Ensuring Food Security in India.doc

7/27/2019 Ensuring Food Security in India.doc

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Ensuring Food Security in India Challenges and

Future


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Food Security

WHO Website

The World Food Summit of 1996 defined food security as existing when all people

at all times have access to sufficient, safe, nutritious food to maintain a healthy and

active life. Commonly, the concept of food security is defined as including both

physical and economic access to food that meets people's dietary needs as well as

their food preferences. In many countries, health problems related to dietary excess

are an ever increasing threat, In fact, malnutrion and foodborne diarrhea are become

double burden.

Food security is built on three pillars:

Food availability: sufficient quantities of food available on a consistent basis.

Food access: having sufficient resources to obtain appropriate foods for anutritious diet.

Food use: appropriate use based on knowledge of basic nutrition and care, as

well as adequate water and sanitation.

Food security is a complex sustainable development issue, linked to health through

malnutrition, but also to sustainable economic development, environment, and trade.

There is a great deal of debate around food security with some arguing that:

There is enough food in the world to feed everyone adequately; the problem is

distribution.

Future food needs can - or cannot - be met by current levels of production.

National food security is paramount - or no longer necessary because of global

trade.

Globalization may - or may not - lead to the persistence of food insecurity and

poverty in rural communities.

Issues such as whether households get enough food, how it is distributed within the

household and whether that food fulfils the nutrition needs of all members of the

household show that food security is clearly linked to health.

Agriculture remains the largest employment sector in most developing countries and

international agriculture agreements are crucial to a country's food security. Some

critics argue that trade liberalization may reduce a country's food security by reducing

agricultural employment levels. Concern about this has led a group of World Trade

Organization (WTO) member states to recommend that current negotiations on

agricultural agreements allow developing countries to re-evaluate and raise tariffs on

key products to protect national food security and employment. They argue that WTO

agreements, by pushing for the liberalization of crucial markets, are threatening the

food security of whole communities. Related issues include:

What is the net impact of the further liberalization of food and agricultural

trade, considering the widely differing situations in developing countries?


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To what extent can domestic economic and social policies - and food,

agricultural and rural development policies - offset the diverse (and possibly negative)

impacts of international policies, such as those relating to international trade?

How can the overall economic gains from trade benefit those who are most

likely to be suffering from food insecurity?

Do gains trickle down to enhance economic access to food for the poor?

How can food and agricultural production and trade be restrained from the

over-exploitation of natural resources that may jeopardize domestic food security in

the long term?

How to ensure that imported food products are of acceptable quality and safe

to eat?


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Food security in India

The Hindu - Businessline

The focus on accelerated foodgrains production on a sustainable basis and free trade

in grains would help create massive employment and reduce the incidence of poverty

in rural areas.

INDIA AT present finds itself in the midst of a paradoxical situation: endemic mass-

hunger coexisting with the mounting foodgrain stocks. The foodgrain stocks available

with the Food Corporation of India (FCI) stand at an all time high of 62 million

tonnes against an annual requirement of around 20 million tonnes for ensuring food

security. Still, an estimated 200 million people are underfed and 50 million on the

brink of starvation, resulting in starvation deaths. The paradox lies in the inherentflaws in the existing policy and implementation bottlenecks.

Challenges ahead

India's food security policy has a laudable objective to ensure availability of

foodgrains to the common people at an affordable price and it has enabled the poor to

have access to food where none existed. The policy has focused essentially on growth

in agriculture production (once India used to import foodgrains) and on support price

for procurement and maintenance of rice and wheat stocks. The responsibility for

procuring and stocking of foodgrains lies with the FCI and for distribution with thepublic distribution system (PDS).

Minimum support price: The FCI procures foodgrains from the farmers at the

government announced minimum support price (MSP). The MSP should ideally be at

a level where the procurement by FCI and the offtake from it are balanced. However,

under continuous pressure from the powerful farmers lobby, the government has been

raising the MSP and it has now become higher than what the market offers to the

farmers. Also, with quality norms in the procured grains not strictly observed, farmers

pressurise the FCI to procure grains beyond its procurement target and carrying

capacity. The MSP has now become more of a procurement price rather than being asupport price to ensure minimum production. The rich farmers and traders have

cornered most of the benefits under the support price policy. The small farmers lack

access to FCI and being steeped in poverty resort to distress selling. Constricted

warehousing facility has further aggravated their miseries. At times, the same farmers

later pay more to buy it from PDS.

Input subsidies: Over the years, to keep foodgrain prices at affordable levels for the

poor, the government has been imposing restrictions on free trade in foodgrains. This

has suppressed foodgrain prices in the local market, where the farmers sell a part of

their produce and as compensation, they are provided subsidies on agriculture inputssuch as fertilizers, power and water. These subsidies have now reached unsustainable


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levels and also led to large scale inefficiencies in the use of these scarce inputs.

Overuse of fertilizer and water has led to waterlogging, salinity, depletion of vital

micronutrients in the soil, and reduced fertility. The high subsidies have come at the

expense of public investments in the critical agriculture infrastructure, thereby

reducing agriculture productivity. Besides the high MSP, input subsidies and

committed FCI purchases have distorted the cropping pattern with wheat and paddy

crops being grown more for the MSP they fetch, despite therebeing relatively less

demand for them. Punjab and Haryana are classic examples here. This has also led to

a serious imbalance in inter-crop parities despite no significant increase in the yield of

wheat and paddy.

Issue price: The people are divided into two categories: below poverty line (BPL) and

above poverty line (APL), with the issue price being different for each category.

However, this categorisation is imperfect and a number of deserving poor have been

excluded from the BPL fold. Moreover, some of the so called APL slip back to BPL,

say with failure of even one crop and it is administratively difficult to accommodate

such shifts.

To reduce the fiscal deficit, the government has sought to curtail the food subsidy bill

by raising the issue price of foodgrains and linking it to the economic cost at which

the FCI supplies foodgrains to the PDS. The economic cost comprises the cost of

procurement, that is, MSP, storage, transportation and administration and is high

mainly because of the artificially inflated MSP and also due to the operational

inefficiencies of the FCI. This has pushed the issue price to APL category higher than

the market rates and to BPL category beyond their purchasing power, resulting in

plummeting of offtake from the PDS.

Also, the low quality of PDS grains and the poor service at PDS shops have forced

many people to switchover to market, which offers better quality grains, allows

purchase on credit and ensures flexibility to purchase in small quantities.

Also, the high-priced, low-quality Indian rice and wheat find little place in the

international market. Recently, two Indian consignments were rejected even by Iraq

on quality considerations. The result is bulging stocks with FCI amidst widespread

starvation.

Market demand: The PDS entitlement meets only around 25 per cent of the total

foodgrain requirement of a BPL family and it has to depend more on the market for

meeting its needs. Also with the APL families essentially opting for market purchases,

the market demand has risen. However, the massive FCI procurement has crowded

out the market supplies, resulting in a relative rise in rates. The poor are the most hurt

in this bargain.

Food-for-work scheme: The government is running food-for-work scheme to give

purchasing power to the poor who get paid for their labour in cash and foodgrains.

The scheme is, however, not successful, since the Central Government is required to


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meet only the foodgrain component and the cash strapped States are expected to meet

the cash component (almost 50 per cent of the total expenditure). In many States the

scheme has even failed to take off.

Suggested recommendations

There is a need to shift from the existing expensive, inefficient and corruption ridden

institutional arrangements to those that will ensure cheap delivery of requisite quality

grains in a transparent manner and are self-targeting.

Futures market and free trade: The present system marked by input subsidies and high

MSP should be phased out. To avoid wide fluctuations in prices and prevent distress

selling by small farmers, futures market can be encouraged. Improved communication

systems through the use of information technology may help farmers get a better deal

for their produce. Crop insurance schemes can be promoted with government meeting

a major part of the insurance premium to protect the farmers against natural

calamities.

To start with, all restrictions on foodgrains regarding inter-State movement, stocking,

exports and institutional credit and trade financing should be renounced. Free trade

will help make-up the difference between production and consumption needs, reduce

supply variability, increase efficiency in resource-use and permit production in

regions more suited to it.

Food-for-education programme: To achieve cent per cent literacy, the food security

need can be productively linked to increased enrolment in schools. With the phasing

out of PDS, food coupons may be issued to poor people depending on their

entitlement.

Modified food-for-work scheme/ direct subsidies: With rationalisation of input

subsidies and MSP, the Central Government will be left with sufficient funds, which

may be given as grants to each State depending on the number of poor.

The State government will in turn distribute the grants to the village bodies, which

can decide on the list of essential infrastructure work the village needs and allow

every needy villager to contribute through his labour and get paid in food coupons and

cash.

Community grain storage banks: The FCI can be gradually dismantled and

procurement decentralised through the creation of foodgrain banks in each block/

village of the district, from which people may get subsidised foodgrains against food

coupons. The food coupons can be numbered serially to avoid frauds. The grain

storage facilities can be created within two years under the existing rural development

schemes and the initial lot of grains can come from the existing FCI stocks. If

culturally acceptable, the possibility of relatively cheap coarse grains, like bajara and

ragi and nutritional grains like millets and pulses meeting the nutritional needs of the

people can also be explored. This will not only enlarge the food basket but also


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prevent such locally adapted grains from becoming extinct. The community can be

authorised to manage the food banks. This decentralised management will improve

the delivery of entitlements, reduce handling and transport costs and eliminate

corruption, thereby bringing down the issue price substantially. To enforce efficiency

in grain banks operation, people can also be given an option to obtain foodgrains

against food coupons from the open market, if the rates in the grain banks are higher,

quality is poor or services are deficient. A fund can be set up to reimburse the food

retailers for the presented coupons. This competition will lead to constant

improvement and lower prices. It must also be mandatory to maintain a small buffer

stock at the State level, to deal with exigencies.

Enhancing agriculture productivity: The government, through investments in vital

agriculture infrastructure, credit linkages and encouraging the use of latest techniques,

motivate each district/ block to achieve local self-sufficiency in foodgrain production.

However, instead of concentrating only on rice or wheat, the food crop with a

potential in the area must be encouraged. Creation of necessary infrastructure like

irrigation facilities will also simulate private investments in agriculture.

The focus on accelerated foodgrains production on a sustainable basis and free trade

in grains would help create massive employment and reduce the incidence of poverty

in rural areas. This will lead to faster economic growth and give purchasing power to

the people.

A five-year transitory period may be allowed while implementing these. Thus, India

can achieve food security in the real sense and in a realistic timeframe.

Prashant Goyal

Secretary to Government Chief Secretariat, Pondicherry

(The views expressed here are the author's personal)


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India may settle for compromise solution to

Food Security issue at WTO

NEW DELHI, OCT 7: THE HINDU BUSINESS LINE

India may have to settle for a temporary solution to its concerns about the validity of

its Food Security legislation at the World Trade Organisation in return for its consent

for a pact to facilitate movement of goods across borders being pushed by developed

countries.

A peace clause that would allow developing countries like India legal protection

against action by other members for breaching food subsidy limits for a two-three

year period is what developed countries seem to be willing to offer at the moment.

WTO members are trying to arrive at an agreement on a small package of issues that

includes Trade Facilitation and Food Security at the forthcoming Ministerial meeting

in Bali, Indonesia.

'Long-term solution after Bali'

There is appreciation of legitimacy of food security concerns in India and other

developing countries. Work is going on intensely to find a solution which willprobably include a peace clause and a conversation for a long-term solution will

happen very meaningfully after Bali, visiting WTO Director-General Roberto

Azevedo said at a press conference on Monday.

Azevedo is in India to seek the countrys support for a successful Ministerial in Bali.

The Doha Development Round, launched 12 years back, remains stuck, but members

are hopeful that a limited agreement in Bali would give the Round a much-needed

boost.

Although India had been demanding a change in the WTOs Agreement on

Agriculture to remove limits on public stockholding and food aid, it now seems

willing to go in for a compromise solution.

The Agreement allows so called market distorting subsidies up to a limit of 10 per

cent of total production. India is apprehensive that once its Food Security legislation

is fully implemented, its food subsidies will breach the 10 per cent mark.

Sharma said that India was in favour of a trade facilitation pact too as long as it wasbalanced and served the interests of both developed and developing countries.


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Stressing the importance of the December Ministerial in Indonesia, Azevedo said that

it was absolutely critical in establishing the conditions for moving forward in areas

other than the deliverables which members were looking for in December, not only in

the Doha Development Agenda, but also in other issues that are trade related and also

of interest to member countries.

Bali is not the end of the road. It is one first step towards an agenda that we have to

define for the WTO and that delivers on areas of interest in developing countries and

developed countries alike, the DG added.

[email protected]

(This article was published on October 7, 2013)
mailto:[email protected]:[email protected]


10/27

The global implications of India's food security

law

Balancing duty to the poor while mitigating 'policy externalities' arising out of

the food bill is India's latest challenge

Business Standard

The government has fought all odds to get the food security bill an entitlement

programme that covers 67% of Indias 1.2 billion large population under a subsidised

grain regime, passed in the Parliament. But the battle now shifts to the global stage

with India having to convince negotiators, particularly the United States, at

the WTO meeting in Bali, that this new law will not have market distorting effects

on trade.

Commerce MinisterAnand Sharma will meet the new WTO Chief Roberto Azevedo

on October 7, and at the core of their discussions is likely to be Indias demand for the

amendment of the Agreement on Agriculture (AoA). In a nutshell, this agreement

restricts India and other developing nations from exceeding market distorting

subsidies that it gives to farmers, beyond 10% of total production. This is also called

de minimis support. According to Martin Khor, executive director of the South Centre

(an inter-governmental organisation of developing countries based in Geneva), Indiais among the countries that risks exceeding this 10% threshold, with the ambitious

food security programme being rolled out.

In case of paddy India has already breached the 10% threshold. We are at 24%

currently. India will have to defend its right to subsidise, because the livelihood

security of small farmers is at stake. We allowed the US to boost its subsidies, now it

is their turn to let us fulfill our domestic commitments. Else let us approach the

dispute panel of the WTO, Devinder Sharma, a food and trade policy expert toldBusiness Standard

It is critical that New Delhi, backed by the G-33, bargains hard at the WTO table to

seek these exemptions to uphold its sovereign duties, adds Sharma. Even if it means a

dj vu of the Doha round that ended in a colossal failure.

India will spend about $20 bn (Rs 1.2 lakh approximately) annually on food subsidy.

That is a pittance compared to the $400 bn that rich countries spend subsidising their

farmers. Khor in his column in The Star, Malaysia says it is discriminatory and
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hypocritical on the part of developing countries like the US to pressure India into

adhering to the AoA.

How India navigates through the WTO round in December remains to be seen, but

what is clear is that the world community is going to increasingly harden scrutiny on

the potential implications of the food security bill and the global imbalances it might

create. Nomura had warned months ago that the scale of Indias food entitlement

programme has the capacity to send global food grain prices soaring in a year when

the monsoon is deficient and India has to import grains.

Andy Mukherjee, a Reuters Breakingviews columnist, reiterated this concern warning

that India will start exporting food inflation in the years to come to poor countries

like Nigeria, Senegal, Bangladesh and Indonesia if Indias imports swell in a drought

year.

It is imperative for the Indian government then, to prudently balance its role as one of

the worlds biggest exporters and consumers of food grain, (of rice, sugar and wheat),

while sticking on to its commitment to the poor of this country.

The only sustainable way to reconcile these dichotomous demands is to continually

increase farm productivity, maintain consistently high stockpiles (without letting themrot), which means increased investment in irrigation, and creating efficient supply

chains. Indias food grain production reduced from 259.29 million tonne in 2011-12

to 250 million tonne in 2012-13 because of poor rains. Reducing our dependence on

monsoons and improving agri-infrastructure is critical to curbing import distortions

during drought years, if we are to avoid a backlash from the global community.

At the same time, it is also absolutely necessary for India to cut a winning bargain at

the WTO bearing in mind the fact that with the food bill now a reality, procurement

from small farmers will have to be stepped up (to 70 million tonne from 45 million

tonne presently), which means minimum support prices will also go up, making it

impossible for India to stick to AoA norms.

The challenge, then, is very clearly to defend our national obligations while giving

due credence to mitigating the policy externalities (the consequences of a policy

that extends outside the policymakers domain) that may arise out the passage of the

food bill.


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Is The Food Bill Enough To Feed Indias

Hungry?

The Centres proposal still has many flaws. Learning from Chhattisgarh could fix

them

BHAVDEEP KANG

Consider the two best-known facts about Indias food economy. On the one hand, 42percent of our little children are malnourished. On the other, our godowns are burstingwith foodgrain. Can we join the dots by drawing a straight line from the warehouse to

the homes of the hungry?

Thats only the most obvious of our food systems glaring contradictions. Subsidieson food and agriculture have shot up and bumper crops have been harvested, butinstead of bringing down food prices, it seems to have had the opposite effect.Farmers are being paid more than double than what they were 10 years ago for theirfoodgrain, and retail prices of food have gone up but they are still committingsuicide.

We congratulate ourselves on record foodgrain exports at a time when the per capitafood availability at home is declining and we lose money on every tonne that weexport. Exporters make profits, but the exchequer loses.

Into this crazy picture, the UPA government proposes to introduce the NationalFoodSecurity 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 theeconomy?

The success of the MGNREGA, which was passed in the teeth of considerableopposition, is held up as an example of a positive social legislation that worked. Sowhy should theFood 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 inidentifying beneficiaries, a poor grievance redressal mechanism and providing scopefor substituting the Public Distribution system (PDS) with cash transfers.

However, theres 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, Foodminister KV Thomas answered, Can we afford not to?

Agriculture minister Sharad Pawar voiced his doubts in the Union Cabinet. If a smallfarmer could get foodgrain for as little as Rs 1 per kg, as proposed in the Food
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Security Bill, why should he bother to grow his own? And what would happen in abad crop year, or successive bad years?

Policymakers clearly have little idea how much implementing the Right to Food willcost. 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 additionalamount for implementing theFood Security Bill. The food ministry estimates that thesubsidy 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 AgriculturalCosts and Prices, which puts the cost at Rs 2.41 lakh crore in the first year ofimplementation. 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 ricehave 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 morethan 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 andagriculture. The former, as the purchaser, does not want the MSP increased. Thelatter, 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 cometo expect procurement at the time of harvest this is because market prices areknown to fall below the minimum prices set by the government during the harvestglut. According to Thomas, We are bound to provide food and to procure whenthe farmers who have grown the grain are waiting for you to procure, can you sayno?

Given annually escalating costs, will the Food Security Bill cripple the economy? Thehead of a leading global commodities major observed, You will run your ship intothe ground. If you implement theFood Security Bill today, Indias credit rating willfall by two points tomorrow.

But economist Jean Drze saysthe Bill makes sense, not merely on civilisational, buteconomic grounds.

The government has sought to balance the Budget by cutting back on the fertilisersubsidy. In 2009, a nutrient-based subsidy regime was introduced, whereby the priceof 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 MGNREGA,the hike in fertiliser prices has inflated input costs to the point of making farming
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unsustainable, so that farmers are forced to lobby for an increase in MSP. It alsodrives farmers into debt, the leading cause of farmers suicides.

Once the MSP goes up, so does the cost of procurement and therefore, the foodsubsidy 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: fertiliserconsumption has gone up much faster than crop production. To get the same quantumof grain, you use more fertiliser every year. By making fertiliser unaffordable forfarmers, you force him to look for cheaper and more soil-friendly alternatives, like

bio-manure. At the same time, policymakers lament the fact that Indias fertiliser useis low, far below optimum levels.

According to Ajay Jakher of the Bharat Krishak Samaj, farming simply isnt viablewithout subsidies and the Indian farmer gets a fifth of the subsidy given to a USfarmer. He believes a drop in farm subsidies would lead to a fall in consumption and adrop 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 FoodSecurity 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 FoodCorporation of India (FCI) expects to procure some 44 million tonnes of wheat thisrabi season, so its stocks may well touch 100 million tonnes. On 1 March, Indiasfood stocks stood at 62.8 million tonnes.

Stockpiling by the FCI has led to an artificial shortage of wheat despite bumper cropsand 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, thegovernment 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 theeconomic cost of wheat is Rs 19,100 (per metric tonne) and the minimum export pricefor wheat fixed by the government is in the region of Rs 16,200, the losses areestimated 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 fixedminimum export price of $300 a metric tonne to about $270. Even so, thegovernment is considering further exports to decongest its godowns.

On the one hand, there appears to be a glut. On the other, per capita availability offoodgrain stands at 462.9 gm in 2011 less than 170 kg per person per year. Thismakes our food security situation look quite precarious, especially given the fact thatthe average food availability for 2006-10 was 404.62 gm per capita. Declining percapita availability of foodgrain has been a major concern in India, says the economicsurvey for 2012-13.
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Another characteristic of our food economy is the focus on cereals to the exclusion ofnutrient-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 isdeclining, 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. Littlewonder our malnutrition indices are worse than those of sub-Saharan Africa.

Compounding these problems is the leakage from the PDS, variously estimated byresearchers at 40 to 55 percent. Although the situation appears to be improving, theleakage is still unacceptably high. To plug the leaks, the Centre has proposedintroducing direct cash transfer of the subsidy to the beneficiaries.

Chhattisgarh, the only state to have enacted a food security law, also has the bestperforming PDS after Tamil Nadu. A combination of policy, policing andadministrative measures opting for wider coverage rather than targeteddistribution, putting ration shops in the hands of those trusted by the community theyserve, incentives for those running the fair price shops, computerised tracking offoodgrain, weeding out bogus BPL (below poverty line) cards and zero tolerance for

pilferage has resulted in efficient delivery of foodgrain to 74 percent of thepopulation.

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- Rs10 per kg. The Chhattisgarh model would argue that the Food Security Act can workwithout 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.

[email protected] (Published in Tehelka Magazine, Volume 10 Issue 15, Dated 13April 2013)
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Food Bill is the biggest mistake India might have

made till dateFirst Post

Historians often ask counterfactual questions to figure out how history could have

evolved differently. Ramachandra Guha asks and answers one such question in an

essay titled A Short History of Congress Chamchagiri, which is a part of the book

Patriots and Partisans.

In this essay Guha briefly discusses what would have happened if Lal Bahadur

Shastri, the second prime minister of India, had lived a little longer. Shastri died on

January 11, 1966, after serving as the prime minister for a little over 19 months.

The political future of India would have evolved very differently had Shashtri lived

longer, feels Guha. As he writes Had Shastri lived, Indira Gandhi may or may not

have migrated to London. But even had she stayed in India, it is highly unlikely that

she would have become prime minister. And it is certain that her son would have

never have occupied or aspired to that officeSanjay Gandhi and Rajiv Gandhi

would almost certainly still be alive, and in private life. The former would be a

(failed) entrepreneur, the latter a recently retired airline pilot with a passion for

photography. Finally, had Shastri lived longer, Sonia Gandhi would still be a devoted

and loving housewife, and Rahul Gandhi perhaps a middle-level manager in a private

sector company.

But that as we know was not to be. Last night, the Lok Sabha, worked overtime to

pass Sonia Gandhi's passion project, the Food Security Bill. India as a nation has

made big mistakes on the economic and the financial front in the nearly 66 years that

it has been independent, but the passage of the Food Security Bill, might turn out to

be our biggest mistake till date.

The Food Security Bill guarantees 5 kg of rice, wheat and coarse cereals per month


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per individual at a fixed price of Rs 3, 2, 1, respectively, to nearly 67% of the

population.

The government estimates suggest that food security will cost Rs 1,24,723 crore per

year. But that is just one estimate. Andy Mukherjee, a columnist with Reuters, puts

the cost at around $25 billion. The Commission for Agricultural Costs and

Prices(CACP) of the Ministry of Agriculture in a research paper titledNational Food

Security Bill - Challenges and Optionsputs the cost of the food security scheme over a

three year period at Rs 6,82,163 crore. During the first year the cost to the government

has been estimated at Rs 2,41,263 crore.

Economist Surjit Bhalla in a column in The Indian Express put the cost of the bill at

Rs 3,14,000 crore or around 3% of the gross domestic product (GDP). Ashok Kotwal,

Milind Murugkar and Bharat Ramaswami challenge Bhalla's calculation in a column

in The Financial Express and write the food subsidy bill should...come to around

1.35% of GDP, which is still way less than the numbers he(i.e. Bhalla) put out.

The trouble here is that by expressing the cost of food security in terms of percentage

of GDP, we do not understand the seriousness of the situation that we are getting into.

In order to properly understand the situation we need to express the cost of food

security as a percentage of the total receipts(less borrowings) of the government. The

receipts of the government for the year 2013-2014 are projected at Rs 11,22,799

crore.

The government's estimated cost of food security comes at 11.10%(Rs 1,24,723expressed as a % of Rs 11,22,799 crore) of the total receipts. The CACP's estimatedcost of food security comes at 21.5%(Rs 2,41,623 crore expressed as a % of Rs11,22,799 crore) of the total receipts. Bhalla's cost of food security comes at around28% of the total receipts (Rs 3,14,000 crore expressed as a % of Rs 11,22,799 crore).

Once we express the cost of food security as a percentage of the total estimatedreceipts of the government, during the current financial year, we see how huge thecost of food security really is. This is something that doesn't come out when the costof food security is expressed as a percentage of GDP. In this case the estimated cost is

in the range of 1-3% of GDP. But the government does not have the entire GDP tospend. It can only spend what it earns.
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The interesting thing is that the cost of food security expressed as a percentage of totalreceipts of the government is likely to be even higher. This is primarily because thegovernment's collection of taxes has been slower than expected this year.The Controller General of Accounts has put out numbers to showprecisely this. For

the first three months of the financial year (i.e. the period between April 1, 2013 andJune 30, 2013) only 11.1% of the total expected revenue receipts (the total tax andnon tax revenue) for the year have been collected. When it comes to capitalreceipts(which does not include government borrowings) only 3.3% of the totalexpected amount for the year have been collected.What this means is that the government during the first three months of the financialyear has not been able to collect as much money as it had expected to. This means thatthe cost of food security will form a higher proportion of the total government receiptsthan the numbers currently tell us. And that is just one problem.

It is also worth remembering that the government estimate of the cost of food security

at Rs 1,24,723 crore is very optimistic. The CACP points out that this estimate doesnot take into account additional expenditure (that) is needed for the envisagedadministrative set up, scaling up of operations, enhancement of production,investments for storage, movement, processing and market infrastructure etc.

Food security will also mean a higher expenditure for the government in the days tocome. A higher expenditure will mean a higher fiscal deficit. Fiscal deficit is definedas the difference between what a government earns and what it spends.

The question is how will this higher expenditure be financed? Given that the economyis in a breakdown mode, higher taxes are not the answer. The government will have tofinance food security through higher borrowing.

Higher government borrowing by the government as this writer has often explained inthe past crowds out private borrowing. The private sector (be it banks or companies)in order to compete with the government for savings will have to offer higher interestrates. This means that the era of high interest rates will continue, which will not begood for economic growth.

Also, it is important to remember that the food security scheme is an open endedscheme. As Nitin Pai, Director of The Takshashila Institution, writes in a column

The scheme is open-ended: there's no expiry date, no sunset clause. It covers aroundtwo-thirds of the population-even those who are not really needy. This means that theoutlays will have to increase as the population grows.

This might also lead to the government printing money to finance the scheme. It wasand remains easy for the government to obtain money by printing it rather than taxingits citizens. F P Powers aptly put it when he said that money printing would always bethe first device thought of by a finance minister when a large quantity of money hasto be raised at once. History is full of such examples.

Money printing will lead to higher inflation. Prices will rise due to other reasons as

well. Every year, the government declares a minimum support price (MSP) on riceand wheat. At this price, it buys grains from farmers. This grain is then distributed to
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those entitled to it under the various programmes of the government.

The grain to be distributed under the food security programme will also be procuredin a similar way. But this may have other unintended consequences which thegovernment is not taking into account. As the CACP points out Assured procurement

gives an incentive for farmers to produce cereals rather than diversify the production-basketVegetable production too may be affected - pushing food inflation further.

And this will hit the very people food security is expected to benefit. A discussionpaper titledTaming Food Inflation in Indiareleased by CACP in April 2013 points outthe same. Food inflation in India has been a major challenge to policy makers, moreso during recent years when it has averaged 10% during 2008-09 to December 2012.Given that an average household in India still spends almost half of its expenditure onfood, and poor around 60 percent (NSSO, 2011), and that poor cannot easily hedgeagainst inflation, high food inflation inflicts a strong hidden tax' on the poorIn thelast five years, post 2008, food inflation contributed to over 41% to the overall

inflation in the country.

Higher food prices will mean higher inflation and this in turn will mean lowersavings, as people will end up spending a higher proportion of their income to meettheir expenses. This will lead to people spending a lower amount of money onconsuming good and services and thus economic growth will slowdown further. Itmight not be surprising to see economic growth go below the 5% level.

Lower savings will also have an impact on the current account deficit. As AtishGhosh and Uma Ramakrishnan point out in an article on the IMF website Thecurrent account can also be expressed as the difference between national (both publicand private) savings and investment. A current account deficit may therefore reflect alow level of national savings relative to investment. If India does not save enough, itmeans it will have to borrow capital from abroad. And when these foreign borrowingsneed to be repaid, dollars will need to be bought. This will put pressure on the rupeeand lead to its depreciation against the dollar.

There is another factor that can put pressure on the rupee. In a particular year whenthe government is not able to procure enough rice or wheat to fulfil its obligationsunder right to food security, it will have to import these grains. But that is easier saidthan done, specially in case of rice. Rice is a very thinly traded commodity, with

only about 7 per cent of world production being traded and five countries corneringthree-fourths of the rice exports. The thinness and concentration of world rice marketsimply that changes in production or consumption in major rice-trading countries havean amplified effect on world prices, a CACP research paper points out. And buyingrice or wheat internationally will mean paying in dollars. This will lead to increaseddemand for dollars and pressure on the rupee.

The weakest point of the right to food security is that it will use the extremely leakypublic distribution system to distribute food grains. As Jagdish Bhagwati and ArvindPanagariya write in India's Tryst With Destiny - Debunking Myths That UndermineProgress and Addressing New Challenges A recent study by Jha and Ramaswami

estimates that in 2004-05, 70 per cent of the poor received no grain through the pubicdistribution system while 70 per cent of those who did receive it were non-poor. They
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also estimate that as much as 55 per cent of the grain supplied through the publicdistribution system leaked out along the distribution chain, with only 45 per centactually sold to beneficiaries through fair-price shops. The share of food subsidyreceived by the poor turned out to be astonishingly low 10.5 per cent.

Estimates made by CACP suggest that the public distribution system has a leakage of40.4%. In 2009-10, 25.3 million tonnes was received by the people under PDS whilethe offtake by states was 42.4 million tonnes- indicating a leakage of 40.4 percent, aCACP research paper points out.

Bhagwati and Panagariya also point out that with the subsidy on rice being thehighest, the demand for rice will be the highest and the government distributionsystem will fail to procure enough rice. As they write recognising that the absolutesubsidy per kilogram is the largest in rice, the eligible households would stand tomaximize the implicit transfer to them by buying rice and no other grain from the

public distribution system. By reselling rice in the private market, they would be able

to convert this maximized in-kind subsidy into cash...Of course, with all eligiblehouseholds buying rice for their entire permitted quotas, the government distributionsystem will simply fail to procure enough rice.

The jhollawallas' big plan for financing the food security scheme comes from the

revenue foregone number put out by the Finance Ministry. This is essentially tax that

could have been collected but was foregone due to various exemptions and incentives.

The Finance Ministry put this number at Rs 480,000 crore for 2010-2011 and Rs

530,000 crore for 2011-2012. Now only if these taxes could be collected food security

could be easily financed the jhollawallas feel.

But this number is a huge overestimation given that a lot of revenue foregone is

difficult to capture. As Amartya Sen, the big inspiration for the jhollawallas put it in a

column in The Hindu in January 2012 This is, of course, a big overestimation of

revenue that can be actually obtained (or saved), since many of the revenues allegedly

forgone would be difficult to capture - and so I am not accepting that rosy

evaluation.

Also, it is worth remembering something that finance minister P Chidambarampointed out in his budget speech. There are 42,800 persons - let me repeat, only42,800 persons - who admitted to a taxable income exceeding Rs 1 crore per year,Chidambaram said.

So Indians do not like to pay tax. And just because a tax is implemented does notmean that they will pay up. This is an after effect of marginal income tax ratestouching a high of 97% during the rule of Indira Gandhi. A huge amount of the

economy has since moved to black, where transactions happen but are never recorded.
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To conclude, the basic point is that food security will turn out to be a fairly expensiveproposition for India. But then Sonia Gandhi believes in it and so do other partieswhich have voted for it. With this Congress has firmly gone back to the garibi hatao

politics of Indira Gandhi. And that is not surprising given the huge influence IndiraGandhi has had on Sonia.

As Tavleen Singh puts it in Durbaar When she (i.e. Sonia) refused to becomeCongress president on the night Rajiv died, it was probably because she knew that ifshe took the job, she would be quickly exposed. In her year of semi-retirement shelearned to speak Hindi well enough to read out a speech written in Roman script, andstudied carefully the politics of her mother-in-law. There were rumours that shewatched videos of the late prime minister Indira Gandhi so she could learn to imitateher mannerisms.

Other than imitating the mannerisms of Indira Gandhi, Sonia has also ended upimitating her politics and her economics. Now only if Lal Bahadur Shastri had lived a

few years more...

Vivek Kaul is a writer. He tweets @kaul_vivek


22/27

India's New Food Security Bill Makes Right to

Food a LawByParomita Pain, Occupy.com| truth-out.org

Manju is 34. She lives in Kolkata, India, and has two school-age children. She works

as a cook in six different homes, making a salary that enables her children to live in a

reasonably safe place. Manju cooks many delicacies for the different families she

works for, yet her children make do with a basic rice and lentil dish for most meals.

They dont starve, but if Manju cant work, food is the first thing they will miss.

Manju and her family are luckier, however, than four-year-old Surjo Basfore who

lives with his seven-year-old sister on Platform No. 4 of the Kalyani Railway Station

in Kolkata. They beg for a living. A usual breakfast is about half a puri (a staple of

fried flour cake), which brother and sister share. Lunch is about two handfuls of dal

(boiled lentils) and rice.

Surjo Basfore and Manju are the human face of Indias grim hunger epidemic and the

dismal health conditions of those too poor to afford even basic food. The National

Family Health Survey for 2005/06 stated thatmore than 40 percent of Indian children

under the age of three are underweight, 33 percent of women aged 15 to 49 have a

body mass index that is below normal, and nearly four out of five children aged 6 to

35 months are anemic.

It is for these people that the Indian government recently announced an ambitious

$19.5 billion National Food Security Bill. Passed by the legislature in the first week of

September, the bill promises heavily subsidized wheat and rice for those who live

below the poverty line about 67 percent of the population.
http://truth-out.org/author/itemlist/user/48759http://www.occupy.com/article/indias-new-food-security-bill-makes-right-food-lawhttp://www.occupy.com/article/indias-new-food-security-bill-makes-right-food-lawhttp://atrium.occupy.com/read/node/eac.gov.in/reports/rep_NFSB.pdf%E2%80%8Ehttp://atrium.occupy.com/read/node/eac.gov.in/reports/rep_NFSB.pdf%E2%80%8Ehttp://truth-out.org/author/itemlist/user/48759http://www.occupy.com/article/indias-new-food-security-bill-makes-right-food-lawhttp://atrium.occupy.com/read/node/eac.gov.in/reports/rep_NFSB.pdf%E2%80%8E


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Asreported in the legislation, a total of five kilograms of food grains per month will

be provided at a fixed price of Rs 1-3 ($0.02 to $0.05) per kilogram through ration

shops across the country. If the food security bill works as planned, it will become

one of the worlds largest welfare schemes.

This bill makes the right to food a law, says Chintan Kalra, a food security activist

from Mumbai. However, Kalra is aware of the many ways the bill can fail, which is

why implementation will play a huge role in what the bill really achieves.

Overall, the legislation has aroused perhaps more skepticism than hope. While the

bill's supporters say it is a welcome and needed change, critics call it a shameful tactic

to win elections scheduled for early next year.

Kavita Srivastava of the People's Union for Civil Liberties contends one problem of

the bill is that no time frame has been set for garnering results.

The Guardian reported that while the average Indian adult requires 14 kilograms of

food grains per month, and children need seven kilograms, the new bill provides

entitlements of just five kilograms per person per month, thus ensuring only 166g of

cereal per person per day.

India has a long history of food welfare programs, the country's midday meal scheme

for school children being the most famous. Butthe recent tragedy in Chhapra in the

state of Bihar, which saw 23 children die after they ate poison-laced food, underlined

the degree of corruption and lack of care that plague even the best plans.

The Indian Anganwadi system, started in 1975 to provide basic healthcare in the rural

areas, offer focal points of nutrition and care for children and pregnant women. And

strengthening those centers will mean more people getting access to what the current

food security bill promises.
http://articles.timesofindia.indiatimes.com/2013-06-13/india/39950536_1_food-security-bill-ordinance-route-opposition-partieshttp://articles.timesofindia.indiatimes.com/2013-06-13/india/39950536_1_food-security-bill-ordinance-route-opposition-partieshttp://www.theguardian.com/global-development-professionals-network/2013/jul/15/india-food-security-billhttp://www.bbc.co.uk/news/world-asia-india-23353017http://www.bbc.co.uk/news/world-asia-india-23353017http://articles.timesofindia.indiatimes.com/2013-06-13/india/39950536_1_food-security-bill-ordinance-route-opposition-partieshttp://www.theguardian.com/global-development-professionals-network/2013/jul/15/india-food-security-billhttp://www.bbc.co.uk/news/world-asia-india-23353017


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But Dr. Jayakumar Christian, who leads World Vision India, stressed the importance

of the distribution system in making the bill a success.

At this point the Anganwadis become the most important link in fulfilling the

purpose of the bill. The bill states that it 'provides for food and nutritional security in

human life cycle approach,'" said Dr. Christian. "Then it should address the gaps and

have provisions for strengthening the current system."

The work of identifying eligible households for the program has been left to the

states. Indias Planning Commission has said that those living on Rs 29 a day (about

$0.50) are eligible for the Below Poverty Line, or BPL, cards.

It is also important that no person is robbed of his/her right to access food because

they dont have adequate documents or they live in inaccessible places," added

Christian.

The Right to Food Campaign, an informal network of organizations and individuals

committed to realizing the right to food for everyone in India, agrees. It statedthat

the Act must include strong accountability and grievance redressal provisions,

including mandatory penalties for any violation of the Act and compensation for those

whose entitlements have been denied.

Yet, in the whole issue of making sure basic food grains are available, the question of

nutrition is often overlooked. India is among the third largest economies in Asia, but

the poor are barely feeling the progress being made. And it isn't food alone that is

lacking. Health, safe water and access to education are equally important, especially

in our overcrowded cities, said Dr. Julan Ghosh, who runs a womans group in

Kolkata.
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India ranks 65 out of 79 countries on the Global Hunger Index. In their recent

book, An Uncertain Glory: India and its Contradictions, writers Amartya Sen and Jean

Dreze argue that the countrys failure to adequately feed its women and children

demonstrate "catastrophic failures, with wide-ranging implications not only for the

people of India today but also for the generations to be born in the near future."

Sonia Gandhi, the head of the Congress Party, emphasized in simple terms the

importance of the new bill: The question is not whether we can do it or not," she

said. "We have to do it.
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WTO chief raises concerns over India food

security law

The Hindu

Asserting that India will soon be breaching their Aggregate Measurement of Support

(AMS) commitments to WTO due to its new food security programme, the newly

elected Director General, Roberto Azevedo on Monday sought a positive solution to

the issue before the Bali Ministerial to be held in December as some countries have

expressed concern over the procurement and distribution of highly subsidised

foodgrains.

Speaking separately at the events organised by CII and FICCI, Mr. Azevedo said

India had asked the WTO to work out a solution as it was keen to win legitimacy for

its ambitious food security law that promises highly subsidised foodgrain to rural and

urban poor. We have agreed in Geneva on a certain issue and are working on a

peace clause to find a permanent solution to the issue. India would soon be

breaching their AMS commitments in the WTO. So, they are asking for some kind of

action in Geneva that could allow those programme to continue to work unaffected till

a final solution is found, the WTO Director General said.

He said Bali Ministerial meet will look at how this permanent solution will come. The

Peace Clause in Article 13 of the agreement on agriculture (AOA) has been there for

9 years. India is open to accepting a Peace Clause as an interim mechanism till an

acceptable final solution. India is also ready to commit that procured food grains

would not be released for international trade and the management of public stocks

would be done in a transparent manner, the official said.

The UPA II government is presently implementing the Food Security Act which

entitles 82 crore people to 5 Kg of foodgrain per person per month at the rate of Rs. 1-

3 per Kg. The country needs 62 million tonnes of foodgrain in a year to implement the

law. The initial proposal on food security, which was tabled by G-33 was

immediately rejected by many countries for different reasons. However, we have

made lot of progress since that point of time. From upfront rejection, we now are

building an environment for very constructive engagement that will try to address this

issue in a positive manner, Mr. Azevedo said.

Mr. Azevedo underlined the need for national governments to show flexibility andreasonability to evolve a consensus on a multilateral trade package that is meaningful


27/27

and doable. Time was running out and it was imperative that Trade Ministers

actively engage with one another in the weeks ahead to find a common ground, failing

which plurilateral, multilateral and bilateral agreements will proliferate and many

countries will be denied the benefits of a rule-based approach to trade liberalisation.

The markets will then open on non-MFN basis and the ticket to admission into these

agreements will be far more expensive than a WTO-led multilateral trading system,

he added.

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