The Sonia Gandhi backed Food Security Bill (FSB) has been a hotly debated topic lately. In a country where 21% of the population (and 44% of below 5 children ) is undernourished, the bill seems to be the silver lining the whole country was looking for. Yet it has been received with a combination of optimism ans pessimism. Before seeing why this is so, let us look at the bill itself.
The National Food Security Bill, 2011 aims to provide subsidized grains to about 65% of the population. The recipients have been divided into two parts- the people below poverty line (BPL) as priority group/household (PG/PH) and the people above poverty line as general group(GG). The people in PG are entitled to receive grains worth 7kg/person/month at a cost of Re1,2,3, for millet, wheat and rice respectively. The person in GG are entitled to receive 3kg/person/month at maximum half the MSP (Minimum Support Price) given to farmers. The bill aims to cover 75% of rural population(out of which 46% is PG/PH) and 50% urban population((out of which 28% is PG/PH). Lactating mothers will be given Rs 1000 for 6 months and nutritional support. ICDS (Integrated Child Development Society) and mid day scheme are covered under the bill. People affected by natural disaster will get two free meals a day for 3 months. The bill provides for nutritional support for children below 14 years.
So much so for the bill. The positives to emerge from here are pretty obvious. India has 230 mn malnourished people, worse than its neighbors Pakistan and Nepal, and this bill will provide for food for a large part of this population. The bill might ensure that the grains stored in the warehouses do not go waste and thus decrease the wastage of grains. It would ensure financial stability for the lactating women. So why is it that the seemingly noble and pro-poor bill being rejected by a significant chunk of people?
The answer to this lies in the implementation. While bought up with a noble cause, the implementation can be describes as poor at the best. First lets have a look at the economics of the bill. As per the estimate, the subsidy would cost the government approximately Rs 95,000 crore.The cost for producing extra food grains would cost a little more than Rs110,000 crore according to the ministry of agriculture. The set up required and the movement of the grains through PDS(Public Distribution System) would escalate the cost and it would be safe to assume that the total cost would be Rs 250,000 crore. Then lets not forget that the budget of the FSB would largely depend on the MSPs. MSP is dependent on the cost of production of the grains. In the past three years the production cost for rice has gone up by 15% per year. If this holds true for the coming years too, the expenditure would also go up by at least 20%. At a time of burgeoning fiscal deficit and slowing economy, can the government afford to spend this much? Don't get me wrong, I don't say that let the poor be damned, lets focus on GDP growth but one has to realize that the magnitude of this bill is beyond what we can spend right now. Our debt to GDP ratio is already well above 80%. The bill needs to be revisited so that it can be "pruned down" a little to make it feasible. Not that economics alone is the reason for reviewing the bill. The bill tries to fit the same hat on everyone's head. It authorizes the government to allow for uniform procurement, distribution and storage of the grains. Different states have different needs and different capacities and hence this centralized system is bound to spell doom as far as the effectiveness of the bill is concerned. A decentralized system is the right approach as it would allow the state the independence to demand the required amount of resources that are required for the malnourished and under developed section. The state, on their part, need to ensure that the system for calculating the resources requirement are efficient and transparent. We have also failed to come up with a fail safe plan. The procurement of these grains has not been looked into. Do we have the resourced to produce this amount of food? What would happen if there is a drought? How will we get the extra grains needed? If we import food, the international food prices get affected adversely leading to even larger subsidiary and consequently higher expenditure. The FCI(Food Corporation of India) which is going to be responsible for distribution, is not known for efficiency ( The World Bank says that 60% of the subsidy reaches the wrong hand) and the food bill would only increase the workload by 2-3 times. The bill will have an adverse affect on the recently tamed inflation. With the larger procurement need, the MSP is going to be pushed up leading to price rise. Then the other point is that who decides which 65% of population is this bill going to serve? In other words, how do we decide who comes under the umbrella of the bill?
There are many such concerns that have not been addressed. The bill needs to be looked into again and amended so that the delivery system becomes efficient. Otherwise it will go into the bin containing the laws created with the right intention, but rendered useless because of ineffective implementation.
The National Food Security Bill, 2011 aims to provide subsidized grains to about 65% of the population. The recipients have been divided into two parts- the people below poverty line (BPL) as priority group/household (PG/PH) and the people above poverty line as general group(GG). The people in PG are entitled to receive grains worth 7kg/person/month at a cost of Re1,2,3, for millet, wheat and rice respectively. The person in GG are entitled to receive 3kg/person/month at maximum half the MSP (Minimum Support Price) given to farmers. The bill aims to cover 75% of rural population(out of which 46% is PG/PH) and 50% urban population((out of which 28% is PG/PH). Lactating mothers will be given Rs 1000 for 6 months and nutritional support. ICDS (Integrated Child Development Society) and mid day scheme are covered under the bill. People affected by natural disaster will get two free meals a day for 3 months. The bill provides for nutritional support for children below 14 years.
So much so for the bill. The positives to emerge from here are pretty obvious. India has 230 mn malnourished people, worse than its neighbors Pakistan and Nepal, and this bill will provide for food for a large part of this population. The bill might ensure that the grains stored in the warehouses do not go waste and thus decrease the wastage of grains. It would ensure financial stability for the lactating women. So why is it that the seemingly noble and pro-poor bill being rejected by a significant chunk of people?
The answer to this lies in the implementation. While bought up with a noble cause, the implementation can be describes as poor at the best. First lets have a look at the economics of the bill. As per the estimate, the subsidy would cost the government approximately Rs 95,000 crore.The cost for producing extra food grains would cost a little more than Rs110,000 crore according to the ministry of agriculture. The set up required and the movement of the grains through PDS(Public Distribution System) would escalate the cost and it would be safe to assume that the total cost would be Rs 250,000 crore. Then lets not forget that the budget of the FSB would largely depend on the MSPs. MSP is dependent on the cost of production of the grains. In the past three years the production cost for rice has gone up by 15% per year. If this holds true for the coming years too, the expenditure would also go up by at least 20%. At a time of burgeoning fiscal deficit and slowing economy, can the government afford to spend this much? Don't get me wrong, I don't say that let the poor be damned, lets focus on GDP growth but one has to realize that the magnitude of this bill is beyond what we can spend right now. Our debt to GDP ratio is already well above 80%. The bill needs to be revisited so that it can be "pruned down" a little to make it feasible. Not that economics alone is the reason for reviewing the bill. The bill tries to fit the same hat on everyone's head. It authorizes the government to allow for uniform procurement, distribution and storage of the grains. Different states have different needs and different capacities and hence this centralized system is bound to spell doom as far as the effectiveness of the bill is concerned. A decentralized system is the right approach as it would allow the state the independence to demand the required amount of resources that are required for the malnourished and under developed section. The state, on their part, need to ensure that the system for calculating the resources requirement are efficient and transparent. We have also failed to come up with a fail safe plan. The procurement of these grains has not been looked into. Do we have the resourced to produce this amount of food? What would happen if there is a drought? How will we get the extra grains needed? If we import food, the international food prices get affected adversely leading to even larger subsidiary and consequently higher expenditure. The FCI(Food Corporation of India) which is going to be responsible for distribution, is not known for efficiency ( The World Bank says that 60% of the subsidy reaches the wrong hand) and the food bill would only increase the workload by 2-3 times. The bill will have an adverse affect on the recently tamed inflation. With the larger procurement need, the MSP is going to be pushed up leading to price rise. Then the other point is that who decides which 65% of population is this bill going to serve? In other words, how do we decide who comes under the umbrella of the bill?
There are many such concerns that have not been addressed. The bill needs to be looked into again and amended so that the delivery system becomes efficient. Otherwise it will go into the bin containing the laws created with the right intention, but rendered useless because of ineffective implementation.
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