The current Food Security Bill creates a statutory entitlement for the included population and its

obverse — namely a legal obligation for the Government to provide subsidised food grains to vast
section of poor in India.

Therefore, it is important to ensure adequate availability of grain with the public authorities to fulfill
the underlying obligation. Given the current trends in rates of growth in food grain production and
yields, and the growing pressures on land and water in the wake of climate change, there is a
possibility that food grain availability on sustainable basis becomes a constraint. With 60 per cent of
India’s farmland dependent upon monsoon rains, drought years can slash production and force the
country to import large quantities. The Government already procures one-third of the cereal
production and any increase in it will have enormous ramifications on the cereal economy/markets
and would crowd out private sector operations with a consequent effect on open market prices.

The food subsidy in coming years will balloon due to the issue of lower price of grain, a significant
rise in the number of entitled beneficiaries and the need to keep raising the Minimum Support Price
(MSP) to cover the rising costs of production and to incentivise farmers to increase production. The
existing food security complex of procurement, stocking and distribution would further increase the
operational expenditure of the scheme given its creaking infrastructure, leakages and inefficient
governance. This raises the issue of sustainability of the financial obligations entailed in FSB.

The following excerpts from the Bill best summarises the rationale for the Bill:

“Article 47 of the Constitution, inter-alia, provides that the State shall regard raising the level of
nutrition and the standard of living of its people and the improvement of public health as among its
primary duties. Eradicating extreme poverty and hunger is one of the goals under the Millennium
Development Goals of the United Nations.”

The Food Security Bill aims to provide Food Grains entitlement per person is fixed at RS 7/Kg, which
includes Rs 3/Kg for rice, Rs 2/Kg for wheat and Rs 1/Kg for coarse grains. The Bill aims to cover 75
per cent of rural population and 50 per cent of the urban population.

Contentious issues in Food Security Bill (FSB)

a) Where is the food at the time of a crisis?

The Bill provides for a Force Majeure Clause (Clause 52) that “the Central Government, or the State
Governments, shall not be liable for any claim by persons belonging to the priority households or
general households or other groups entitled under this Act for loss/damage/compensation, arising
out of failure of supply of foodgrains or meals when such failure of supply is due to conditions such
as, war, flood, drought, fire, cyclone, earthquake or any act of God.”

b) FSB imposes a highly centralised model discouraging customised State-level initiatives

The draft Bill in the current shape gives a legal sanction to a highly centralised procurement and
distribution model. All guidelines, rules will be prescribed by the Centre, including criteria for priority
households, exclusion criteria, reforms in TPDS, price at which the State Government is required to
sell the food grains to the entitled persons – to name a few. It leaves no room for
experimentation/customisation for the States suited to their specific choices, institutional strengths
and weakness.

c) Volatility in production

Volatility in food systems due to exogenous shocks from weather related events or instability in
international markets compromises National Food Security. While India has achieved much in
augmenting food grain production, especially of rice and wheat, curbing volatility in year-to-year
production remains a critical challenge. The volatility in coarse cereals is much higher than that of
rice and wheat, intensifying the pressure on rice and wheat in drought years. Indian agriculture is still
highly dependent on rainfall and drought years cause production and stock declines which can take
a couple of years to be made up.

d) Procurement

FSB would require procurement for Central Pool and would depend upon the existing system
particularly Food Corporation of India (FCI). Currently, FCI procures mainly paddy and wheat
(primarily through State agencies) from farmers (at MSP) and in the form of rice from millers (at levy
price). It is essentially a system of an open-ended procurement under which FCI is obligated to buy
all the grains that farmers offer to sell at the prescribed procurement price (MSP plus bonus) as long
as the grains meet a certain quality standard. The high cost of operations has been evident and well
documented.

e) Imports

Given that NFSB commits for legal entitlements of food (especially rice and wheat), India will have to
carry a much larger stock of these to avoid any eventuality of large scale imports of rice and wheat in
the event of domestic shortfall (as happened in 2002-03 when grain production fell by 38 million
tonnes). If this is not done, India will risk high cost of cereal imports in times of need, especially
during drought years.

f) Reforms in TPDS

The problem of fake ration cards has been addressed by a number of States by computerisation of
databases and using hologram-enabled technologies to eliminate the duplicate cards. A key reform
being proposed involves using Aadhaar number based application for improving delivery of food
grains through Public Distribution Sysytem (PDS). The solution aims to tackle the primary issue of
identifying eligible beneficiaries, removal of bogus ration cards and provide choice of FPS to the
beneficiary to procure food grains. With respect to private sector participation in PDS
reforms, Madhya Pradesh has taken a significant step and used private sector to put in place a
system to computerise the PDS and register beneficiaries with their Aadhaar number and provide
the food coupons to the beneficiaries.
g) Financial Challenges
The large-scale subsidised grain distribution to almost two-thirds of the country’s population of 1.2
billion implies massive procurement of food grains and a very large distribution network entailing a
huge financial burden on the already burdened fiscal system. The stated expenditure of Rs 1,20,000
crore annually in NFSB is merely the tip of the iceberg. To support the system and the welfare
schemes, additional expenditure is needed for the envisaged administrative set up, scaling up of
operations, enhancement of production, investments for storage, movement, processing and market
infrastructure. The existing Food Security Complex of Procurement, Stocking and
Distribution- which NFSB perpetuates- would increase the operational expenditure of the Scheme
given its creaking infrastructure, leakages and inefficient governance.

Over and above that, the yearly Food Subsidy Bill itself is likely to gallop. The estimate of food
subsidy would depend upon economic cost, central issue price of food grains, number
of beneficiaries covered and quantities of food grains allocated and lifted. The food subsidy in the
coming years will balloon due to the lower central issue price of grain, a significant rise in the
number of entitled beneficiaries and the need to keep raising the MSP to cover the rising costs of
production and to incentivise farmers to increase production. These issues raise doubts on the
sustainability of the financial obligations entailed in NFSB.

h) Inflationary pressures on food prices

India has recently been experiencing high food inflation in the face of record production of food
grains, robust buffer stocks and growing resilience of agriculture to monsoon uncertainties. A distinct
feature of recent food price inflation has been the sustained price pressure in protein rich items
(pulses, milk, fish, meat and eggs). According to RBI, the inflationary impact of NFSB will depend on
the extent to which it will raise demand for food grains relative to the normal increase in supply. This
will create demand pressures, which will inevitably spillover to market prices of food grains.
Furthermore, the higher food subsidy burden on the budget will raise the fiscal deficit, exacerbating
macro level inflationary pressures. Additionally, the need to procure large amounts would need a
consistent rise in MSP of the foodgrains to incentivise their production further fuelling the inflationary
pressures. This will create further macro-economic imbalances.

The above analysis shows that it is imperative that we look at the entire system of food production,
food procurement and the release and distribution of food for achieving food security.

Trying to correct one segment of this complicated system is likely to end up in failure or, at best,
have limited success. While food grains are central to food security, diversifying demand patterns
need to be appreciated for holistic approach to Food and Nutritional Security. It has to be
appreciated that the issue of food security is not so much about availability of grains but more the
composition of the overall food basket as observed in changing consumption patterns. In light of the
issues raised above, the long-term feasibility of the envisaged strategy under NFSB needs to be
carefully debated in national interest.

It needs to be recognised that malnutrition is a multi-dimensional problem and needs a multi-

pronged strategy. The challenge of improving absorption lies in linking nutrition with health,
education and agriculture interventions. Women’s education, access to clean drinking water,
availability of hygeinic facilities is the prime prerequisites for improved nutrition. To begin with an
effective convergence of schemes like Mid-day meals and ICDS can then be attempted.
Food Security Bill: Good politics to deliver bad
economics
Annapurna Singh
A bill duly tabled in Parliament promises to give legal right to subsidised food to two-thirds of the
country’s 1.2 billion population.
The ambitious proposal should be seen in the context of India being home to
roughly one third of the world’s poor; where over 70 per cent of children are
malnourished and about 10 million or more people die of chronic hunger or hunger-
related diseases every year.

The Food Security Bill, the UPA-II’s flagship scheme, envisages the distribution of
wheat, rice and coarse grains at just Rs 2, Rs 3 and Re1 a kilo each to about 65
per cent of the population — 75 per cent of them in rural areas and the rest in cities
and towns. Add to that, some entitlements to ‘special groups,’ like destitutes or homeless persons, who
will be entitled to at least one meal a day.

Through this world’s largest experiment of providing food grain to poor, the government plans to double its
food subsidies to 2 per cent of the GDP. If the government machinery is able to deliver on Congress chief
Sonia Gandhi’s pet project, it could mean the end to country’s widespread malnutrition and poverty
relatively soon!

“It’s a most thoughtful and timely action, in the light of coming UP elections and thereafter the 2014
general elections,” said Prof B B Bhattacharya, eminent economist and former vice-chancellor of
Jawaharlal Nehru University.

Then what is the clamour all about? Why are some people hell-bent on opposing it? The general view is
that if the government can pull it off, it can be the biggest trump card for the UPA government, at a time
when nothing seems to be working in its favour at the moment –- neither politics nor economics.

Bad economics
But, one very important factor worth taking notice is: the scheme can severely impact on India’s economic
growth prospects, should the populist measure be brought into force.

The proposed Food Security Bill came on a day (Thursday) when the Reserve Bank of India also came
out with its Financial Stability Report, which categorically states that India’s inflation risk remains high
and a slowdown in revenue collections and higher spending on subsidies may make it challenging for the
government to achieve the fiscal deficit target of 4.6 per cent of the Gross Domestic Product (GDP) this
financial year (2011-12).

It also said that India’s trade deficit for this fiscal is expected to widen sharply to between $155 billion and
$160 billion from a little above $104 billion a year ago.
Economy watchers say, both these deficits will only bloat immensely in due course, should the bill be
passed and implemented. But, it is the trade deficit, which will soar manifold since the government will
have to resort to large scale import of food grain as our own grain output is not adequate to handle such a
voluminous expenditure programme.
“It will worsen the fiscal deficit situation, but more than that it is India’s trade deficit which will be hit hard
as the programme will require 70-80 million tonnes of more food grain every year. India obviously does
not produce that much and the shortfall will have to be met from imports,” said Prof Bhattacharya.

The country produces 225-230 million tonnes of food grain every year barring a bumper crop year when
the output surges by a few million tonnes more. Where will the rest come from, if not from overseas
market! Economists opine, it will increase food inflation.

Analysts at Kotak Mahindra Bank said that besides skewing the food inflation to a higher side, the move
will also result in rise in prices of food grain for non-beneficiaries of the programme. “There will be
pressure on prices of food for those outside this scheme,” an economist of Kotak said.

Procurement problem
As regards the increased requirement of food grain for distribution under the Act, Union food minister K V
Thomas said only 15 per cent more supplies would be needed as the Centre is already distributing 526.8
lakh tonnes through public distribution system, while the estimated demand under the Act will be 607.4
lakh tonnes. He said government can even procure more for the purpose. Currently, government procures
only 30 per cent of the total production.

But, what about government’s delivery mechanism? “If the government goes in for enlarging the public
distribution system without revamping it, where is the guarantee that the intended food grain will reach the
poor?,” Bhattacharya asked. Then there is problem of storage. Currently, the state-run Food Corporation
of India and the Central Warehousing Corporation have the capacity to store 87 million tonnes of grain.
The CWC has 487 warehouses with a capacity of 10.6 million, while the FCI, with 1,500 godowns,
accounts for the rest.

The new measure, according to experts, will cost an additional sum of Rs 27,000 crore annually to the
exchequer, while the government puts it at Rs 21,000 crore by way of subsidies. But, the question is: can
a government, burdened with whopping food, fuel and fertiliser subsidies, afford such a large expenditure
programme, especially when the Mahatma Gandhi National Rural Employment Guarantee Scheme is
already drilling a large whole in the nation’s kitty?

Policymakers say that the government can find resources provided it cuts down or ends the oil subsidy to
offset the additional burden arising out of the Food Security Bill. But the government is unlikely to do that,
as it will not go down well among the voters in an election year.
CONSIDER THE two best-known facts about India’s food economy. On the one hand, 42 percent of our little
children are malnourished. On the other, our godowns are bursting with foodgrain. Can we join the dots by
drawing a straight line from the warehouse to the homes of the hungry?

That’s only the most obvious of our food system’s glaring contradictions. subsidies on food and agriculture
have shot up and bumper crops have been harvested, but instead of bringing down food prices, it seems to have
had the opposite effect. Farmers are being paid more than double what they were 10 years ago for their
foodgrain and retail prices of food have gone up — but they are still committing suicide.

We congratulate ourselves on record foodgrain exports at a time when per capita food availability at ho-me is
declining — and we lose money on every tonne that we export. Exporters make profits, but the exchequer
loses.

Into this crazy picture, the UPA government proposes to introduce the National Food security Bill. No one
knows what impact it will have — economic, political, social — but it appears set to become law nonetheless.
Will it fix the problem or cripple the economy?

The success of the MGNREGs, which was passed in the teeth of considerable opposition, is held up as an
example of a positive social legislation that worked. so why should the Food security Bill not prove an even
bigger game-changer?

It is not a perfect Bill and has been variously criticised for low food entitlements, inadequate attention to
nutrition, too much discretion to state governments in identifying beneficiaries, a poor grievance redressal
mechanism and providing scope for substituting the Public Distribution system (PDs) with cash transfers.

However, there’s no argument against a framework law on the right to food per se. When asked whether India
could afford to have a statutory right to food, Food minister KV Thomas answered, “Can we afford not to?”

Agriculture minister Sharad Pawar voiced his doubts in the Union Cabinet. If a small farmer could get
foodgrain for as little as Rs.1 per kg, as proposed in the Food Security Bill, why should he bother to grow his
own? And what would happen in a bad crop year, or successive bad years?

Policymakers clearly have little idea how much implementing the Right to Food will cost. In the current year,
Finance minister P Chidambaram has allocated only Rs 90,000 crore towards the food subsidy, of which Rs.
10,000 crore is the additional amount for implementing the Food security Bill. The food ministry estimates that
the subsidy bill in the current year is likely to cross Rs 1.3 lakh crore.

And even this is inadequate, according to a paper by the Commission on Agricultural Costs and Prices, which
puts the cost at Rs 2.41 lakh crore in the first year of implementation. Over three years, it says, the outlay will
be Rs 6.82 lakh crore, including the Rs 1.1 lakh crore required for upscaling food production.

Whatever the figure, the fact is that every year, the minimum support price (MSP) will go up and impact the
food subsidy bill. since 2003-04, MSPs of wheat and rice have more than doubled, from Rs 640 to Rs 1,350
per quintal in the case of wheat, and from Rs 550 to Rs 1,250 for paddy. But the food subsidy bill has gone up
more three times in the same period, from Rs 25,181 crore to Rs 85,000 crore. This is because handling and
storage costs have gone up as well.

small wonder that there is an annual tug of war between the ministries of food and agriculture. The former, as
the purchaser, does not want the MSP increased. The latter, representing farmers, insists that it must be.
The MSP is a political and an economic necessity; it is especially relevant to farmers who have the means to
produce surplus foodgrain for the market. Farmers have come to expect procurement at the time of harvest —
this is because market prices are known to fall below the “minimum” prices set by the government during the
harvest glut. According to Thomas, “We are bound to provide food and to procure… when the farmers who
have grown the grain are waiting for you to procure, can you say no?”

Given annually escalating costs, will the Food security Bill cripple the economy? The head of a leading global
commodities major observed, “You will run your ship into the ground. If you implement the Food security Bill
today, India’s credit rating will fall by two points tomorrow.”

But economist Jean Drèze says the Bill makes sense, not merely on civilisational, but economic grounds.

The government has sought to balance the Budget by cutting back on the fertiliser subsidy. In 2009, a nutrient-
based subsidy regime was introduced, whereby the price of non-urea fertilisers was decontrolled. The retail
prices of fertilisers (except urea) increased, with the popular di-ammonium phosphate (DAP) going up almost
30 percent over 2011 and muriate of potash (MOP) by 40 percent.

Already burdened by a 100 percent increase in labour costs due to the MGNREGs, the hike in fertiliser prices
has inflated input costs to the point of making farming unsustainable, so that farmers are forced to lobby for an
increase in MSP. It also drives farmers into debt, the leading cause of farmers’ suicides.

Once the MSP goes up, so does the cost of procurement and therefore, the food subsidy bill. so, trimming the
fertiliser subsidy pushes the food subsidy up: a Catch-22 situation.

The case for reducing subsidies on fertilisers goes something like this: fertiliser consumption has gone up
much faster than crop production. To get the same quantum of grain, you use more fertiliser every year. By
making fertiliser unaffordable for farmers, you force him to look for cheaper and more soil-friendly
alternatives, like bio-manure. At the same time, policymakers lament the fact that India’s fertiliser use is low,
far below optimum levels.

According to Ajay Jakher of the Bharat Krishak samaj, farming simply isn’t viable without subsidies and the
Indian farmer gets a fifth of the subsidy given to a Us farmer. He believes a drop in farm subsidies would lead
to a fall in consumption and a drop in production. “If fertiliser subsidy is withdrawn, production could drop 18
percent,” says Jakher. That would be catastrophic for food security.

Currently, production and availability of foodgrain for implementing the Food security Bill does not appear to
be an issue. We have had bumper crops every year — 259.32 million tonnes in 2012-13 — and have enormous
buffer stocks. The Food Corporation of India (FCI) expects to procure some 44 million tonnes of wheat this
rabi season, so its stocks may well touch 100 million tonnes. On 1 march, India’s food stocks stood at 62.8
million tonnes.

Stockpiling by the FCI has led to an artificial shortage of wheat despite bumper crops and pushed up domestic
prices. Food policy expert Biraj Patnaik sees no sense in building up such massive stocks at a huge cost. And
then, unable to manage them, the government resorts to exports. “You are exporting foodgrain at subsidised
rates — feeding cattle and pigs in other countries — instead of giving it to the poor.”

FCI CHAIRMAN Amar Singh admits it has lost money on exports. Given that the economic cost of wheat is
Rs. 19,100 (per metric tonne) and the minimum export price for wheat fixed by the government is in the region
of Rs. 16,200, the losses are estimated at Rs 1,700 crore for the previous year. According to The Wall Street
Journal, “Global prices have tumbled in the past week below the government fixed minimum export price of
$300 a metric tonne to about $270.” Even so, the government is considering further exports to decongest its
godowns.

On the one hand, there appears to be a glut. On the other, per capita availability of foodgrain stands at 462.9
gm in 2011 — less than 170 kg per person per year. This makes our food security situation look quite
precarious, especially given the fact that the average food availability for 2006-10 was 404.62 gm per capita.
Declining per capita availability of foodgrain has been a major concern in India, says the Economic survey for
2012-13.

Another characteristic of our food economy is the focus on cereals to the exclusion of nutrient-dense items like
pulses and oilseeds, with the result that we are import-dependent for both. Protein and cereal consumption in
both rural and urban areas is declining, giving the lie to the specious argument that calorie consumption has
fallen because Indians are shifting to high-protein diets. As Patnaik points out, the major drivers for food
inflation have not been cereals, but protein-rich food items. little wonder our malnutrition indices are worse
than those of sub-saharan Africa.

Compounding these problems is the leakage from the PDs, variously estimated by researchers at 40 to 55
percent. Although the situation appears to be improving, the leakage is still unacceptably high. To plug the
leaks, the Centre has proposed introducing direct cash transfer of the subsidy to the beneficiaries.

Chhattisgarh, the only state to have enacted a food security law, also has the best performing PDS after Tamil
Nadu. A combination of policy, policing and adminstrative measures — opting for wider coverage rather than
targeted distribution, putting ration shops in the hands of those trusted by the community they serve, incentives
for those running the fair price shops, computerised tracking of foodgrain, weeding out bogus BPL (below
poverty line) cards and zero tolerance for pilferage — has resulted in efficient delivery of foodgrain to 74
percent of the population.

The Chhattisgarh Food Security Act extends coverage to 90 percent of the population. significantly, apart from
grains, beneficiaries are entitled to 2 kg of pulses at Rs 5- Rs 10 per kg. The Chhattisgarh model would argue
that the Food Security Act can work without sinking the economy. But then, the state first fixed its leaky PDS
and gave its farmers incentives before enacting the law.

So, tackling silent hunger may well be about the governance gap, not the fiscal deficit.

letters@tehelka.com
 Here's your 10-point cheat-sheet on the Food Security Bill:

1. Critics say at a time when India's economy is growing at its slowest pace in a
decade, the Rs. 1.23 lakh crore populist scheme will simply add to the fiscal nightmare.
2. India's food subsidies account for nearly 40 per cent of overall subsidy costs and that
bill is expected to soar to more than 50 per cent once operationalised.
3. Some activists feel that the bill may not be an instant solution to the problem of
malnourishment, as its benefits will not reach those who are in need. "If we leave any room
for corruption in the bill, it will lead to its non-implementation, and will also in a sense make
entitlements to not reach the poor people. And hunger and malnutrition will continue to be
in place," said Sachin Jain, an activist.
4. Currently, 61 million children in India suffer from malnourishment, statistics that's
worse than some of the poorest countries like Bangladesh or regions like Sub-Saharan
Africa. The Food Security Bill, which is championed by Congress president Sonia Gandhi,
promises wheat at Rs. 2 per kilo and rice at Rs. 3 to nearly 70 per cent of India's
population.
5. Many families think that the scheme could literally be a life-saver for them. "I am not
able to provide proper food to my children. There is only one member of family working in
the mines, how can we afford nutritional food?" says Saroj, a villager in Madhya Pradesh.
Her husband Vikash earns just Rs. 1,000 per month as a mine worker. His meagre salary
is just not enough to feed the family of five.
6. The malnourishment situation is acute in the country but despite that, the
government has decided to triple its wheat exports this year to a record six million tonnes.
The Centre has also moved to procure an additional 53 million tonnes of foodgrain, but the
decision will stretch the existing storage capacity, resulting in overflowing godowns,
something the activists feel is criminal.
7. The passage of the bill also faces some political hurdles. The Opposition, led by the
BJP, has opposed the ordinance route to the food security bill. The BJP has said it wants a
debate in Parliament on the proposal.
8. More than the Opposition, the Samajwadi Party (SP), whose support is crucial to the
stability of UPA, is strongly opposed to the bill. SP chief Mulayam Singh Yadav has openly
opposed the bill as "anti-farmer". The Left too had attacked the government for trying to
force the scheme without an adequate discussion in Parliament about logistics or its
impact on farmers.
9. The government has abandoned any plans it may have had to get it passed in
Parliament based largely, sources say, on suggestions from the Election Commission that
state elections will be announced by September 22. That gives the ruling coalition a
narrow window to push through as an ordinance using its special constitutional powers.
10. The ordinance must be cleared by Parliament within six weeks of its next seating;
sources say this may provoke the government to delay the Monsoon Session.
 ECONOMICS FOR EVERYONE – Food Security Bill in India

Prof. M. Guruprasad – AICAR Business School/ Mumbai 10:32 , Jul 05, 2013

The National Food Security Bill, UPA government's ambitious social welfare programme, at present is awaiting
its passage in Parliament.

CONTEXT

- Cabinet to take up ordinance on Food Security Bill

- Food Security Bill faces fresh challenge

- Congress to discuss Food Security Bill today

- BJP seeks debate on food security bill to plug 'loopholes'

CONTENTS

What is the food bill and its purpose?

What are the proposals?

Back ground history

What is the debate?

CONCLUSIONS

What is the food bill and its purpose?

The Food Security Bill (FSB), which had been in the works since UPA took office for the second time in 2009, finally
received the nod from the cabinet recently. The National Food Security Bill, UPA government's ambitious social
welfare programme, at present is awaiting its passage in Parliament. It was tabled in the Lok Sabha recently amid
uproar created by the Opposition over allegations of corruption in the UPA government.

National Food Security Act, 2013

To provide for food an nutritional security in human life cycle approach, by

ensuring access to adequate quantity of quality food at affordable prices to
people to live a life with dignity and for matters connected therewith and
incidental thereto.
What are the proposals?

EARLIER PROPOSALS

The Council has suggested two broad categories - priority and general, under the proposed food security law. If made
into a law, the draft Food Security Bill would reduce the allocation for a below poverty line (BPL) household (e.g. in
the case of Antodaya Anna Yojana) from 35 kg of rice/ wheat per month to 25 kg of rice/ wheat per month.

Recently the government has come with a proposal to redraft the Food Security Bill and will include fresh suggestions
from the Planning Commission and the Food Ministry.

PRESENT PROPOSALS

The proposed bill aims to provide legal right over subsidised food grain to 67 per cent of the population. The bill
proposes to provide all beneficiaries uniform allocation of 5 kg food grain (per person) at fixed rate of Rs. 3
(rice), Rs. 2 (wheat) and Rs. 1 (coarse grains) per kg to 75 per cent of the rural population and 50 per cent of the
poor in urban India. Protection to 2.43 crore poorest of poor families under the Antodaya Anna Yojana (AAY) to supply
of 35 kg food grains per month per family would continue. Nutritional support to pregnant women without limitation
are among other changes proposed in the bill. It will be linked to the Aadhar scheme which provides every citizen with
a unique identification number that's linked to a database that includes the biometrics of all card-holders. At the
proposed coverage of entitlement, total estimated annual food grains requirement is 61.23 million tones and is likely
to cost the exchequer Rs.1, 24,724 crore.The panel wants the first phase of food security law implemented from the
beginning of the next financial year, and wants the entire country covered by 2014. If that happens, it will cost the
government over Rs. 23,000 crore more additionally in the annual food subsidy. Now the government's annual food
subsidy bill stands at over Rs. 56,000 crore.

The implementation would rely excessively on existing infrastructure and logistical support of the public distribution
system (PDS).In 1997, the PDS was reformed and converted from a universal to a targeted programme, the TPDS,
which focused on different levels of subsidy for three categories of households: APL (above poverty line), BPL (below
poverty line) and Antodaya (ultra poor) households.

KEY HIGHLIGHTS OF THE PRESENT PROPOSAL

The government will provide food entitlement to 75% of the

population in rural India and 50% of the population in cities. Each eligible
household will get 5 kg of food grain per person per month.
The grains will be available at Rs 3/2/1 per kg of rice /wheat /coarse
grains.

Anganwadis to provide age-appropriate meals to children aged

between 6 months and 6 years.

Mid-day meal scheme will provide food to children aged between 6

years and 14 years

Breastfeeding to be promoted for children below 6 months.

State food commissions to be created that will monitor and

evaluate the implementation of the Act as well as redress grievances.

Central and state governments will undertake PDS reforms.

The central government will provide food grains (or, failing that,
funds) to state governments, at prices specified, to eligible households.

BACKGROUND HISTORY

The National Food Security Bill is the brainchild of Congress president Sonia Gandhi. The bill was originally
introduced in Parliament in December 2011. The government had tried to take up the bill in Parliament also but could
not as Opposition members disrupted the House, demanding Prime Minister's resignation over the coal blocks issue.

Ms.Sonia Gandhi, the Chairperson of the National Advisory Council wrote to the Prime Minister during October, 2010
forwarding the basic framework of the proposed National Food Security Bill (NFSB). In another letter on November,
2010 to the PM, she suggested a close examination of the proposal of the Ministry of Rural Development (MoRD) to
replace the existing BPL survey with a socioeconomic census/ survey to be conducted by the Registrar General and
Census Commissioner of India. The Prime Minister set up an Expert Committee under the chairmanship of Dr
C.Rangarajan to examine the implications of the proposals of the NAC and MoRD and make suitable
recommendations. The members of the Expert Committee include Member Secretary Planning Commission, Chief
Economic Advisor, and the Secretaries of Departments of Agriculture & Cooperation, Expenditure and Food & Public
Distribution. It has also been suggested that views of other Secretaries and Registrar General of India and Census
Commissioner may be obtained if required. The Expert Committee has been requested to submit its report within one
month.

EVOLUTION OF THE IDEA:

The right to food campaign started when the Rajasthan unit of the People’s Union for Civil Liberties filed a writ
petition in the Supreme Court in April 2001 demanding that the country’s food stocks be used to alleviate hunger and
malnutrition. The prolonged battle between the PUCL and the Union of India led to many “interventions”, like
instituting food commissioners, to ensure universalisation of welfare schemes like mid-day meals for schoolchildren.
With the success of MNREGA, the activists had asked the UPA a simple question when it took over the second time
in 2009.

Addressing a joint session of Parliament earlier, the President of India announced that India will soon pass a Food
Security Act, which will ensure at least 25kg of wheat at Rs. 3 per kg to every household below the poverty line.
Since then there has been a raging debate on the scale and scope on the potential Act. Two drafts of the proposed
legislation have been passed around policy circles: one version that mainly focuses on the delivery of grain to poor
households through reforms of India’s large food subsidy programme and another prepared by activists who are part
of the Right to Food Campaign, a people’s movement that hopes to enshrine broader entitlements to food in law.

It is to be noted that the Supreme Court of India had passed orders regarding the right to food with respect to the
following

• Converted all food and employment schemes into legal entitlements

• Universalised food entitlement programmes for children (ICDS for children under six and Mid Day Meal Scheme
(MDMS) for all primary school children)

• Instituted the independent mechanism of Commissioners to the Supreme Court to monitor all food and employment
programmes

• Prevented the reduction of the “poverty line” from 36% to 26%

Since then the government of India has made the following policies

• Universalisation of MDMS (120 million children get school meals) and ICDS (Government would need to double
the ICDS centres to 1.4 million centres covering 60 million children under the age of six)

• Managed to restrict the lowering of BPL quotas by GoI from 36% to 26%

• Increase in off-take of subsidized food-grains through the targeted public distribution system

• Increased budgetary allocation for ICDS, Old Age Pensions

• Passage of the National Rural Employment Guarantee Act which guarantees 100 days of employment a year (at
minimum wages)

• Brought the discourse on food rights to the centre-stage of governance in the States and Government of India.
The case of Chhattisgarh:

Food security model of Chhattisgarh has been acclaimed at national and international level. Even Supreme Court
and World Bank have recommended central government to adopt Chhattisgarh's public distribution system as model
for implementation in other states of country. According to experts, the change began with Chhattisgarh wresting
ownership of ration shops from private traders and handing over control to self-help groups, panchayats and
cooperatives. This has meant greater accountability, unlike in the past when villagers had to trek for several hours to
a privately-run ration shop that would open erratically, overcharge or claim it has run out of grain. There is also in
place an efficient, corruption-free back-end logistics chain. Signals from the top and fear of the law are key
ingredients. Regular review meetings are common - as are FIRs. Private rice mills, which mill paddy for the state, no
longer dare siphon off or adulterate rice.

WHAT IS THE DEBATE?

For a country which ranks 66 among 105 countries in the latest Global Hunger Index rankings, and which has a
deplorable 47 per cent of the children under 5 living in acute malnutrition, the government’s resolve to have a legally-
binding legislation on food security certainly provided a historic opportunity. But, contrary to expectations, it was
criticized by many sections of the media and experts. According to some the bill had a fundamental flaw, while some
others explained why it will not work.

Several points of contention have been raised by the experts related to the scope of the act which includes

- Level of coverage

- Level of Poverty

- Level of sustainability

- Crisis in the Agriculture Sector

- Policy differences

Level of coverage

The level of coverage debate involves

- Coverage in terms of issues or areas

- In terms of coverage of people(Universal or targeted)

One argument is should the act cover the broad set of issues that relate to food security, including land reform,
agricultural policy etc. or should the act be limited to concrete food entitlements- The enactment of the law is also
debated with diverse views on inclusion and exclusion of beneficiaries and provisioning of commodities. Given the
problems with identifying the poor and the large errors in existing BPL lists, there was a strong case presented for
universal coverage. Those who support this say that this is possible since we have a procurement of over 200 Million
Tonnes of wheat and rice, and, the Central Pool, intended for buffer capacity has more than twice the buffer norms.
On the other hand, others argued that agricultural production, resource and capacity constraints might initially call for
some form of targeting. The draft bill has received some support on the grounds that creating a universal right to food
will create too much of a burden on the exchequer, and that the production is insufficient to meet the requirement that
will be created.

Members from the Right to Food Campaign have expressed its concern at the fact that the bill instead reduces the
ration the government provides to the poor under the current targeted public distribution system in the proposed
legislation. They expressed their concern that the proposed bill intends to exclude a large section of the population by
targeting only those selected as living below the poverty line.

Level of Poverty

Also, it is complex to determine the number of poor in this country. Four separate surveys and commissions, all
sponsored by the Central Government have estimated figures varying from a modest 27.5% (Planning
Commission) to a high of 77% (Arjun Sengupta Committee).

Level of sustainability

The level of sustainability debate concern with the issue of

- Environmental issues

- Ground water utilisation

The World Development Report 2008-Agriculture for Development, which has been brought out by the World Bank
mentions that India presently faces the problem of depleting ground water level that makes agriculture unsustainable
and poses risk to environment. If rice is one of the food grains that would be supplied when the Food Security Act
comes into being, then more and more farmers would go for cultivation of rice. According to experts, a minimum
support prices (MSP) for rice increase the financial attractiveness of rice relative to less water-intensive crops, which
makes depletion of ground water table.

Crisis in the Agriculture Sector

The crisis in agriculture has been manifest in the growing incidence of farmers taking their own lives. At least 10,000
farmers have committed suicide each year over the last decade because of their inability of repay loans taken at
usurious rates of interest from local moneylenders.

Overall, the agriculture sector is mired with numerous problems such as low purchasing power of India's poor, low
rise in farm productivity, unremunerative prices for cultivators, poor food storage facilities resulting in high levels of
wastage, fragmentation of land holdings, fall in public investments in rural areas, especially in irrigation facilities,
volatile monsoon, inefficient machinery, role of the black marketers, food inflation and so on.

Policy differences

There were considerable debates within the government even at the drafting stage of the bill. A working group of the
Council will redraft the bill that was earlier prepared by the food ministry. The Council also wants to do away with the
Below Poverty Line (BPL) criteria for allotting cheaper food grains, which was a key proposal in the earlier food bill.

Political differences- needless to say governments delay in tabling the bill in the parliament or the oppositions
criticisms on the many dimensions of the bill is one of the major roadblock in the implementation of the bill.

Recently the government decided to bring in a special ordinance to make the Food Security Bill a legal right. The
government changed its mind and said it would make "one more effort" to convince the Opposition, thus deferring
plans to use an ordinance to provide subsidised food to nearly 70% of India's population. The government will try to
convene a special session of Parliament to clear the Rs. 1.3 lakh crore welfare reform."Our intention is to get it (Food
Bill) passed in a special session of Parliament," Finance Minister P Chidambaram said.

Conclusion

Experts have suggested various measures such as , Universal coverage, thrust on nutritional security, bottom-up
approach, removing corruption, more area under irrigation, balancing between the farmers income and the cost of
agriculture produce and hence the overall financial burden for the government, the real effectiveness of the program.
Therefore, the challenges in guaranteeing right to food in India remain complex. The nation needs an effective
policy tools and implementation to achieve the end objective of ensuring food and nutritional security in India.

-- BY PROF.M.GURUPRASAD

AICAR BUSINESS SCHOOL

A part from the positives of the Food Security Bill like affordable food being available to
all,negatives like its effect on the current account deficit should be taken into account.

Speaking on the subject, Sonal Varma, chief economist at Nomura. feels the fear of the
current year's fiscal deficit being overshot by the implementation of the Bill is unwarranted.

Besides Varma, Ashok Gulati chairman of the Commission on Agricultural Costs and Prices
and T Nanda Kumar, former Agriculture secretary discuss the nuances of the Food Security
Bill .

Gulati feels that the government's estimate of the Food Bill at Rs 1.3 lakh crore does not
take into account other peripheral costs that would be needed to implement the Bill
effectively, like increasing storage facilities and railway capacities.

Kumar feels another major worry would be that a totally cereal-focused kind of an
intervention could distort the long-term objective of giving adequate proteins and nutrition
through other means.

Here is the edited transcript of the discussion on CNBC-TV18

Q: There are varying estimates of what this bill will cost the exchequer and one of the
figure from the government is Rs 1.3 lakh crore per year. But that's the cost of
procuring the grain. As you have said in one of your articles this doesn’t include the
cost of more people, more transportation, more storage. According to you what is the
estimate of the total cost?

Gulati: The financial implication of this in the very first year of operation as per
governments calculation is about Rs 1.3 lakh crore. However what it does not take into
account is the other peripheral costs that would be needed to set up the thing in a manner
which is more sustainable and reliable.

For example the storage facilities have to be created, railways don’t have enough capacity
to carry the food grains and then the volatility in the grain production needs to be stabilised
otherwise there could be years like in 2002-2003 when in a single year the food grain
production dropped by 38 million tonnes. Where will you go to buy that food?
So, you need to invest in that. If you take into account these types of costs, our estimate is
that it will cost you more than Rs 2 lakh crore per year.

Q: That's the economic cost. Do you see any other adverse consequences, if such a
large work load and responsibility is put on the existing creaky public distribution
system (PDS) or ration shops network? For instance, will there be more pilferage,
more rotting of grains? What are the other possible adverse effects?

Kumar: The bill in its current form is an expanded PDS as it operates today. It takes away
the Antyodaya Anna Yojana (AAY) and combines it with below poverty line (BPL) and
reduces the price for BPL and calls it a priority category and then retains the above poverty
line (APL) formulation in another name called the general category.

So, there will be two categories of beneficiaries who will get rice and wheat and other grains
at different prices.

The system as it is today the PDS is run through about 5 lakh-odd private fair price shops
mostly. Leakages have been estimated of the order of 50 percent in 2004-2005. Probably
things have improved a bit and now there is talk of about 40 percent leakage - even that is
an unacceptable level of leakage.

The second issue is, it is a centrally administered, centrally sponsored kind of a programme,
which means that the responsibility of procurement of such huge quantities of grains will
rest with the central government, primarily the Food Corporation of India (FCI).

Remember that wheat procurement is confined largely to the four states of Punjab,
Haryana, Madhya Pradesh and Uttar Pradesh and rice from about four or five states which
include Andhra Pradesh, Orissa and Chhattisgarh.

Given this logistics problem, distribution of food grains and reaching them to places where
they need it most will be a major challenge.

The third issue is what does it do to the open market? Given the fact that our production of
rice is about 100 million tonne and wheat is about 85-90 million tonnes and the marketable
surpluses are only about 55-60 percent, if the government is going to procure most of it then
the private sector will be starved of supplies and that could lead to a certain set of
inflationary pressures on the open market.

As long as the government does not have a mechanism to release these grains into the
open market, we will have a little bit of a problem in handling the other side of the market
which is the private market.

Q: Do you see the current year's fiscal deficit itself being overshot? What about next
year which will be the first full year of the Food Security Bill?

Varma: This year the first quarter has already gone by and if this Food Security Bill is
introduced lets say in the next couple of months, its going to be in a phased manner. So,
this estimate of Rs 1.3 lakh crore may not be the food subsidy burden this year.

What the government has budgeted this year is about Rs 90,000 crore. That could
potentially go up by another Rs 10000 or so. However I think FY15 is where a substantial
burden is going to come in.

Over and above this Rs 1.3 lakh crore that we are talking about right now there has to be
more infrastructure building, storage, distribution costs, maintaining the buffer costs,
marking it to the Minimum Support Price (MSP) increases, the cost of food that is going to
go up every year and putting it altogether easily one could probably be looking at close to
Rs 2 lakh crore or so.

So, I think the fiscal implications are quite significant. It means that the ability of the
government to continue to give subsidies on other items is clearly going to get diminished.
We will have to look for new sources to finance the food subsidy burden.

So, it has tremendous fiscal consequences. We need to have a clear thought out strategy
on the implications this is going to have on the macro economy.

Q: To continue the discussion with you what maybe the other concomitant
macroeconomic distortions if the Food Security Bill became law, in terms of higher
deficit leading to higher interest rates, lower growth as well as perhaps distortions in
the argi economy?
Varma: I think when we are thinking about the food security, we need to compare it to the
National Rural Employment Guarantee because per se whatever is the expenditure on this
particular scheme the macro implications can be quite substantial and there the inflationary
consequence of this Food Security Bill is quite large.

Now 61 million tonnes is what the government will need every year, where is this going to
come from? So, the government needs to incentivise domestic producers, which means that
minimum support prices (MSPs) will actually have to go up at a higher rate inorder to
incentivise, which as we have seen historically has been inflationary.

Let us say there is a year where we have a drought, this is clearly going to mean we have to
import, so the moment India steps out in the global market to try to import, global prices are
going to up, so we will be importing at a much higher rate and then if you give this free food
to people at a lower rate more income is available, disposable income is available to spend
on other items.

So, this is by definition also inflationary. So, the inflationary consequences are quite
significant and we have been fighting five years of protein food inflation. If this scheme
leads to scarcity of available produce for private sector because government is basically
going to procure bunch of this then we would potentially be starring at double digit cereal
price inflation for also a sustained period of time. So, the inflationary consequences are
quite significant apart from the impact it has on the twin deficits and on the current account
if we have to import.

Q: This point about protein inflation has been interpreted by some experts to say that
the large part of the population has perhaps moved away from cereal to other kinds
of consumption and therefore by simply concentrating on rice and wheat there could
be serious distortions that the bill will introduce in the cereal economy itself, with
farmers producing something which perhaps the population is not looking for. That
the population is actually looking for probably pulses, milk, vegetables, fish, eggs
and other kinds of things. With your experience in the agriculture ministry are you
sensing that these distortions are going to creep in, this is worthwhile fear?

Kumar: Yes, this fear is quite justified. If you look at either the National Sample Survey
Organisation (NSSO) data or even look at how the Indian diet is changing, the cereal
consumption is coming down on a per capita basis except probably for the last bottom five
percent of the population, even that the recent NSSO shows has stabilised, whereas the
consumption of other things like vegetable, pulses, milk eggs whatever are increasing and
this is also the impact of growth in the Indian economy and any poor family the aspirational
level is to also include more items in their Thali as compared to what they were used to
earlier.

So, if by policy we encourage only cereals by giving much higher MSPs and the rest of the it
is left to the market forces, there are only two things that will happen one is that there will be
a scarcity of those items which will drive up prices and when you see good prices farmer
would probably start getting into producing those.

There are serious challenges in those production systems like cold storages, logistics etc.
So, one of the major worry’s would be that totally cereal focused kind of an intervention
could distort the long-term objective of giving adequate proteins and nutrition through other
means.

Q: What is the administrative bandwidth in the states and in the centre to be able to
implement something that is so ambitious even if it is worthwhile and secondly what
will be the political resistance given the fact that the bill reads in such a way that it is
actually imposing responsibilities on the states and if there are resistant state
governments either because they lack the political will or even the financial and
administrative will, will that lead to the bill just falling flat on its face, expenses
happening but the goods not getting delivered?

Kumar: Let me take the administrative issues first. The real core issue is this is to be
delivered every month, every month delivery from a procurement point to a distribution point
without fail and it has to reach every single consumer who has been identified as a
beneficiary, forget the problems in identification, forget the problems that identifying BPL
versus APL will have etc. those problems will continue to remain.

But even you reach this the logistics that is required, the storage that is required, the kind of
administrative backing that is required I don’t think exists today.

We are taking on something which is very large and which is not ready to be implemented
in many of India and if you look at the leakage figures, the states which have higher levels
of poverty are the ones with higher levels of leakage, which also shows the governance
deficit in those states, which is extremely important to address if you are really looking at
the issue of poverty.
Now the other question about states resisting this - one is we are moving away from a
decentralised procurement and distribution situation to a centralised procurement situation,
which is not good either for agriculture or for food security.
The major change that the Food Bill may need to have is to give adequate freedom to state
governments to procure and to distribute locally produced grains, which will probably take
care of a large number of problems and will also boost agriculture.

Q: Do you think the government should approach the food security issue more like it
has approached the goods and services tax (GST) - in a spirit of coordination with
the states and see how each state can contribute or take from the centre and from
each other?

Gulati: I think the best thing is because the deliver at the end of the round is on the states.
Are all the states onboard? This needs to be sorted out.
Comments have been taken into account and all that but personally at our level and
commission on agricultural costs and prices we feel there are better ways to do it and much
more cost effective. That is the route that most of the best practices internationally have
revealed.

There were many countries which used to physically handle all these grains procuring and
distributing almost all of them have moved away from it and gone in for more of conditional
cash transfers and those are today the best international practices because the technology
of information technology (IT) allows you to reach them.

We have to take this that it is not going to happen tomorrow, but at least the technology is
available to reduce those leakages to the minimum possible. We should work more towards
that rather than carry a system which is 60 years old and highly leaky and inefficient.

Q: The fashion of the day is to talk about cash transfers. But at the moment we have
a mountain of grains 80 million tonnes to be precise, which have been accumulated
because of our price support to farmers. Won't it make sense to distribute this grain
rather than allow it to rot and give cash food subsidies to the poor?

Gulati: What is happening is you want to ensure good income level to the farmer that is the
ultimate objective. It depends upon what is the productivity level and what is the price. You
can take last three years prices and last three years productivity and say this is the average
income level.
You can get that insured. US is discussing the Farm Bill exactly on these lines. More than
60 percent of the premium is going to be paid by the state. If whether the productivity goes
down below that or the prices go below down so that his net income goes below what is
insured then the farmer is compensated for.

So, they are using so called risk management. These are the new tools which are less
distorting the production structure. What we should be doing is basically procuring as
strategic reserves which is not more than 10-15 million tonnes you need. The rest of things
the state should come as a last resort not the first one to buy.

What happens is you ban exports and then everything falls on you. You put controls on
private trade to hold stocks, so everything falls on you. You put levy on rice millers so the
states procure. All these things and inter-state movement when you start banning all these
and use very restrictive market practices, the market collapses.

So, first you have to free-up and get the markets right. Then come as a last resort when the
market still fails because of one reason or the other the state should come.