Features and Highlights of the National Food Security Bill

by Manshu on July 4, 2013

in Economy

The UPA government has said today that it is going to try and pass an Ordinance to implement the National Food Security Bill. They are going the Ordinance route without the full support of their allies and there are some news reports that talk about early elections due to this.

So far I’ve not seen a single group that supports the Food Security Bill and everyone has their own reasons for not supporting this. I’m going to talk about my impressions later on in this post, as I want to start by listing out features and highlights of this bill.

Features of the National Food Security Bill

The idea behind the National Food Security Bill is to provide really cheap food to people who may not able to afford it otherwise, and the Centre and State governments are both responsible to enable and implement this.

I think there are several things to understand here.

Why type of food does the National Food Security Bill provide?

This bill talks about providing rice, wheat or coarse-grains to people through PDS shops.  That’s also one criticism of the bill since people are now demanding protein rich food in India, and this bill doesn’t do anything to address that need.

Who does the National Food Security Bill aim to assist?  

The bill covers up to 75% of rural population, and 50% of urban population, and following categories are created in the bill.

Priority Households: People in the Priority Households are entitled to get 5 kgs of subsidized food grain per person per household.

Antodya or Eligible Households: An Eligible Household can get up to 35 kgs of subsidized food grain.

From reading the bill, it is my understanding that they haven’t yet defined these two type of households, just that these two categories together should cover 75% of the rural population, and 50% of the urban population.

In addition to the above two categories, the following will also be covered by the bill.

Children in the age group of 6 months to 6 years: The bill guarantees what is called an “age appropriate meal” for children falling under this age group.

Children in the age group of 6 years to 14 years:  Bill guarantees a free mid day meal in school for all children in this age group who go to schools run by the government or government bodies.

Pregnant or Lactating Mothers: These women will get a free meal during pregnancy and six months after child birth, and they will also get maternity benefit of not less than Rs. 6,000 in installments. The Bill doesn’t detail out how will these installments be paid.

What subsidy does the National Food Security Bill provide?

The bill states that rice will be sold at no more than Rs. 3 per kg, wheat for no more than Rs. 2 per kg and coarse grain for no more than Rs. 1 per kg.

What is the responsibility of the Central and the State Government?

The responsibility for procuring the food grain lies with the Central Government and the responsibility of distributing the food grain lies with the State governments. The bill also talks about women empowerment and to do that they are going to issue ration cards to women over 18 in every family as head of that family.

The States have the responsibility to build storage, ensure delivery and smooth functioning the scheme. They have the current Public Distribution System to work with, and clearly there is a lot of work to be done in that area.

How much does the Food Security Bill Cost?

The government has estimated Rs. 1.23 lakh crore as the subsidy cost for this bill. However, this is an incomplete estimate since it only includes the cost of food grain and doesn’t address the infrastructure or day to day running of the scheme.

Here is the government statement about this.

“As per the provision of the Bill, estimated annual requirement of food-grains at 2011 population is 60.74 million tonnes and the corresponding estimated food subsidy at 2013-14 costs is about Rs 1,23,084 crore,” Food Minister K V Thomas said in a written reply to Rajya Sabha.

They have already budgeted Rs. 90,000 crore as food subsidy this year, and based on how much they are able to implement this scheme

Thoughts on this bill

These were some of the main points of the bill, and now I will get to my impressions on this which are all rather negative. I can’t seem to find anything positive about this bill except perhaps the good intention behind it.

The government simply doesn’t have enough money to give away food like this. The government should be looking at cutting subsidies to get its spending control, not increasing it specially when everyone knows the leakages that exist in the system, and the black markets that are created due to such schemes.

The government doesn’t even have enough food grains. The grain stock is about 70 million tons and if the estimated requirement is 60.74 million tons then how will this be feasible three or four years down the line, the food stock isn’t getting replenished at the rate of 60 tons ever year, and one bad monsoon will leave the scheme totally infeasible.

There is no infrastructure to deliver the scheme – they haven’t defined who gets the benefit, there is no clarity on where the grain will be stored, or how it will be delivered.

The scheme distorts markets and it is not clear to me how this will affect prices for people who won’t buy food from this scheme. How will this affect farmers who will be dependent on state machinery to sell their food grains.

Such a costly bill is not good for the deficit, and while some brokerages have expressed that the deficit won’t be worsened because of the bill this year, that’s only because they don’t expect the bill to be really implemented this year, otherwise when the bill is fully implemented that will add to the food subsidy which in turn will worsen the deficit and ultimately fuel inflation.

I’m not optimistic that this bill will do anything to improve the state of the Indian economy or the state of the Indian people.

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{ 4 comments… read them below or add one }

ashish July 4, 2013 at 7:54 am

nice analysis

Reply

Manshu July 4, 2013 at 9:03 am

Thanks!

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santonu July 4, 2013 at 8:52 am

govt is frequently talking of direct cash transfer scheme and can this cash transfer be linked with this project to make it simpler.

Reply

Manshu July 4, 2013 at 9:04 am

Direct cash transfers are a lot better than these type of schemes but unless there are proper systems that can ensure no or very little leakages, even direct transfers aren’t likely to do a lot of good.

Reply

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