Thursday, March 28, 2013

Food for Thought

The National Food Security Bill 2011 is all set to be introduced in the second-half of the Budget Session of Parliament. The Bill presents a difficult set of dilemma's and conundrums.

On the face of it, there could be no cause which is more noble: using our surplus stocks of foodgrains to feed the poor. The Bill proposes to use large-scale food distribution to feed 67% of the country's population of 1.2 billion.

Yet, as always, the devil lurks in the details.

Where will the food come from?

Even though our FCI godowns are overflowing with foodgrains, the Bill needs our Public Distribution system to handle 74 million tonnes by 2013-14. However, just 29.7 million tonnes were lifted by states in 2009-10 as against 45.4 million tonnes allocated for the PDS!

Where will the money come from?

The official estimated cost is Rs.95,000 per annum. Experts say that this is a rather conservative figure. Gulati & Gujral (2011) calculated the minimum annual expenditure at Rs. 200,000 Crores. To put the amount in perspective, total subsidies budgeted for 2011 on everything was Rs 140,000 crore.

Can the existing logistics network handle this?

You could call this 'new wine in an old, leaky bottle'. Until inefficiencies in the existing distribution systems are addressed on a war footing, we might be sending more money than ever before, down the drain. To take one example, labour in FCI is highly organised and an unskilled worker (loading and unloading job) earns around Rs 35,000 per month -- much, much more than the average skilled worker.  According to reports, 'hundreds of such FCI workers get more than Rs 1 lakh a month and the highest is about Rs 1.85 lakh per month'.


The cost of Food Entitlement

* Aggarwal, Ankita and Harsh Mander (2013): ABANDONING THE RIGHT TO FOOD, EPW, Feb 2013 -- url -- ---

* FE Editorial: NOW TO DIGEST THAT FOOD, 19 Dec. 2011, Financial Express, 19 Dec., 2011 -- url --
- To put the amount in perspective, total subsidies budgeted this year on everything are R1.4 lakh crore.
- spends 5-6 times more on farm subsidies than it does on farm investment where the returns in terms of poverty reduction and higher farm growth are several times higher.
- other distortions like the Essential Commodities Act that allows states to ban movement of agri-commodities and suspending futures markets to the APMC Act that allows commission agents to take away as much as 15% of the farmers revenue

* Gulati, Ashok and Jyoti Gujral (2011): "FOOD SECURITY BILL: Can we afford Rs. 6 lakh crore food subsidy in three years?", The Economic Times, 17 Dec., 2011 -- url --
- The farmers are not happy as the MSP for wheat and rice has gone up by less than 20% against a cost escalation of about 45%.
- But Punjab imposes 14.5% taxes and various forms of cess, etc, on top of the MSP for any procurement of grain being done from the state. The argument is that many states have minerals and they impose large royalty on their mineral wealth.

* PRS Legislative Brief - NFSB-2011 -

* Swaminathan, MS (2009): SYNERGY BETWEEN FOOD SECURITY ACT AND NREGA, The Hindu, 1Jun2009 ---url---

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