How good or bad is India’s Food Security Bill By Sriti, Jatin – IIM Rohtak
“The question is not whether we can do it or not. We have to do it.”, Mrs. Sonia Gandhi rightly remarked during the debate on the Food Security Bill in the Parliament.
We are a nation of ‘billions’. A billion people, a billion views, a billion thoughts, and a billion contradictions. When there are that many zeros in your existence, as a nation you aren’t left with many options. In better words, you are a country that has to carve its path of progress amidst several constraints; the frameworks and policies that you design are a carefully managed series of tradeoffs between social welfare and economic progress. When the leading lady of our country, Mrs. Gandhi, urged all political parties in the august house to pass the Food Security Bill unanimously, she knew that each of her words have to struggle against a million criticisms and muffled insecurities rising across the nation. But thshe also knew, that ‘…we have to do it.’ because we hardly have options. A country ranking 65 among 79 nations on Global Hunger Index, half of its children under 5 suffer from chronic malnutrition while on the other hand 17,546 tonnes of food grains was wasted in FCI gowdowns due to insufficient storage between 2009 and 2012. From this side of the world the FSA seems a magical solution to the hunger issues of the nation, but another perspective waits to be inspected before framing any conclusions. Prima facie, by the sheer timing of the bill and the urgency that UPA portrayed through the life of the bill would make even the simplest of men, suspect some foul-play. Is it a Déjà vu, reminding us of 2009, when MNREGA helped UPA gain a second term in the Lok Sabha elections, Is UPA looking forward to using food security bill as a weapon for clearing its way to a consecutive third term? The answers are not far from an obvious ‘Yes’ for anyone who has witnessed how Indian Political System functions.
Keeping the doubts of oppositions aside, the intellectual class of the nation is divided in their view; a few welfare-economists like Amartya Sen have welcomed the bill, while the others are skeptical about its financial viability. The cost of the bill has been estimated to be around ₹3,14,000 crore. The numbers are enough to declare the Food Security Bill an unsustainable move for a country already struggling with Fiscal Deficit and CAD. If we choose to look into a more benevolent approach, it becomes the responsibility of the state to feed its citizens, Right to Live belongs to every individual, and food is a right.
The debate on the FSB has many layers to it, Vote Bank Politics vs. Welfare, Short term solution vs. Long term sustainability, Good Politics vs. Bad Economics, Financial Viability vs. Right of the Poor, the multi-faceted nature of the issue makes it difficult to classify it as black or white. Moreover, it isn’t the first time that such a large scale public welfare distribution policy is being implemented in the nation, the five decades old Public Distribution System already exists to serve the nutritional needs of the poor and hungry. The system is though known to be highly inefficient; with more than half the food siphoned off and sold in the open market for higher prices. This gives a classic precedence of a failed policy functioning for years, depriving the poor of their rights. But some states like Chattisgarh, Jharkhand, Bihar etc., have witnessed a departure from the general corrupt ways and have shown a ray of hope; cleansing the PDS by use of information technology, automated systems to ensure minimum human intervention. Amidst a scenario of such vast contradictions predicting the success or failure of such a policy is impossible, at the most one can look into various perspectives, both positive and negative and weigh them to estimate the impacts.
India is home to about 25 percent of the world’s hungry poor, a bill promising to give legal right of subsidized food to two-thirds of the country’s 1.2 billion population should be a welcome move. However the passage of the bill was followed by a steep fall in the rupee and a 3% fall in benchmark indices. According to government estimates, it will spend over ₹ 1.25 lakh crore (1.2 % of the GDP) annually to supply 62 million tonnes of food-grains like rice, wheat or coarse cereals to poor in the country. While this might not be huge jump to the ₹ 1.09 lakh crore (0.8% of the GDP) that it was spending prior to the Food Security bill. Analysts point out that the stated expenditure of ₹ 1.25 lakh crore annually in NFSB is only the tip of the iceberg. Additional expenditure is needed for the envisaged administrative set up, enhancement of food grain production, creation of storage facilities etc. The total bill for implementation of the Bill may touch an expenditure of 1.5 lakh crore. Noted economist and writer Dr.Surjit S. Bhalla in a scathing attack on the bill writes “The food security bill, if implemented honestly, will cost 3 per cent of the GDP in its very first year.” He also goes on to question the government’s estimate that the bill’s cost would only amount to 11% of the revenues.
The bill also raises serious doubts over Finance minister P Chidambaram’s ambitious target of restricting the current account deficit to $70 billion, or 3.7% of GDP, against 4.8% of GDP last year. With a near 20% depreciation of the rupee in the current account deficit to $70 billion, or 3.7% of GDP, against 4.8% of GDP last year. With a near 20% depreciation of the rupee in the current financial year that would cause the imports to get costlier, this target now looks highly optimistic. Many economists have also criticised the inflationary nature of the bill. To ensure sufficient supply of food grains, the Government would encourage production and may raise minimum support price for food grains. Farmers would thus be inclined to grow less non-food grains items, thereby creating a shortage of those items.
Also, as the government purchases of food grains would increase, marketable surplus for the private sector will come down. This may cause inflation in food items. Also, they point out that India can ill-afford such a costly subsidy burden at a time when economic growth has slowed to a decade-low. Credit ratings agency Moody’s has said that the food security bill will weaken government finances and deteriorate country’s macroeconomic situation. “The measure (Food Bill) is credit negative for the Indian government because it will raise government spending on food subsidies to about 1.2% of GDP per year from an estimated 0.8% currently, exacerbating the government’s weak finances,” Moody’s said in a statement on Thursday.
The timing of the bill, believed by many to be Sonia Gandhi’s dream project has also been under question. Senior BJP leader MurliManohar Joshi termed it as the “Vote Security Bill” that was “more of laws that would not fill up bellies of even poor”. The political calculations behind the bill are far too clear for anyone to miss. With the rise in Narendra Modi’s stardom for which the congress party has no match, wooing the lowest strata of the populace which has for long been the party’s vote bank with such populist measures makes political sense. The party would hope that the food security scheme will work for UPA 2 in the same way the farm loan waiver and NREGA worked for UPA 1 in 2004.
Then there are question marks over the constitutional validity of the bill. Mamta Banerjee claims that the bill infringes on the federal structure of the constitution. Food security, she points out is a state subject. A national bill can only paint the broad contours but it will have to be up the states to watch out for good practices. States like Tamil Nadu, which already have a well-functioning food distribution system, will be forced to realign it based on the Food security bill. Even the who’s who of India’s corporate world have openly come out in criticism of the bill. “It has been done with an eye on the polls. What I would have preferred is a focus on reforms, building infrastructure and clearing supply-side bottlenecks. That is the need of the hour in my view,” said Harsh Mariwala, Chairman and Managing Director, Marico. There is also a concern about leakages in such a massive scheme. Past experiences in MNREGA have shown that it the government lacks both the skill and the will to counter such a menace. Also, the government intends to use the infamous Public Distribution System for delivering subsidies to the poor. Unfortunately the Food Security remains largely silent on this important aspect.
The food bill promises 5kg of food grain per month to 67 percent of the country’s population – 75 percent in rural areas and 50 percent in urban areas. It delinks the PDS entitlements from the poverty line based division of the population into BPL and APL. It is well known that the present system of targeted PDS is not efficient, with many poor actually being left out of the BPL net. The expanded coverage under the Food Security Bill results in a doubling of coverage in many states. For states like UP, Bihar, Jharkhand and Assam the coverage under this Act will be over 80 percent in rural areas. Such wide coverage can automatically bring down exclusion errors. This has been the experience of other states such as Tamil Nadu, Andhra Pradesh and Chhattisgarh.
Some of the welcome steps that the Bill has taken are in relation to women’s rights. The ration cards will be in the name of women. Universal maternity entitlements will be provided to all pregnant and lactating women, to the tune of ₹ 6000 over six months. This recognizes women as workers and their right to wage compensation for maternity leave in order to exclusively breastfeed the child. The bill also consolidates various food-related programs and entitlements that have made gradual headway during the last decade. Provisions of the bill dealing with food grain entitlements under the public distribution system have grabbed most of the attention. Children’s entitlements, however, are possibly more important. These include cooked midday meals for all school-going children and nutritious food (either a cooked meal or a take-home ration) for all children below the age of 6. These child nutrition programs are already in place; they are mandatory under Supreme Court orders. Permanent legal entitlements could strengthen and energize these initiatives.
As Montek Singh Ahluwalia, deputy chairman of the Planning Commission, settled the debate, “This is no longer about facts. This is about a moral recognition that something is wrong. There is now a broad consensus (among policymakers) and that is new.” This probably is not the only bill that is facing such uncertainties, most policies in our country go through such phases because we have failed in the execution and the consequences of many continue to haunt us till date. Success of the program largely depends on correctly identifying all the poor households in the country. For this, the government can leverage the Aadhar platform and link the income status along with biometric and demographic information in Aadhar database. Transferring subsidies through Aadhar-enabled bank account of beneficiaries will also ensure that cash benefits reach intended recipients. Many such big and small steps towards refining our executional capabilities in case of FSB will not only serve the actual purpose behind the bill but will also set a benchmark for many such steps in future. According to Amartya Sen, India’s inability to properly feed its women and children is one of its “catastrophic failures, with wide-ranging implications not only for the people of India today but also for the generations to be born in the near future.”, the statement alone encapsulates all the arguments in favor of the bill. On the other hand we have this whole pitfall of uncertainty looming large; the costs incurred would be high, failure is not an option, both numbers and historical evidence stand against the bill and as per Mr. Sen, “policies for the poor often turn out to be poor policies”.
It is too early to predict anything but tackling the hunger issue is imperative for the country. FSB may not be the magic trick towards success but it will definitely provide the policy makers a chance to alleviate the masses from the state of utter poverty.
By Jatin Arora & Sriti Yadav, PGP04, IIM Rohtak