India and the food security bill

Executive Summary

There is no doubt that in a country where 320 million people live below the poverty line, the government must do everything to ensure that everyone gets two square meals a day. But the government’s agenda of providing food security via the food security bill is ridden with flaws. The National Food Security Bill 2011 is an act to ensure public provisioning of food and related measures to enable assured economic and social access to adequate food, for all persons in the India, at all times, in pursuance of their fundamental right to live with dignity (National Food Security Bill 2011). And Food for all is a noble thought. But the question remains whether India can afford such a noble thought at this juncture. Are we reaching beyond our means? This essay seeks to give an overview of the bill and speaks on two major points that will hamper the implementation of the project: a) the prescribed method of distribution of food and b) the problem of identification. It will also shed light on the impact of this bill on the Indian exchequer.

 

Need for the Bill

The need for food security in India is well documented. In a population of over 1 billion, 320 million live below the poverty line with little access to food. Hunger is usually defined by the discomfort associated with lack of food. The FAO defines it specifically as consumption of fewer than approximately 1,800 kilocalories a day – the minimum that most people require to live a healthy and productive life. According to the 2011 Global Hunger Index report by IFPRI, India moved from the ‘extremely alarming’ category to the ‘alarming’ category in the GHI score keeping company with countries such as Bangladesh, Angola, Ethiopia and Sierra Leone,  among others. Not something a supposed contender for superpower status wants to speak about. But that is not all. The study also reveals that 21% of the Indian population is undernourished. It states that four out of every 10 children under the age of 5 suffer from malnutrition, with a mortality of 6.6%. Again, not a very comforting thought for a country that wants a permanent seat on the Security Council. All these facts support the government’s view point that we need to provide food security for the people. We need a mechanism that will expedite this process, and a bill that guarantees that right could be the required mechanism.

 

Provision of the National Food Security Act 2011

The bill envisages that “Every person shall have physical, economic and social access, at all times, either directly or by means of financial purchases, to quantitatively and qualitatively adequate, sufficient and safe food, which ensures an active and healthy life” (National Food Security bill, July 2011). The bill guarantees subsidized food for 75% of the rural population of which 46% are categorized as priority households. It also covers 50% of urban households and categories 28% of which are priority households. It lays emphasis on nutrition for the first thousand days of a child’s life, recognises that the woman is the right person to control the food subsidy in each household and widens the food basket from just wheat and rice currently to nutri cereals or core cereals like ragi, jowar, bajra and millets. Under the bill, all households, rural or urban will receive a minimum of 5 kgs of foodgrains per person per month. The households will be provided with wheat at Rs 2/kg, rice at Rs 3/kg and millets at Rs 1/kg. Food grain prices will not be revised for a minimum of 10 years from the date of notification of the act. This means that the government will be spending more than one lakh crore rupees every year as part of the food subsidy bill, making it all the more imperative that this programme works and works well, without any hindrances. However a clean operation will not be possible until the Indian government iron out some key structural problems within the bill.

 

Structural Problems

The primary concern with the bill is the method of classification of the populace covered under the act. The main problem is that the government has still not been able to figure out and unambiguously decide who the BPL population is. The bill also does not contain any clear direction on how the priority households will be determined by the Centre/State government. The recent political storm where parties demanded that everyone should receive fair treatment has not helped clear the air any better, and since they still have not decided how to classify the primary beneficiaries of the bill, unwarranted people will get subsidies.

 

Targeting the right demographic has been under scrutiny for many years now. That is because it adds to the problems plaguing the public distribution system. The food bill intends to offer food subsidies via fair price shops or the public distribution system. But the benefits of subsidies provided at these fair price shops rarely reach the intended beneficiaries. A World Bank report states that the only 11% of the targeted BPL population in India is benefited by the PDS. That is because of a lack of centralized database, something that the National population register and the UID aim to resolve. This lack of a database has led to a rise in ghost beneficiaries and fakes. This in turn leads to leakages almost as high as 40% and diverts commodities from the intended recipients. Add to that the lack of awareness of subsidy schemes and the inability of the BPL population to provide documentation and what you have is beneficiaries getting completely excluded from the system.

 

Experts such as Bibek Debroy, an economist at the Centre for Policy Research, believe that the food security bill is another political gimmick, just like MNREGA. He also believes that this bill is without any economic rationale. That perhaps could be very true. A look at the economics of the several social welfare schemes reveals how much money we are putting behind these schemes. Currently there are 3 large social sector schemes targeting the poor: The Swarnajayanti gram Swarozgar yojana, Indira Awaas yojana and the massive public distribution system or PDS, which accounts for half of the budgetary allocation for India’s social sector spending. Apart from this, there are schemes like the Midday meals and the integrated child development programme (ICDS), but the effectiveness of these schemes is questionable. For instance, a World Bank report on the impact of the ICDS states that there is no clear evidence whether the scheme has achieved its goal of improving the coverage of specific child health interventions. And lastly we have the MNREGA with a budgeted expenditure of about 60,000 crores for FY12-13.

 

And here is where we tally costs to see how the government will be able to handle an addition to the social spending budget. Let us take the example of wheat. The cost of wheat to the Food Corporation of India which will procure food under the Act would come to around Rs 19/kg and above Rs 22/kg for rice. That means the government will be shelling out as much as Rs 120,000 crores on just subsidizing food alone. (Business Standard, September 2012) And this is just the calculation for a year. As the food prices escalate, so will the bill to the exchequer. And we have not even added the investment needed in agriculture to stabilize production, improvements in storage facilities and transportation costs. In the union budget speech of 2012, Former Finance Minister Pranab Mukherjee announced that the government would see the subsidies bill come down from 2% to 1.7% of the GDP. But with the escalating food inflation, the government has a tough task on its hand.

 

The food inflation in India is still hovering in double digits and the weak monsoon this year, coupled with a drought situation around the world has not helped. Weak monsoon in July has affected the kharif crop sowing season which contributes to the food basket. This will have an alarming effect on the food production numbers for next year; this is incidentally when the Food security bill will come into place. Currently, the government procures 40 to 42 million tonnes of staples from the market every year. It is estimated that under the food bill, that number is likely to touch 60-70 million tonnes per year on account of a wider basket. But more procurement is the least of the government’s worry, at least for the next year. A weak monsoon this year means less income for the rural poor not only in terms of loss of crops but also on account of the drying up of job opportunities. And the biggest casualty will be the landless manual worker who will look towards jobs under the MNREGA. (Crisil Insight on Monsoon, July 2012) This means a higher burden on the treasury especially at a time when India is undergoing its own version of a fiscal cliff.

 

Conclusion

The idea of providing food to all is indeed very noble. In fact it should have been our birthright, right up there with freedom to speech and liberty. But sometimes it is virtually impossible to translate an ideal into reality. The National Food Security Bill 2011/12 is an ideal that India will not be capable of translating into reality for the next couple of years. Not until it sorts out existing problems in our public distribution system. Moreover the current health report of the Indian economy is not favourable for such a costly exercise to take place.

Scrapping subsidies is an idea that has been mooted many times. But it is a political hot potato that no party will go near so the only way we can implement the food subsidy bill will be to iron out issues such as targeting the right demographic. And the UID which aims to cover every Indian can be used to solve this situation. In itself the unique identification card is not of much use, but coupled with schemes such as the MNREGA or the Food Security bill, this card will help clean up the corruption and leakages that occur in the system. As for the problem of identification of BPL families, it is a matter that cannot yet be cast in iron law as every community wants to be a beneficiary and thus it will not be an easy matter for the government to figure out. There are challenges to overcome before the government decides to implement this bill and I sincerely hope it will not be done during the next union budget just before the general elections. Because, frankly, we do not need another gimmick to drain taxpayers’ money.

BY: Swati Mitchelle D’souza