National Food Security Bill and its working

The quantum of grain required for Right to Food is not the problem. The issue really is of making the PDS deliver.

For all the criticism aired against it, the National Food Security Bill (NFSB) strikes a reasonable balance between providing subsidised foodgrain entitlements for a large section of India's population that needs it and the feasibility of extending this right by law. From a grain availability standpoint, there is nothing insurmountable about meeting the goal set under the Bill, slated for tabling in the current session of Parliament. The NFSB proposes to cover 46 per cent of the country's rural and 28 per cent of the urban population — together about 49 crore people as per the 2011 Census — under the ‘priority' category. These households would be given a monthly grain quota of seven kg per person, translating into an aggregate annual requirement of roughly 42 million tonnes (mt). Supplying it should be no problem, as Government agencies have been procuring an average 53 mt of grain (31 mt rice and 22 mt wheat) in the last five years. Any fears of open market prices rising on account of ‘priority' household entitlements are, hence, misplaced. These apprehensions would stand further diminished, given the state of the public distribution system (PDS) in Uttar Pradesh or Bihar that house much of India's poor. Even if the Bill gets passed, it will take some time for these States to implement the scheme on the ground.

Besides ‘priority' households, the Bill also seeks to cover another 29 per cent of the rural and 22 per cent of the urban population under the ‘general' category. For these additional 33 crore people, the individual monthly grain entitlement is limited to 3 kg or 12 mt, taking the total grain requirement to 54 mt. This virtually corresponds to the existing levels of procurement, which may actually go up with the Government's plans to extend the Green Revolution to Eastern India.

The problem with the NFSB is not with supply as much as the unrealistically low rates – Rs 2-3/kg for ‘priority' households – at which grains are be priced. The implications here are not just fiscal; selling at these rates increases the possibility of leakages, while also disincentivising farmers from cultivation. A better idea would be to make available grain through PDS outlets at open market prices and separately issue food stamps or vouchers to the targeted population against the purchases they make. For this, it is not necessary for the PDS prices to dynamically match the market prices; even a reasonable alignment would eliminate the temptation for diversion. The stamps/vouchers, representing the difference between the open market price and the desired lower rate for the targeted quantity of grain, could be subsequently encashed through traditional banking channels. The Government's focus must primarily be to ensure that the PDS has enough quantity of grain to sell, which will happen if there are no leakages. Simultaneously, it should step up procurement by getting not only state agencies, but even private players to buy on its behalf at the official minimum support price. That would be a win-win for both farmers and food-insecure consumers.

Food Security Bill likely to hurt the poor more

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. 

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: in harnessing water for scientific irrigation, in extension of know-how as well as in R&D, in rural roads that provide vital physical linkage to markets, in electronic spot exchanges, in scientific storage and efficient transport logistics, in developing as close a link as possible between the farmer and the first stage of food processing and in providing proper regulation of financial markets in agricultural commodities, futures, derivatives and insurance. 

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.