital that finds the rate of return from warehousing  a relatively  unattractive candidate compared to alternative investment opportunities and high cost of land and limited capacity of the farmers to pay rentals sufficiently attractive for the private capital. Godowns by the panchayats on  their  own land  built with the use of MNREGA labour on the basis of a technically appropriate blueprint or design given to them by the   higher  tiers  of government  along with  lending of  financial resources by the  term lending development finance institutions, or  mobilized specifically for his purpose by means of special purpose bonds with suitable tax breaks  or, if  other means  fail to  provide adequate  funds, by  drawing on the black wealth after the payment of applicable  taxes  but immunity from prosecution(provided  a full and  final disclosure  to come clean once and  for  ever is made)  can  provide a network of lakhs of godowns in and around the villages.Its employment impact and   o the building material industry are  a source of real good externalities. The  role given to the panchayats to enter  as a big prop of support for the rural farm economy can give undreamt  of   advantages for  strengthening the farm economy  and the  struggling  small and marginal farmers in many diverse ways. Additionally this move can easily  become one of the biggest  blow for  moving the PRIs towards financial viability, independence and capability to  discharge many  conventional functions of  local government without  having to depend on  a flow of funds from the higher tiers of  government.
However,  the proposed  Panchayati warehouses have to be supported by a  number of complementary and  concomitant measures. One  primary  step is to  authorize the Panchayat  warehouses to issue a negotiable warehouse receipt (WR)  for the grains deposited with  the  warehouses  and the WR has to be certified by the government as a  valid  collateral for  short-term  loans that can  go up to  90 percent of the Minimum Support Price( MSP) based value of the grains  deposited minus the rental for the  grains. This measure of introducing the  WR  has been talked of in thin air  without  providing for a network of easily accessible network of rural godowns.  It is clear that rural  warehousing for the farm produce is something which  has  so far neither  interested  the corporate capital, despite a large and identifiable market for storage. Given  tis experience one  has reservations over the vain current hope   to depend on the proposed FDI in retail to fill this glaring  shortcoming of the post-harvest  farm sector marketing  network. Actually the  problems of decentralized , highly dispersed location of godowns suitable for the farmers , say  reachable  by them at a low and affordable  cost  within a short distance , suitable for the farmers and yet attractive and practical for the investors, can be tackled by  panchayati godowns  as the cost of land  and construction labour can be kept  at a level that no other agency s capable of. The advantage of  shared  management with a voice for the gram sabha by the users is cannot be gainsaid. As we see below  the capability of these rural godowns to serve the PDS effectively with low cost, regular delivery with little leakages to the PDS outlets can also be ensured  by means of the rural Panchayaiwaehouses.
There has been little interest by the organized sector  to tap this  huge market at the bottom of the   rural economy. This is not an activity or investment that can suit or interest big organized capital. On the other hand, pnchayati godowns are likely to be used  by the farmers may be even for  availing of better  market prices by depositing  their grains output against  a WR andescape the compulsion of marketing  in the immediate post-harvest  season with bunched  supplies and low prices   and this way even out the flow of supplies over the  year.  The problem of cash crunch and exorbitant  interest rates based  loans with high transactions cost faced by the farmers too can be eased   by the use of  warehouses located   in the vicinity  by making   it obligatory for the warehouse to issue a negotiable Warehouse receipt(WR)  of the  grains deposited with them. WR can also be used  to  reach the  pubic procurement  to every farmer  in remote villages as well by  the use of the Minimum Support Price (MSP) for recording the value of the   produce deposited with the  rural godowns. Thus the MPS need not remain  just  notional  for  the  majority of the  farmers as  at present. The   problems  faced by the PDS outlets owing to limited rural location storage and avoidable cross movements of grains and the often faced inability to move them quickly and at a low cost without pilferage  can also be eased if there are  appropriate  size godowns in and round the rural area that happen to be  both major producing and consuming  areas and more so now that about  90 per cent of the rural households are to be  reached by the right  to food law for heavily subsidized  food grains. Of course the  public procurement agencies have to make use of these  godowns  for  storing the  procured grains which may include  locally preferred so-called coarse grains too. The advantage of local area  location can thus help reduce the  cost to the public exchequer and  its subsidy outgo. Absence of such decentralized warehousing may   cause food insecurity even   during the times when  the availability of food as such is not  causing a headache.
 A major advantage of rural location and size commensurate with the  requirements of the hinter land, besides relatively low cost, is that dispersed local control and management  can  help  reduce  its  bureaucratization that  is  often a major  snag derailing rural  development and welfare.     Actually by  giving the Panchayat Samitis at the block level the responsibility and resources ,mainly finance and technical support,   a chain of cold storages can  be built in thousands of our  blocks to prevent the avoidable  wastage of fruits and vegetables, especially of the perishable type and those with small local demand .
Be as it may, the short point is that good  panchayat  owned and managed rural  godowns  can prevent post-harvest wastage of  valuable crops. How  the stored  grains output of the farmers can help increase the share of the ultimate producers in the consumers’ rupee  by means of WR  and rural  godowns— the two go hand in hand--and  strengthen the economy of the small and  marginal farmers  is  simply  enormous. With these facilities the farmers can be enabled to finally dispose of the stocks when the market is good in the lean season and thus     avoid the loss inherent in immediate post-harvest sale.  But none of this is possible  without there being rural warehouse at small distances from the farms where the farmers can stock  their  marketable stocks for a  few  months and yet  can get bank advance against the  stocks left with the warehouses by means of the WRs. May be the rural  warehouses can also be used at a relatively low for  stocking the  procured grains by the public agencies  dealing with  food security and  ensure grater regularity with low cost of supplies. The  villages are the main producing areas and  with the new law  the countryside  can also become the major consuming  areas too. Why   transport and stock the grains that are ultimately proposed to be  brought back to the village PDS shop by  continuing the existing practices. This way the  procurement agency would not  be required to pay cash but the  farmers can directly take  loans against the security of the grains deposited with the warehouses. Thus the food credit   system and ‘financialinclusion’ too is decentralized with assured repayment when the farmers dispose of their stocks at the time of their choice in order to take advantage of the market situation and  the windfall   so far going  in to the coffers of the traders now becomes available o the farmers . This can   generate a positive supply response in the subsequent  rounds of the crop cycle  and help increase production .
What we have argued o far  shows that rural decentralized warehouses  hold a great deal of potential for  doing good to our rural economy, poor rural people and  reduce the   fiscal burden of  managing food security without educing its coverage and effectiveness.
 The critical factors are the construction in the shortest time a  chain of lakhs of  godowns in the rural areas on panchayat lands and wthhe use of MNREGA workers to avoid additional labour cost (synergy) with scientific arrangements of proper upkeep of the precious grains as we can waste the grains  only at a great human cost in a chronically hunger-ridden country. What an enormous  flow of externalities  in terms of employment,  income  gains to the farmers,  price gains to the consumers, reduced subsidy burden for the macro -and public  economy and  food security for the deprived, discriminated and  excluded masses can well be imagined. This also  gives the panchayat s an independent source of regular inflow of revenue that can be used for the local municipal functions without  dependence on the higher tiers for every single paisa that  has to be spent by the PRIs. 
For all the reasons that we have suggested above, the  at the village level the panhayat samitis for   a chain of cold storages at the block level for fruits and vegetables . But  the programme  has to be a really ambitious one, say covering  all the village pachayats in a matter of  a few years. The  positive contribution of the programme would surely go beyond  food security,  strengthening of the rural economy, a stable source of revenue for the Panchayats for local social services. Its help in curbing  inflationary processes by evening out supplies and prevention of  hoarding are also obvious.

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