Is The Food Bill Enough To Feed India's Hungry?
2013-04-13 , Issue 15 Volume 10
Illustration: Anand Naorem
CONSIDER THE two best-known facts about India's food economy. On the one hand, 42 percent of our little children are malnourished. On the other, our godowns are bursting with foodgrain. Can we join the dots by drawing a straight line from the warehouse to the homes of the hungry?
That's only the most obvious of our food system's glaring contradictions. subsidies on food and agriculture have shot up and bumper crops have been harvested, but instead of bringing down food prices, it seems to have had the opposite effect. Farmers are being paid more than double what they were 10 years ago for their foodgrain and retail prices of food have gone up — but they are still committing suicide.
We congratulate ourselves on record foodgrain exports at a time when per capita food availability at ho-me is declining — and we lose money on every tonne that we export. Exporters make profits, but the exchequer loses.
Into this crazy picture, the UPA government proposes to introduce the National Food security Bill. No one knows what impact it will have — economic, political, social — but it appears set to become law nonetheless. Will it fix the problem or cripple the economy?
The success of the MGNREGs, which was passed in the teeth of considerable opposition, is held up as an example of a positive social legislation that worked. so why should the Food security Bill not prove an even bigger game-changer?
It is not a perfect Bill and has been variously criticised for low food entitlements, inadequate attention to nutrition, too much discretion to state governments in identifying beneficiaries, a poor grievance redressal mechanism and providing scope for substituting the Public Distribution system (PDs) with cash transfers.
However, there's no argument against a framework law on the right to food per se. When asked whether India could afford to have a statutory right to food, Food minister KV Thomas answered, "Can we afford not to?"
Agriculture minister Sharad Pawar voiced his doubts in the Union Cabinet. If a small farmer could get foodgrain for as little as Rs.1 per kg, as proposed in the Food Security Bill, why should he bother to grow his own? And what would happen in a bad crop year, or successive bad years?
Policymakers clearly have little idea how much implementing the Right to Food will cost. In the current year, Finance minister P Chidambaram has allocated only Rs 90,000 crore towards the food subsidy, of which Rs. 10,000 crore is the additional amount for implementing the Food security Bill. The food ministry estimates that the subsidy bill in the current year is likely to cross Rs 1.3 lakh crore.
And even this is inadequate, according to a paper by the Commission on Agricultural Costs and Prices, which puts the cost at Rs 2.41 lakh crore in the first year of implementation. Over three years, it says, the outlay will be Rs 6.82 lakh crore, including the Rs 1.1 lakh crore required for upscaling food production.
Whatever the figure, the fact is that every year, the minimum support price (MSP) will go up and impact the food subsidy bill. since 2003-04, MSPs of wheat and rice have more than doubled, from Rs 640 to Rs 1,350 per quintal in the case of wheat, and from Rs 550 to Rs 1,250 for paddy. But the food subsidy bill has gone up more three times in the same period, from Rs 25,181 crore to Rs 85,000 crore. This is because handling and storage costs have gone up as well.
small wonder that there is an annual tug of war between the ministries of food and agriculture. The former, as the purchaser, does not want the MSP increased. The latter, representing farmers, insists that it must be.
The MSP is a political and an economic necessity; it is especially relevant to farmers who have the means to produce surplus foodgrain for the market. Farmers have come to expect procurement at the time of harvest — this is because market prices are known to fall below the "minimum" prices set by the government during the harvest glut. According to Thomas, "We are bound to provide food and to procure… when the farmers who have grown the grain are waiting for you to procure, can you say no?"
Given annually escalating costs, will the Food security Bill cripple the economy? The head of a leading global commodities major observed, "You will run your ship into the ground. If you implement the Food security Bill today, India's credit rating will fall by two points tomorrow."
But economist Jean Drèze says the Bill makes sense, not merely on civilisational, but economic grounds.
The government has sought to balance the Budget by cutting back on the fertiliser subsidy. In 2009, a nutrient-based subsidy regime was introduced, whereby the price of non-urea fertilisers was decontrolled. The retail prices of fertilisers (except urea) increased, with the popular di-ammonium phosphate (DAP) going up almost 30 percent over 2011 and muriate of potash (MOP) by 40 percent.
Already burdened by a 100 percent increase in labour costs due to the MGNREGs, the hike in fertiliser prices has inflated input costs to the point of making farming unsustainable, so that farmers are forced to lobby for an increase in MSP. It also drives farmers into debt, the leading cause of farmers' suicides.
Once the MSP goes up, so does the cost of procurement and therefore, the food subsidy bill. so, trimming the fertiliser subsidy pushes the food subsidy up: a Catch-22 situation.
The case for reducing subsidies on fertilisers goes something like this: fertiliser consumption has gone up much faster than crop production. To get the same quantum of grain, you use more fertiliser every year. By making fertiliser unaffordable for farmers, you force him to look for cheaper and more soil-friendly alternatives, like bio-manure. At the same time, policymakers lament the fact that India's fertiliser use is low, far below optimum levels.
According to Ajay Jakher of the Bharat Krishak samaj, farming simply isn't viable without subsidies and the Indian farmer gets a fifth of the subsidy given to a Us farmer. He believes a drop in farm subsidies would lead to a fall in consumption and a drop in production. "If fertiliser subsidy is withdrawn, production could drop 18 percent," says Jakher. That would be catastrophic for food security.
Currently, production and availability of foodgrain for implementing the Food security Bill does not appear to be an issue. We have had bumper crops every year — 259.32 million tonnes in 2012-13 — and have enormous buffer stocks. The Food Corporation of India (FCI) expects to procure some 44 million tonnes of wheat this rabi season, so its stocks may well touch 100 million tonnes. On 1 march, India's food stocks stood at 62.8 million tonnes.
Stockpiling by the FCI has led to an artificial shortage of wheat despite bumper crops and pushed up domestic prices. Food policy expert Biraj Patnaik sees no sense in building up such massive stocks at a huge cost. And then, unable to manage them, the government resorts to exports. "You are exporting foodgrain at subsidised rates — feeding cattle and pigs in other countries — instead of giving it to the poor."
FCI CHAIRMAN Amar Singh admits it has lost money on exports. Given that the economic cost of wheat is Rs. 19,100 (per metric tonne) and the minimum export price for wheat fixed by the government is in the region of Rs. 16,200, the losses are estimated at Rs 1,700 crore for the previous year. According to The Wall Street Journal, "Global prices have tumbled in the past week below the government fixed minimum export price of $300 a metric tonne to about $270." Even so, the government is considering further exports to decongest its godowns.
On the one hand, there appears to be a glut. On the other, per capita availability of foodgrain stands at 462.9 gm in 2011 — less than 170 kg per person per year. This makes our food security situation look quite precarious, especially given the fact that the average food availability for 2006-10 was 404.62 gm per capita. Declining per capita availability of foodgrain has been a major concern in India, says the Economic survey for 2012-13.
Another characteristic of our food economy is the focus on cereals to the exclusion of nutrient-dense items like pulses and oilseeds, with the result that we are import-dependent for both. Protein and cereal consumption in both rural and urban areas is declining, giving the lie to the specious argument that calorie consumption has fallen because Indians are shifting to high-protein diets. As Patnaik points out, the major drivers for food inflation have not been cereals, but protein-rich food items. little wonder our malnutrition indices are worse than those of sub-saharan Africa.
Compounding these problems is the leakage from the PDs, variously estimated by researchers at 40 to 55 percent. Although the situation appears to be improving, the leakage is still unacceptably high. To plug the leaks, the Centre has proposed introducing direct cash transfer of the subsidy to the beneficiaries.
Chhattisgarh, the only state to have enacted a food security law, also has the best performing PDS after Tamil Nadu. A combination of policy, policing and adminstrative measures — opting for wider coverage rather than targeted distribution, putting ration shops in the hands of those trusted by the community they serve, incentives for those running the fair price shops, computerised tracking of foodgrain, weeding out bogus BPL (below poverty line) cards and zero tolerance for pilferage — has resulted in efficient delivery of foodgrain to 74 percent of the population.
The Chhattisgarh Food Security Act extends coverage to 90 percent of the population. significantly, apart from grains, beneficiaries are entitled to 2 kg of pulses at Rs 5- Rs 10 per kg. The Chhattisgarh model would argue that the Food Security Act can work without sinking the economy. But then, the state first fixed its leaky PDS and gave its farmers incentives before enacting the law.
So, tackling silent hunger may well be about the governance gap, not the fiscal deficit.
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(Published in Tehelka Magazine, Volume 10 Issue 15, Dated 13 April 2013)
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