GOVERNMENT OF INDIA FOOD SECURITY BILL- MISS UTILIZATION OF PUBLIC MONEY

Food Security Bill of India - Concerns

India’s high economic growth rate in the past decade has not been fully reflected in the health status of its people, with 22 per cent of its population undernourished1. According to the National Family Health Survey 2005-06, 40.4 per cent of children under the age of three are underweight, 33 per cent of women in the age group of 15-49 have a body mass index below normal and 78.9 per cent of children in the age group of 6-35 months are anaemic. These are disturbing statistics which point to nutritional deficiencies. The NAC proposal for a National Food Security Bill is perhaps the most important national effort yet to address these deficiencies in India.

According to the projections made by Department of Agriculture, the total projected foodgrain

production (wheat and rice) is expected to be 187.82 million tonnes for 2011-12 and 192.02 million tonnes for 2013-14.we have assumed that it will be possible to procure 30 per cent of the total production which translates to 56.35 million tonnes in 2011-12 and 57.61 million tonnes in 2013-14. In view of the cycles in agricultural procurement, it may be imprudent to assume an average procurement level of more than 30 per cent. It has been estimated by the Department of Agriculture that the marketable surplus of wheat and rice in 2010-11 was about 106.5 million tonnes. The expected procurement of 53.22 million tonnes in 2010-11 works out to about 50 per cent of the marketable surplus. A larger procurement has the danger of distorting the food prices in the open markets. This is an important consideration, since the proposed entitlement of 7kgs per capita per month for the priority category, does not cover their total consumption requirement,

necessitating the purchase of the balance foodgrain from the open market. Higher government procurement will lead to a lower availability of foodgrain for the open market, pushing up prices. According to the NSSO consumption expenditure survey 2004-05 the average monthly per capita rural consumption of wheat and rice for the lowest MPCE classes constituting 49.9% of the rural

population was 10.11 kg while the urban consumption for the lowest MPCE classes constituting 30.2% of the urban population was 9.35 kg6. This implies that even the priority households which constitute the most vulnerable section of the population will have to procure 25 to 30 per cent of their consumption requirement from the open market. The actual requirement is likely to be higher since people consume wheat and rice in processed forms like bread, biscuits, sooji, maida etc which are not reflected in the consumption estimates worked out here. In other words the market prices are extremely relevant for the household budgets of both the entitled and other households.

The Food security bill passed by the government will give legal entitlement of cheaper food grains to about 63.5% of Indian population or about 800 million Indians, the country will have to spend nearly Rs 1,12,205 crore. In absolute terms, the country will have to spend about Rs 2,410 crore more on food, or a 2.2% rise, under the food security law.

India currently spends Rs 60,572 crore for an existing food supply programme under the "Targeted Public Distribution System" for the needy. Food handouts are currently pegged to the 1993-94 poverty estimates and in line with population figures of the 2000 census.

Since the government will have to apply the 2011 census and updated poverty estimates — currently being finalised — for all future entitlements, the food subsidy will rise to Rs 1,09,795 crore even without the food security law.

The food bill, which seeks to cover 75% of rural households and 50% of urban dwellers. The bill will be passed in Parliament but the real challenge is how much financial burden the Government will have to bear." The additional financial burden of the legislation is estimated to be Rs.27,663 crore per year. It will bloat the Government's total food subsidy bill to Rs.95,000 crore per year. The Government already spends Rs.40,000 crore every year on its flagship Mahatma Gandhi National  Rural employment Guarantee Act.

Cost is not the only factor.   "There are better ways of providing food to the people than through a leaky PDS." The Government should have invested in agriculture and infrastructure instead, thus raising farm output, reducing waste and enabling poor farmers to feed themselves.

With 230 million people under-nourished, the country awaits some comprehensive policy intervention from the government to tackle this haunting crisis. One of the most logical measures would be to provide a fixed amount of foodgrain to all citizens. But wouldn't the costs be enormous, ask sceptics?

The Center for Budget and Governance Accountability (CBGA), a Delhi-based think tank, crunched all the numbers and came up with the answer. It would take Rs 1.85 lakh crore every year to provide 24 crore households with adequate monthly food grains. This assumes that each household will be sold 23 kg rice at Rs.3 per kg, about 12 kg wheat at Rs.2 per kg and millets at Rs.1 per kg every month.

The employment guarantee scheme is a vital part of food security, as a self-selecting scheme of doles for the truly needy. Enhancing earning power through farm growth is the right strategy, supplemented with cash transfers to the poor. Instead of doing all this, if investible resources are diverted to gargantuan subsidy, the government would forgo a possible future of prosperity, to lay its hands on a populist present.But, here's the rub: the government has provided for just Rs 79,800 crore in the proposed draft National Food Security Bill. That is about two-thirds of what is actually needed.

CBGA researchers say that what the government is planning is to make available food grain at low prices only to certain 'targeted' sections, that is, the below-povertyline population. "Dividing households into "priority" and "general" category and not universalizing the distribution of grains, seems to be a step backwards," says CBGA.

This is because the poverty line is pegged very low at Rs. 25 per day in rural areas and Rs.32 in urban areas. A large number of people are technically above this line but in reality are very poor. Also, the poverty line surveys are ten years old, and they missed out on thousands of people.

Given the widespread hunger and malnutrition, the government will have to get serious and "take the bull by the horns", says CBGA.

This ideally should manifest in growth of Indian human capital, productive work force and skilled labor and long term growth of the economy. These people will work more efficiently, spend more and thus will domestically drive the Indian economy.

Food Security Act takes into consideration the following three important aspects:

ñ Food Availability.

ñ Food Access.

ñ Food Absorption.

Issues on Food security bill:

 The proposed bill could kill agriculture by creating a monopoly of the Government. In order to meet its commitments for the bill, the Government will have to procure at least 10 per cent more foodgrain than it does. That will mean 40 to 50 per cent market share. "It will wreak havoc on the open market. Prices will go up. The poor buy from open markets as well," says a senior official.

Where will the Government store the additional grain it procures? Even at current procurement levels, wheat rots every year. The Food Security Bill cleared by the Cabinet is likely to hurt the poor more than it helps them. India already has 54.7 million tonnes of rice and wheat lying as stocks with the Centre and the states, 29.7 million tonnes of grain in excess of the buffer stocking norm.

Offtake of rice in the current fiscal year has been 74% of the allotment, and that of wheat, 64%. The residual will keep adding to the grain mountain with the government, which will rot, due to poor storage, be eaten by rats and be pilfered. By cornering huge volumes of grain, the government reduces the supply in the open market, putting upward pressure on prices.

By banning exports every now and then, it depresses prices. This irrationality is set to be replicated on a much bigger scale, if the proposed Food Security Bill becomes law. This is not to say that the goal of ensuring food security for the people is either unworthy or undoable. It is neither.

Rather, the government is going about it in the most inefficient, unintelligent fashion possible. The world demand for food is set to climb, thanks to steady growth in the poorer regions of the world and increasing diversion of corn to biofuel.

Main Issues point’s:

• Given the current trends of foodgrain production and government procurement, and the likely improvements in these over time, will there be adequate availability of grain with the public authorities to implement the full entitlements for the priority and general category as proposed in the NFSB?
• What will be the impact of such large government foodgrain procurement on the open market prices? This is relevant since both the priority and general category will be purchasing a part of their consumption needs from the open market.
• What are the subsidy implications for both the phases and can these levels be sustained in the future?
• Arriving at a clear definition of priority and general households and the methodology of identification of these households especially the feasibility of involving the Registrar General of India and Census Commissioner in this task.
• Given the inefficiencies and leakages in the current distribution system, identify the principal areas of reform of the PDS and the alternative mechanisms of reaching the foodgrain/subsidy to the entitled households.
• What is the guarantee that the legal entitlement to the poor will be adhered to?
• Another serious concern is the huge amounts of money associated with the project.
• Food minister K V Thomas had said that the total financial liability to implement the law would be Rs 3.5 lakh crore, as funds would be required to raise agriculture production, create storage space and publicity among others. Each stage presents an opportunity for making easy money and there are no checks and provisions to prevent it. which it has been dealt shows lack of concern and callousness.

Point considering into notice:

• Legal entitlement to subsidized foodgrains to be extended to at least 75% of the country’s population - 90% in Rural areas and 50% in urban areas
• The priority households (46% in rural areas and 28% in urban areas) to have a monthly entitlement of 35 Kgs (equivalent to 7 Kgs per person) at a subsidized price of Rs. 1 per Kg for millets, Rs. 2 per Kg for wheat and Rs. 3 per Kg for rice
• The general households (39% rural and 12% urban in phase 1 and 44% rural and 22% urban in final phase) to have a monthly entitlement of 20Kgs (equivalent to 4 Kgs per person) at a price not exceeding 50% of the current Minimum Support Price for millets, wheat and rice
• The minimum coverage, entitlement and price to remain unchanged until the end of the XII five year plan
• Government of India to specify the criteria for categorization of population into priority and general households
• In the first phase, food entitlement to be extended to 72 per cent of the population. In the final phase, to be completed before March 31, 2014, full coverage of food entitlement (to 75 per cent of the population) to be ensured
• Legal entitlements for child and maternal nutrition, destitute and other vulnerable groups

·         Reform of the Public Distribution System

Best way for addressing issues :

·         The right way to guarantee every Indian food security is to act to make India a major source of the additional food the world demands,

·         To invest in agricultural growth.

·         Harnessing water for scientific irrigation

·         Extension of know-how as well as in R&D

·         Rural roads that provide vital physical linkage to markets.

·         Electronic spot exchanges.

·         Scientific storage and efficient transport logistics.

·    Developing as close a link as possible between the farmer and the first stage of food processing.

·         Proper regulation of financial markets in agricultural commodities, futures, derivatives and insurance.