The shaky Food Security Bill
by K P Prabhakaran Nair on 18 Aug 2013 1 Comment

In 1948, when the United Nations passed the Covenant ensuring the right to food vis-à-vis the right to a proper livelihood, to which India became a signatory, it did not envisage that the whole issue would be caught up in such an imbroglio – political and economic – as the one we are witnessing today. The original covenant in Article 25 ensures the “right to work and livelihood”; right to food was only an ancillary issue, but the implication was always there. It is such a shame that more than six decades after independence, we still are dabbling with an issue that is so vital to the very existence of India as a sovereign nation.


There are very crucial issues related to the Food Security Bill (FSB) that is now pending in Parliament. Whatever the disagreement on the food security ordinance, because of the political expediency which drove it, the magnitude of the fiscal burden it would impose on the national exchequer cannot be lightly brushed aside. Data from the Reserve Bank of India clearly show that the food security bill will lead to empty coffers.


India has already recorded a gross fiscal deficit (GFD) of Rs 5, 20, 925 crore (5.2 per cent of Gross Domestic Product, GDP) in 2012-13, which is expected to increase to Rs 5, 42, 499 crore (4.6 per cent of GDP) in 2013-14. And the food subsidy, as per budget estimations, will increase from Rs 85000 crores to Rs 90000 crores over this period.


The Expert Committee headed by Rangarajan had indicated in 2011 that the cost implications of the Food Security Bill (FSB) would be quite large. The Commission for Agricultural Costs and Prices (CACP) provided a starkly high estimate, meticulously calculated in its discussion papers released in December 2012 and May 2013. CACP estimates an expenditure of Rs 6, 82, 183 crore in the first three years of launching the FSB, with Rs 2, 41, 263 crores in the first year itself.


If the scheme is initiated in 2013-14, which the UPA is in a great hurry to, the GFD of the Central Government would shoot up to 6.7 per cent of the GDP, a level reached in 1993-94. This is only an optimistic level, given the lackadaisical performance on the industrial front.  What additional burden the FSB would leave on India’s economy is anybody’s guess. Given the grim national industrial production, depressing external environment and IMF forecasts, revenue from direct and indirect taxes could be lower than budget estimates. India’s industrial production contracted 2.2 per cent in June, more than expected from a year earlier, as shown by government data released on August 12.


International investors and rating agencies closely watching the Indian economic scenario and fiscal trends will be unforgiving in their decisions, which will ultimately adversely impact foreign investment in the country, especially reliable foreign direct investment (FDI).  


To add to the fiscal burden, the fiscal health of some States, irrespective of the party in power, is clearly shaky. Data from RBI are clearly worrisome. These figures exclude impact of government guarantees, which every State government has extended. Hence, initiating the FSB in select States will spiral the nation into competitive political populism, given the election year, and may imply an irreversible nose-dive into the fiscal abyss. The food security ordinance needs reconsideration in view of the recently released National Sample Survey Organisation (NSSO) data showing that population below poverty line has declined from 37.2 per cent in 2004-05 to 21.9 per cent in 2011-12.


To meet the government’s target, New Delhi has to procure a lot more grain from farmers, and perhaps resort to imports as well. To be self-sufficient, farmers must be ensured a definite incentive to produce more, reflected in higher procurement prices and access to better farming methods. The latter is a big question mark, despite the country’s heavy investments in agricultural research.


Look at the varieties of principal cereals like rice and wheat. Each year an agricultural university or research institute supported either by either ICAR or the State government claims that so many new varieties have been released for commercial cultivation by the Central Varietal Release Committee. A critical appraisal shows they differ from one another only marginally. No variety stands out spectacularly.


Take this case. When super cyclone “Aila” swept the Sunderbans in eastern India in May 2009, thousands of hectares of rice were ruined overnight and the area completely submerged in salt water. Traditional farmers who had sown three salt-tolerant rice varieties from the meticulous collection of Dr Debal Deb, a very committed rice agronomist working in a sleepy hamlet in Odisha’s Rayagada district, only could harvest some rice following the winter. All the so-called “miracle hybrid” rice varieties peddled by the research “experts” were down under the water. Does it not speak volumes for the quality of governmental research that is being carried out in this country?  


The Rangarajan Committee constituted by the Prime Minister’s Office (PMO) to “review” the National Advisory Council’s (NAC) version of the Food Security Bill had suggested that the government should procure only 30 per cent of the country’s total food (grain) production from farmers, and anything more than this will result in “distortion of food prices in the open market”. Against the backdrop of the country’s lackadaisical R&D efforts on the food front, this is simply wishful thinking!


Ironically, the UPA is yet to pay farmers market prices, leave alone above them. Assuming UPA does it, for smooth FSB passage, the G33 proposal is unlikely to gain any traction at the WTO negotiating table. The European Union, led by France, is unrelenting to bring down agricultural subsidies.


The UPA, racing to the 2014 election has finally realised that the food security ordinance cannot work without resolving both these concerns. Its hectic efforts to curry favour with the WTO will be unsuccessful. The US will staunchly oppose the G33 proposal at the forthcoming Bali meet coming December. Without WTO’s sanction, India cannot incentivise its grain farmers without stumbling on its international commitments. 


If India determinedly goes ahead, the West is certain to raise crippling trade counter measures. With the EU India FTA waiting to be inked, Europe will push its cheap agricultural and dairy products into India, and our farmers will be crippled economically – a very daunting scenario unfolding before the country.


Admittedly, the food security ordinance has lofty intentions, but New Delhi has to grapple with the serious economic implications that go with it. I have only narrated the most worrying ones. Political populism is no substitute for down to earth pragmatism.

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