INDIA'S FOOD SECURITY COMING IN “MODIFIED" FORMAT--FINANCIAL EXPRESS 8.10.2014

FOOD SECURITY COMING IN “MODI”FIED FORMAT

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 FOOD SECURITY COMING IN “MODI”FIED FORMAT

TEJINDER NARANG

The Food Security Act (the ACT) of 12^th September 2013 was prompted by the insecurity of UPA government for perpetuating political populism by extension of leaky PDS system. The objective of the bill is to enable 810 millions of Indian beneficiaries to purchase 5 kg per “eligible” person per month rice at  Rs.3 (4.9¢ US) pkg, wheat at Rs. 2 (3.3¢ US) pkg,  coarse grains at Rs. 1 (1.6¢ US) pkg against average economic cost of Rs 25(41c US) pkg.

 The said ACT is in abeyance for almost a year for want of identification of “eligible” beneficiaries by some of the states but it is well admitted that this “rights” based law is a prescription of “paper entitlements” without committed obligation in the real sense, except for the Government to perform on a best efforts basis. It does not provide people the food as mandated—it simply raises their expectations from the government to deliver food, failing which the poor can take recourse to Courts—a case of conceptual absurdity.

 The inbuilt deficiencies in the ACT have been widely descripted by many economists and analysts. Silent signals are emanating from the actions of Modi Government that the ACT may be implemented with alternatives/ superior and integrated solutions rather than blind endorsement of flawed law. One can notice over- riding priority for hygienic conditions of living like potable water, sanitation, financial assistance for the poor along with ensuring food security.   

Recent developments

As well reported in media, PMO is keen on introducing PDS through Direct Benefits Transfers (DBT) under Aadhar project via bank accounts of Jan Dhan Yojna. Other indications are (a) Food Ministry is consciously attempting to lower food stocks by announcing disposal of 15 million tons grains (10mill tons wheat plus 5 mill tons rice) from FCI stockpiles; (b) terminating open ended procurement when bonuses are announced by states, which implies lesser purchases by FCI/state agencies; (c) rice procurement under “levy” is reduced from 75% to 25% which will increase market availability  by 10 million tons next year and reduce acquisition by the Government. More grains will flow in the market to depress food inflation. This further supports the view that the ACT may be going in for a limbo.

During 2009 to 2013 of UPA’s rule, grain procurement scaled up from 57 million tons to 72 million tons and now declined to about 60 million tons in 2013-14. UPA  ensured successive and excessive stockpiling of grains from low base of 40 to high of 65 million tons in anticipation of the ACT by starving the market. As can be seen from the graphic below, NDA administration is making sure that inventories are dismantled progressively back to 40 million tons or below, by 2015-16—a substantial reduction of 38%. Proposal for hiking of buffer norms for this ACT is also in hibernation.

Government while constituting a High Level Committee (HLC) for restructuring of FCI has publicly admitted on 20^th August 2014 “that FCI is plagued ‘today’ with several functional and cost inefficiencies”. Terms of reference of HLC require that it must define or give suggestions on MSP, operations . . . .  and “food security systems of the country”. FCI is also troubled with consumer subsidies on grains which have become highly contentious with WTO. 

Any suggestion by HLC that the ACT may utilize the same pipeline of PDS which has pilferage/perishable/decay component of about 40% will be irrational, counterproductive, and unacceptable. HLC in all probability may recommend DBT equivalent to predetermined value of the subsidies.

   Benefits

When procurement is pruned and stocks are destocked there will be pro rata financial savings to the exchequers. Surely consumers and banking sector too will be major gainers. Banks will be acquiring mammoth funds and common man will be exposed to banking. This will further strengthen Government position on DBT/Jan Dhan Yojna. FCI operations for managing limited buffer will get streamlined.  Role of private entrepreneur or traders will expand whose funds will be invested in hygienic storages or silos. WTO’s opposition to India’s trade distorting subventions will also die down.

  

As of now, it appears politically precarious to declare practical and financial unviability of the ACT by the new Government due to electoral compulsions thrust by elections in states of U.P. Maharashtra, Haryana etc. But slow progression and silence on this ACT indicates that  it has  been put into deep sleep for the time being. It will finally rest in peace (RIP) after all loose ends of DBT are tied up and new workable version is launched.