The Food Security Act: A burden on Modi Government
by K P Prabhakaran Nair on 08 Jun 2014 2 Comments
In the late evening of Monday, August 25, 2013, India’s Parliament passed The Food Security Act (FSA) and the UPA government claimed it to be a “game changer”; others had less charitable words to describe it. Initiating the debate, senior BJP leader Murli Manohar Joshi reminded the UPA Government of the announcement made by former President Pratibha Patil, on bringing the Bill. Said Joshi, “After four years, you are bringing the Bill when it is time for you to go”, and called it a “vote security bill”.


But it did not provide the vote security the Congress had so much desired, as amply substantiated by its ignominious defeat at the hustings. Pointedly, Samajwadi Party leader Mulayam Singh Yadav, a key ally of the UPA, bluntly asked the government “Is this Bill for the hungry or the polls?” And, to drive home the message, he left Parliament when the Bill was put to vote. That it did not muster enough support is the reason why it was thrust on India as an ordinance. The Congress was in a very great hurry to get the Bill through to tell Indians that it stood by the “garibi hatao” slogan of late Indira Gandhi. That garibi is still rampant on Indian soil is testimony to the blatant, callous and corrupt management of the economy, for which the party paid dearly. 


All this is now history. The hope of the UPA government that the Food Security Act (FSA) would be a game changer failed to materialise. The Congress met with ignominious defeat in the general election and the BJP triumphantly advanced with an absolute majority. Now, Prime Minister Narendra Modi is charting a 100-day plan to show results. This is the time to keenly reflect whether or not India, or more specifically the Indian exchequer, can meet the financial commitments of the FSA. At the grave risk of inviting a public howl, especially from the Congress, I dare say that the FSA must be scraped forthwith. Let me explain why.


The enormity of the fiscal burden is mind boggling. As far as additional financial burden of implementing the FSA is concerned, it would add Rs 25000 crore annually to the current huge food subsidy. Admittedly, the plan is seen as the biggest in the world with the Government expecting to spend Rs 1,25,000 crore annually on supply of 62 million tonnes of rice and wheat and coarse cereals to 67.7 % of India’s population. Yet the FSA will only drain the national exchequer and not meet the real food needs of economically weak Indians.


If one critically examines data provided by the National Sample Survey Office (NSSO), the share of the total consumer expenditure on food, especially cereals, milk and milk products, eye opening facts emerge. In 1987-88, the percentage of expenditure on food by the rural and urban population was 64.4 and 56.4 respectively. When we break it up based on cereals (staples like rice and wheat) the respective figures are 26.3 and 15.0. For milk and milk products it is 8.6 and 9.5. 


By 1999-2000, the corresponding respective figures had dropped to 59.4 and 48.1, 22.2 and 12.4 and 8.8 and 8.7. By 2011-12, they dropped substantially to 48.6 and 38.5, 12.0 and 7.3 and 9.1 and 7.8 respectively. This clearly shows that starting from the “pre reform” period to the “post reform” period, in a span of a quarter century, Indians are spending only a small percentage on cereal consumption, precisely 54.4 percentage less for the rural population and 51.3 percentage for the urban population. This shows, on average, the percentage drop in cereal consumption annually has lessened by more than 2 per cent per annum. The interesting fact is that during the same period, while the urban population consumed 17.9 per cent less milk and milk products, the corresponding figures for the rural population was an increase of 5.8 per cent, clearly showing a shift away from staples like rice and wheat to better foods like milk and milk products. This shows a changing food habit of Indians and follows a similar pattern as of China, where this author observed the same trend during his two visits to that country.


According to the NSSO data, during 2011-12, average monthly consumption of cereals was 11.2 kg in rural areas and 9.3 kg in urban areas. For the 10 per cent of the bottom slab of the population, which spends the least on household expenditure, monthly cereal consumption was 10 kg and 9.4 kg for urban and rural areas respectively. The FSA promises only 5 kg a month or 50 per cent of the requirement. Under the prevalent Targeted  Public Distribution System (TPDS), below poverty line (BPL) population and those which are covered by the Antyodaya Anna Yojana (AAY) scheme of the previous NDA government get 35 kg of  food grains (rice/wheat) a month. If one takes an average of 5 per family (husband, wife and three children), per person entitlement comes to 7 kg. By comparison, under the FSA they would only get 5 kg a month, which is 28.6 per cent less.


Think of the enormity of the economic implications – this shortfall will have to be made up by buying grain from the open market, paying ten times more than the subsidised price. Clearly a colossal pecuniary problem is staring at New Delhi when Narendra Modi is trying to turn around the economy and enhance delivery efficiency. Where will we go for the foreign exchange to buy all the extra grain from open markets abroad? And how will we meet the WTO criticism when we breach the subsidy rates given to farmers?


When much of the available harvested grain is blocked by FSA, market supply will drastically diminish and food inflation will raise its ugly head. High interest rates and galloping current deficit will lead to stifled growth and all Modi’s dreams will be grounded. Should our Prime Minister stick his neck out on a political gimmick that Sonia Gandhi tried to hoist on a gullible public to harness votes, that too when the same public rejected the gimmick? This will be economic suicide, to put it bluntly. 

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