Economics & Politics

Food Security Bill : Noble Intentions, Bad Economics?

Food Security Bill : Noble Intentions or Bad Economics?

“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.”

Food Security

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% of rural population and 50% of the urban population.

The Food Security Bill (FSB), which had been in the works for some time now, finally received the nod from the cabinet in March 2013. Though not doubting the noble intentions of the thought behind it, it was panned by expert across the spectrum. While some implied that the bill have some fundamental flaw, others explained why it will not work in practice, though looking good on paper. The bill received adverse reactions even from common man, who understand little economics.

The Food security for all is not an idea that the government came up with overnight. It’s been debated over several years and across several platforms.

Food for all

The Origin of the Campaign for Universal Food Security

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.

Meanwhile, the UPA’s first stint had achieved two very important results that propelled the right to food campaigners to push forward their agenda: The government had passed the National Rural Employment Guarantee Act (now the MGNREGA) and which, as its emerging now, is another huge disaster, may have helped India grow steadily during the tough global economic conditions, but now its impacting is being felt by the Indian economy and common people.Whats in the bill Why so Serious?

The argument had lost its edge primarily due to the sharp deceleration in India’s growth rate. From growing at an average of 9% between FY06 and FY11, India is huffing and puffing to even touch the 5 percent mark now. Slower growth has meant a steep fall in tax revenues.

The fiscal deficit is also a major concern and if India further slips on its promised 5.2% growth rate in FY14, the credit rating agencies could downgrade the country’s investment climate to “junk” status. If that happens, corporate India would find it harder, and costlier, to raise loans for investment.

“The Cabinet has approved it [the FSB] with great reluctance and obviously corporate India is not very happy,” says Biraj Patnaik, a senior campaigner for the right to food. Reason: The bill is likely to cost the government Rs 1.25 lakh crore each year.

Why Food Security Bill is a bad Idea

1. Who will be the main beneficiary? Nearly 40-50% of the food passing through the public distribution system goes to the wrong people. If implementing the bill is to cost Rs 6 lakh crore over a three-year period, as the Commission for Agricultural Costs and Prices (CACP) reckons, that’s a huge Rs 3 lakh crore to be siphoned off by various middlemen along the way.

2. Availability of Food stock to meet the demand will be a challenge. A paper published few months back by CACP also said that given the current trends and volatility in rates of growth in food grain production and yields, the growing pressures on land and water in the wake of climate change, dependence on monsoon rains there is a possibility that food grain availability on sustainable and stable basis would require lot of government intervention in augmenting production, enhancing procurement, and stocking large amounts of grains to meet the commitments of food distribution. This may have several undesirable side effects.

3. In India, Government has a key role agriculture produce procurement, once the Food Security Bill becomes a low, it Government intervention will become even more deeper, it would crowd out private sector operations and this would have an adverse effect on overall efficiency of procurement and storage operations, as well as on magnitude of food subsidies and open market prices.

4. Hunger vs Malnutrition. The reason for disapproval stems from the different ways in which hunger and malnutrition are defined. Many expert argue that eradication of malnutrition requires more than just removal of hunger. Simply providing for the basic minimum food is unlikely to do enough to improve India’s ignominious malnutrition levels. Food security is necessary but not sufficient for nutrition security. For nutrition, you need to focus on children and women. The FSB does take a step ahead in that direction, though it could have done more on those fronts

5. Financial sustainability of Scheme. The cost of producing the food will keep increasing, but by ensuring its availability at a lower price for consumption, the Government will have to bridge the gap through food subsidies. 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 incentivize 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.

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