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Food subsidy is a plateful

A scheme that allows for an annual food subsidy of almost Rs 131,000 cr comes with its own set of problems for the government

Sanjeeb Mukherjee  |  New Delhi 

Providing food for its people is the concern of most governments across the globe. But given India's population and the numbers involved, the UPA government's plans to feed at least 67 per cent of its 1.2 billion citizens boggles the mind. A plan like this obviously pays enormous political dividends. So, it isn't any wonder that, with general elections a year away, the government wants to get the (NFSB) passed by Parliament during the

India already offers subsidised food to its poor under various schemes. But in simple terms, what NFSB does is to promise legally enforceable entitlement to food for a major portion of its citizenry.


NFSB -which has undergone numerous changes since it was first tabled in Parliament in December 2011 - will, in its latest version, provide each person with 5 kg of either rice at Rs 3 a kg, wheat at Rs 2 a kg or coarse cereals at Rs 1 a kg per month. Specific sections like pregnant women, children and the poorest of the poor households will be entitled to 35 kg of grain at the same prices.

This entails an annual of almost Rs 131,000 crore, including Rs 8,000 crore for incidentals like setting up food commissions at the Central and state levels and in setting up grievance redress mechanisms. In the Union Budget for 2013-14, the government has allocated Rs 90,000 crore as food subsidy, of which Rs 10,000 crore is earmarked for the new food programme.

NFSB has opted for phased implementation of the various provisions of the bill. The revised NFSB states that the Centre will notify the various provisions of the Bill at different dates for different states, virtually ruling out a uniform roll-out of NFSB .

The figures involved in implementing the programme are astounding. There will be up to 840 million beneficiaries - this is more than double the entire population of the US and more than five times the population of Bangladesh - who will be provided with around 62 million tonne of food through the rickety but massive network of 500,000 ration shops in the existing Public Distribution System (PDS).


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Managing such a complex scheme will be a big headache for the government. For one, NFSB says that the eligibility for getting benefits under the scheme will be determined by the state governments and will, therefore, vary from state to state. The states will only be told that in drawing up the parameters to identify the beneficiaries, they should ensure that 75 per cent of the rural population and 50 per cent of the urban are covered.

And then there are the obvious pitfalls of such massive schemes related to uniform implementation, procuring and distribution of foodgrain and corruption. While the price of procuring the foodgrain has been tagged at Rs 131,000 crore, the total subsidy involved will be higher since the government has to increase the Minimum Support Price of wheat and rice in order to provide remunerative prices to farmers even as the price at which it will sell the grain to the people will be much lower and remain flat for at least three years.

Add to that the costs arising out of leakage. According to a discussion paper put out by the Commission for Agriculture Costs and Prices (CACP), almost 40.4 per cent of the total foodgrain lifted by the states under the Targeted Public Distribution System (TPDS) in 2009-10 across the country did not reach the beneficiaries. In other words, 17.1 million tonne of wheat and rice did not reach the intended people.

Leakages in the have definitely decreased over the years, of course, and officials claim pilferage is now down to 15-20 per cent. But this is still a matter of concern when put in the context of the government's annual spend of Rs 80,000-90,000 crore on procurement, storage and distribution of cheap grain.


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NFSB makes it a legal offence to deprive beneficiaries of foodgrain even at times of shortage. Food ministry official explain that the Bill has made a provision for cash allowance in place of grains in case of shortage in supplies. However, this will come with its own attendant problems, as already evidenced by the debate over the direct benefit transfer policy.

To prevent leakages, the Department of Food and Consumers Affairs has already embarked on a nationwide programme to computerise databases and distribution operations. Computerisation of the system involves the correct identification of beneficiaries, especially under the Targeted PDS, elimination of fake or duplicate ration cards, etc. Computerisation is expected to inject transparency and public accountability into the scheme and deter leakages and diversion of supplies. The deadline for the digitisation of the beneficiary database is just over, while the computerisation of the supply-chain management is to be completed by October 2013.

To date, ration cards have been digitised in Andaman and Nicobar Islands, Andhra Pradesh, Chandigarh, Chhattisgarh, Daman and Diu, Delhi, Gujarat, Karnataka, Kerala, Lakshadweep, Punjab, Puducherry, Tamil Nadu and Uttar Pradesh. The work is in progress in Arunachal Pradesh, Bihar, Dadra and Nagar Haveli, Haryana, Jammu and Kashmir, Jharkhand, Madhya Pradesh, Maharashtra, Nagaland, Odisha, Rajasthan, Sikkim and Tripura. "This will go a long way in addressing all concerns over pilferages and leakages and how the Food Bill will cope with that," says a senior official from the Department of Food and Public Distribution.

There appeared to be a conflict regarding the cheap foodgrain distribution schemes currently in operation in states like Chhattisgarh and Tamil Nadu. The revised Bill tries to answer this by keeping out of its purview state-specific, food-based social security programmes like Chhattisgarh government's Food Security Bill, which guarantees food to almost 90 per cent of the state's population against the NFSB's coverage of 67 per cent. In such case, however, the Centre will bear the financial liability only up to the 67 percent coverage guaranteed by the bill.

Critics like Chairman Ashok Gulati and former food and agriculture secretary T Nandakumar have slammed the proposed Bill on the grounds that a scheme like this will have major operational and financial challenges and have deep ramifications on India's economy and market.

"The fundamental question is not whether to give 35 kg of foodgrain or 25 kg. It is rather about making a switch, instead of giving highly subsidised grain, provide the targeted poor with cash," Gulati told Business Standard. "Make this conditional to their sending their children to school, getting them immunised, etc. Then it can work effectively, as it has in countries like Brazil and the Philippines. We see huge savings in Conditional Cash Transfer, and thereby the potential for augmenting the level of support to the poor through better investments in education, skills development and public health."

The revised NFSB does make provisions for cash transfers and food coupons, but only as an effort to reform the Targeted A pilot project to distribute cash in lieu of foodgrain is expected to start from April 1 in six Union territories. How it will be integrated with the NFSB should it prove a success will be a big challenge for government, which is showcasing the food bill as its biggest achievement in its second term.


HOW IT WILL WORK
  • STEP 1: Central pool of foodgrain maintained by Central government
  • STEP 2: Transported to designated depots in each state according to allocations
  • STEP 3: Intra-state allocation and delivery to ration shops by state government
  • STEP 4: Local authorities responsible for implementation and monitoring
SOURCE: Discussion Paper On National Food Security Bill: Challenges and Options, prepared by Ashok Gulati, Jyoti Gujral and T Nandakumar

First Published: Sat, April 06 2013. 20:30 IST
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