Understanding the Food Supply Chain
Posted by Unknown in Agriculture and Farming, China, India, Supply chain on Sunday 27 January 2013
Agriculture
policies of both India and China would have to cope with the dual
challenges of feeding the poor and meeting the rapidly growing needs of
the middle-class.
Both
China and India, despite their high growth rates, have deprived and
vulnerable populations that are susceptible to hunger. While the opening
up of the economy to ensure growth is a well established tradition,
there is less clarity on what should be the role of the State in
providing food and ensuring a functional food supply chain.
Reforms
that make agriculture more market-oriented require the replacement of
state institutions by more market-based pricing rules. While these new
rules might be helpful in reducing unnecessary costs on account of poor
administrative action, it would be foolish and short-sighted to entirely
dismantle state institutions in agriculture. The challenges of handling
the logistics and technological upgradation of the agricultural supply
chain are evident in China and India, though they have undertaken very
different policies with regard to food procurement and distribution.
DELIVERY MECHANISMS
The
Chinese state has devolved agricultural policy to the district level,
with district mayors often sub-contracting provision of food to poorer
sections to local government bodies. The move away from a central
financial control to a local state-funded system of development was part
of a national decision to move away ‘from maximising to minimising the
state' devised in the late 1990s. This has resulted in state agencies
losing their monopoly position in many areas of agricultural marketing
and processing. They are now required to cooperate with enterprises
outside the state sector, particularly with private sector players. The
localisation of agricultural distribution has led to large variations in
provision, with some districts having a far better track record than
others.
In
the case of India, public agricultural institutions dominate foodgrain
procurement and delivery. The intervention by the Indian state in
procurement through the minimum support price (MSP) is regarded as a
costly and inefficient operation. A manifestation of the squandering of
government funds is the manner in which the current procurement levels
of 60 million tonnes (mt) of grains is being managed. Only three-fourths
of this grain is held in storage with adequate cover, while the
remaining 15 mt lie relatively exposed to the elements and to pests.
In
India, there has been far more debate about the type of public
distribution system (PDS) – especially over the shift from a more
comprehensive universal PDS to the narrower version of the so-called
Targeted PDS in the late 1990s. On the other hand, there has been a
relative neglect of the mid-chain components of storage, as a result of
which the logistics of foodgrain movement have remained virtually
unchanged.
The
Food Security Act, sought to be introduced by the current Government
since 2009, has generated considerable debate, culminating in demands
for a fundamental restructuring of the final stage of the agricultural
supply chain, where food security should be a universal right. But this
content also provides a valuable opportunity for revisiting the various
capacity constraints in each section of the chain and the evaluation of
the cost implications of changing these constraints.
STATE INTERVENTION
The
size and effectiveness of delivery of foodgrains can be deduced from
the nature and reliability of the food supply chain. The hasty
dismantling of state institutions would not be conducive to bolstering
the capacity of the supply chain to improve procurement and delivery.
The success of bringing in the private sector is dependent of the
operation of a set of government regulations that would operate
throughout the chain to ensure minimum standards and technological
dynamism.
In
the case of China, a large part of procured grain stocks are being
diverted towards the creation of a processed foods sector to enhance the
production of meat and animal-based products. This will help to
diversify the Chinese agricultural product sub-sector that can be
subsequently procured through an expanded agricultural supply chain in
the future.
In
the case of India, the present-day agricultural reforms continue to
focus exclusively on procurement and distribution of foodgrains within
the framework of the existing agricultural food chain. There has been
very limited analysis of how technology can help improve processed food
or animal products that will increasingly become the major items of food
consumption by the growing middle classes.
Furthermore,
the importance of food standards and food safety is still relatively
unexplored in the food procurement policy of both India and China and
could prove a future threat to the food security of both countries.
RISING MIDDLE CLASS
The
continued importance of feeding the poor and the new challenge of
meeting the demands of a rapidly growing middle class will continue to
be a concern for national agricultural policy in both countries. The
difference is that India still has at least a third of its population in
poverty and public institutions are already stretched in trying to
ensure food reaches this vulnerable sector.
In
China's case, the high levels of industrial growth in the reform period
were able to reduce poverty levels by half. The use of the largesse of
industrial growth to provide transfers for the poorer sections of rural
China was a smaller task.
The
challenge ahead for both countries is how they use the agricultural
supply chain to deal with the already evident problems of uneven
coverage in different districts in each nation, and how they move
forward to ensure more and better quality food.
This entry was posted on Sunday 27 January 2013 at 10:58 and is filed under Agriculture and Farming, China, India, Supply chain. You can follow any responses to this entry through the RSS 2.0. You can leave a response.
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