More bite, less to chew

The most controversial aspect of the food security law is the restructuring of the public distribution system to cover an unprecedented 67 per cent of the population, most of them in the poorer states. LATHA JISHNU, JYOTIKA SOOD and SUCHITRA M explain why there are winners and losers in the new dispensation and how states with better PDS will have to find huge resources to keep their numbers intact

By Jyotika Sood, Latha Jishnu, Suchitra M
Published: Sunday 15 September 2013
The food security law does not include entitlements for starving, destitute and homeless persons

More bite, less to chew

More bite, less to chewFirst, the mind-blowing figure: 813,373,000 or 813 million to round it off. That is two-thirds of this populous country and the number of people who will be covered by the National Food Security Act once the government pushes it through Rajya Sabha after its victory in Lok Sabha on August 26. A law that makes access to basic foodgrain to such a vast number a legal entitlement—they can claim monetary compensation in case of failure to supply is unprecedented globally, but the fierce controversy it has generated is a misunderstanding of how this coverage is achieved.

Census 2011 National Food Security OrdinanceThe National Food Security Bill 2013 (NFSB), which aims to replace the similarly titled ordinance passed on July 5, is not as radical as it is made out to be. Nor will it punch a hole in the GDP, as its critics claim (see ‘Cost: highs and lows’, p27). What the ordinance, and now the Bill to replace it, promises, is not much; it all depends on which state one belongs to, or which side of the economic and political divide one comes from. The food entitlements it promises to 67 per cent of the population—75 per cent in rural and 50 per cent in urban areas—are national ratios but adjusted proportionately so that the coverage is higher in poorer states. As such, the more populous states which also have the highest poverty rates get coverage that exceeds the national average for both their rural and urban population (see ‘Big gainers’). Uttar Pradesh, notorious for its poor PDS, will have a whopping 152 million of its 199 million people covered under the new law. Correspondingly, a large number of states which are among the better off will see their entitlements snipped drastically.

“For Tamil Nadu, this is actually a Food Insecurity Ordinance. I have strong reasons to suspect that the Central government is deliberately trying to create a food security crisis for the state,” charges Chief Minister J Jayalalithaa, who has opposed outright the UPA government’s design of food security. The state has been running a universal PDS for several decades now, a highly praised system that is credited with wiping out much of its poverty. According to the latest figures released by the Planning Commission, Tamil Nadu’s poverty rate based on the Tendul kar methodology is just 11.28 per cent compared with nearly 40 per cent for Chhattisgarh and close to 37 per cent for Jharkhand and Manipur. These states, and others like Bihar, Madhya Pradesh and Uttar Pradesh, get coverage of 80 per cent and higher for their rural population.

Basically, the Bill guarantees every person belonging to “eligible households” or those categorised below poverty line (BPL) five kg of foodgrain every month at highly subsidised rates of Rs.1/2/3 per kg of millets/wheat/rice under the targeted public distribution system (TPDS).


Another 24.3 million of the poorest of the poor families covered under the current Antyodaya Anna Yojana (AAY) scheme would get 35 kg foodgrain per family per month. It is this part of the Bill, the grains allocation from the Central pool, that has generated most heat, while its other aspects which claim to follow a “life cycle approach” have been glossed over.

One reason is that NFSB does no more than consolidate several food-related programmes that have been in operation for decades: the anganwadi scheme that looks after the nutritional needs of children aged 0-6 years, the midday meal scheme that provides hot, cooked meal to children in primary and elementary school (up to 14 years of age). While anganwadis came under the Integrated Child Development Scheme running since 1975, admittedly haphazardly and in select areas, the midday meal scheme has been mandatory since 2001 under Supreme Court orders. Under the new dispensation, children between six months and six years get to either take home ration or cooked meal that gives them 500-800 calories.

Significantly new are maternity benefits. Every pregnant woman and lactating mother is entitled to free meals during pregnancy and six months after child birth, through the local anganwadi, apart from maternity benefit of not less than Rs.6,000 in installments. It is these facets that health experts believe could have some impact on the country’s dismal record in fighting child malnutrition, female anaemia and maternal health. However, the early drafts of the Bill, from the time it was incubated in Sonia Gandhi’s National Advisory Committee (NAC), included provisions that truly make for food security: special entitlements for vulnerable groups, provisions for the destitute and community kitchens along with markedly strong accountability measures.

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What now constitutes NFSB is no more than the minimum measure for subsistence, a fact that cannot be glossed over. Development economist Jean Dreze, who has for long campaigned for a much stronger law, concedes it is “a fraction of what is required to eliminate hunger and undernutrition in India”. However, “You can denounce it as such, or applaud it as a step forward. My concern is to make the best of this opportunity,” says the academic (see ‘Bill will push PDS reform’).

An analysis of how PDS works throws an interesting mosaic of entitlements and rates at which food is given to different categories of those considered eligible for subsidies. West Bengal, for instance, has apart from BPL, AAY and APL (above poverty line) categories, additional quotas with differential pricing for tea garden workers and those living in areas of Maoist insurgency. The new food security scheme, it calculates, will cost an additional Rs.7,000 crore, an outgo that the state government can ill afford given its current financial crisis. Food and supplies minister Jyotipriyo Mullick says the chief minister has written to the Centre about its inability to implement the scheme in its present form.

For decades, foodgrain, mainly rice and wheat, have been distributed at subsidised prices according to the type of ration card people possess—AAY, BPL and APL. The bulk of food subsidies are meant for BPL households but the process of targeting these has always been contentious and unreliable. Surveys show that a substantial number, about 50 per cent, does not possess the prized BPL card.

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States on their own have rejigged their subsidies, combining Central handouts along with their own schemes, to cover much more of the poor households than are designated by the Planning Commission. As a result, most states provide foodgrain at rates that match what the Bill stipulates apart from giving sugar and kerosene quotas. That’s standard fare. But a clutch of states have spiced up their offerings with protein (lentils), fat (cooking oil) as part of their food security programme.

Madhya Pradesh has leavened its PDS with iodised salt; Punjab has its atta-dal combination. The best offerings, though, come from Tamil Nadu, Chhattisgarh, Andhra Pradesh and Himachal Pradesh, all of whom offer a complete package that includes cereals, lentils, cooking oil and a mélange of spices (see ‘More than bare essentials’).

In states where PDS is efficient, the coverage, too, is extensive. “We follow the poverty assessment of our social justice (welfare) department,” says Anoop Jacob, Kerala Minister for Food and Civil Supplies. According to the Centre’s estimate, only 15 per cent of the population is BPL whereas as per the state’s assessment it is about 38 per cent. At present, around 98 per cent households in the state are under PDS.

For Kerala, a perennially food deficit state, NFSB spells doom. The state’s annual requirement of rice, the staple food, is about 4.2 million tonnes but it produces only about 0.6 million tonnes (15 per cent). Of this, the state procures just 0.2 million tonnes. After NFSB, Kerala will get only 77,453 tonnes foodgrain per month against the present allocation of 148,233 tonnes, half of what the state is currently distributing through PDS. The monthly shortfall will be 70,780 tonnes.

Cost: highs and lows

What will the National Food Security law cost? Estimates vary wildly, with the overblown costs coming from those staunchly opposed to such a law. Invariably, the most trenchant critics of NFSB are also those who believe that India’s poverty figures are vastly exaggerated or are sceptical of the figures of child malnutrition in India which is over 40 per cent.

The government claims the additional expense on account of NSFB will be Rs.24,000 crore annually for the next three years. Minister of state K V Thomas, who holds independent charge of consumer affairs, food and public distribution, says government’s current liability is Rs.109,000 crore. With additional burden of food security schemes, including school midday meal, the figure rises to Rs.135,000 crore, an affordable outgo, he says.

Critics of the scheme pooh-pooh this calculation. The highest estimate of the cost of providing 5 kg every month to 813 million people and 35 kg to another 24.3 million comes from economist and columnist Surjit Bhalla who puts it at Rs.314,000 crore, or 3 per cent of the GDP. Bhalla, chairperson of Oxus Investments, an emerging market advisory firm, challenges Sonia Gandhi, Prime Minister Manmoh an Singh and Finance Minister P Chidambaram to prove him wrong. In a column in The Indian Express, Bhalla says government’s claim that food subsidy bill will only increase by about 25 per cent (one per cent of the GDP) is nonsense.

“I get a conservative increase of 336 per cent, or a total subsidy level of 3 per cent of GDP with an honest implementation of the bill.”

But other economists have questioned his methodology. They point out that procurement of foodgrains will not go up by more than five million tonnes from the current level of 60 million tonnes and although the TPDS coverage will rise from 44.5 per cent to 67 per cent, the quantum of grain per eligible person actually dips from 7.9 kg to 5 kg.

Then there is the Commission for Agricultural Costs and Prices (CACP) which has jumped into the fray. A 2012 study, led by its chairman Ashok Gulati, calculated financial expenditure on food subsidy under NFSB at Rs.682,163 crore over a three-year period, the timeframe of the ordinance.

The figure is calculated on the assumption that the annual foodgrain requirement under NFSB will be around 70 million tonnes.

Perhaps, the final word on this will be that of the Reserve Bank of India. A report released three days ago notes: “While the impact of NFSO on the food subsidies is manageable for 2013-14, in the years to come it will add to the fiscal pressures. The key concern is that it is difficult to contain food subsidies within budgeted amount even in 2013-14 when the Act will just begin to get implemented.

Over the next few years the growing subsidies could restrict investment opportunities, including those in agricultural sector.”

Jagannathan, commissioner, food and civil supplies department, worries 19.31 million will be out of PDS since BPL or priority household category will cover only 11.32 million people. “That means, about 57 per cent of the state’s population will be excluded from the purview of PDS,” says Jacob.

Although the introduction of TPDS in 1997 by the Centre as part of its econom- ic reforms slashed allocations and confined subsidies only to BPL households, Kerala continued its universal rationing system. It did not exclude APL from PDS since this category comprises farmers, wage labourers and agricultural workers. Although it has differential pricing for APL, the state has to bear the financial burden of the subsidies for this segment.

Kerala does not offer any frills. If there is a PDS heaven in India, where for the most part supplies are more often than not irregular, patchy, sub-standard and often missing in parts, it is in Tamil Nadu. The state gives free rice to all categories, besides handing out a combo of items that eases the food burden on poor households. In addition, Jayalalithaa has opened a string of Amma Canteens that offer hygienically cooked food at unbelievably cheap prices: idli at Rs.1 a piece, meals at Rs.5. The runaway success of these canteens has prompted the chief minister to start sale of fresh vegetable, too, at subsidised rates, giving food security an entirely new meaning.

Not surprisingly, Jayalalithaa is incensed by NFSB and has taken on the Centre on several aspects of the proposed law which, she says, are either illogical or weighted against an urbanised state such as Tamil Nadu which, with an urban population of 49 per cent has the highest level of urbanisation among major states and will be particularly hard hit “by this ill-conceived and invidious discrimination against urban areas”. She has, in her August 24 missive, complained that a newly introduced proviso in the bill that gives the Centre discretion to fix price of foodgrain will put an additional burden of Rs.1,000 crore on her government. The state already spends Rs.4,900 crore on its food security network, setting aside Rs.2,525 crore for the free rice alone.

States of worry

One of the biggest worries of state governments is that while the Centre has laid out the ground rules for ensuring food security, all the responsibility lies with the state governments.

As Gujarat Chief Minister pointed out in a letter to the Prime Minister in August, it is the first time any law has first fixed the number of beneficiaries and then left it to the states to decide on the eligibility criteria and entitlements so as to reach the macro figure laid out in the law.

Tamil Nadu Chief Minister J Jayalali thaa’s concern is the proviso that state governments are also obliged to prescribe guidelines and complete identification of the eligible households within 180 days of the commencement of the law. Although this has been extended to a year following her protest, Jayalalithaa says this will not be of much help since states can only start the process of identifying eligible households after the Socio Economic Caste Census is completed. “I am not sure whether even one year’s time is a realistic time frame.”

The other concern voiced by many MPs is that there is no provision to make it incumbent upon the Central government to implement all necessary measures, including import of foodgrain when warranted, to ensure the supply of foodgrain and not leave the states to fend for themselves after providing limited financial assistance.

This obligation on the Central government to import food in times of scarcity, they say, is crucial to make the legislation truly a Food Security Act.

Another contentious issue is the provision for introduction of cash reimbursement or food coupon schemes in “such manner as may be prescribed by the Central government”.

States wanted an amendment indicating that such changes should not be introduced without their concurrence.

As for concerns about sufficiency of foodgrain to meet the requirements of the law, the Food Civil Supplies ministry has pointed out that the total annual requirement is estimated at 61.23 million tonnes. Already, the average annual procurement in the last four years has gone up to 60 million tonnes. “Even with an estimated marginal decline in foodgrain production in 2012-13, the requirements will be met,” it says.

Given the fiscal impact on the states, Tamil Nadu has sought “a legally binding assurance” that the difference in quantity between what has been assured through the newly introduced proviso and what is eligible under earlier clauses will be supplied to the states at the price of Rs.3 per kg or at least at the current price applicable for above poverty line families of Rs.8.30 per kg.

As states and the Centre spar over prices and assurances as the NFSB heads for its denouement in Parliament, a number of states are holding their breath over the outcome. While these states had to fall in line perforce, there is huge unease over what the future portends. An official of the civil supplies in Andhra Pradesh says, “Once NFSB is implemented, 34 million people will be excluded from PDS. To include them in PDS, the state will face an additional financial burden of Rs.2,000 crore.”

Then there is Chhattisgarh which, with its exemplary Food Security Act (CFSA), is waiting for the final amendments to NFSB to come in before taking a position on it. The only state to have passed such a law, Chhattisgarh makes it a serious offence to deprive anyone of their food entitlements and officials involved will face penal provisions. It defines a new category, “particularly vulnerable social groups”, which includes households headed by terminally ill persons, widows or single women, physically challenged persons, all households headed by a person aged 60 or more with no assured means of subsistence or societal support, and a person freed from bonded labour.

In short, it goes way beyond what NFSB does. Vikas Sheel, secretary, Chhattisgarh food and civil supplies department, told Down To Earth there are four major differences between NFSO and Chhattisgarh. First, CFSA is based on households while NFSO is based on per capita consumption thus allowing each household to 35 kg foodgrain. “This apart, we provide salt and pulses. Most importantly, we do not have a cap on beneficiaries as the Central law does.” The state claims to cover 90 per cent of its 25.5 million population but clearly, there are problems in reaching food to people in the Maoist insurgency areas as Down To Earth’s earlier investigations have shown.

What is clear though is while a handful of states boast of universal PDS coverage with a basket of goodies to go with it, NFSB is likely to nudge the laggards to do better and improve the efficiency of the food distribution systems.


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