Consider the following facts on the food governance in India. Don’t be surprised if you appear to get lost in the contradictions.
- The Indian economy, measured in terms of GDP, grew at a good pace over the past decade. Scores of farmers committed suicide in the same period.
- Subsidies on food and agriculture have shot up.
- Food grain production breaks records each year, though appear stagnating.
- Input cost to agriculture as well as the minimum support prices (MSP) have been rising every year.
- Farmers are being paid more than double what they were 10 years ago for their food grain — but they still commit suicide.
- The Food Corporation of India’s warehouses have been overflowing with food grain; in fact, rotting in many places. The Supreme Court, in 2010, had to order to distribute the surplus stock to the poor and increase the PDS entitlements.
- Rising food grain prices have been the main driver of inflation lately.
- Over 40 percent young children are malnourished.
- We bloat with pride at record food grain exports while the per capita food availability in the country is declining.
- We lose money on every tonne that we export; exporters make profits, but the exchequer loses.
Question: In this crazy scenario, why does the UPA government want to pass the National Food Security Bill 2013 in the parliament?
Answer: So that it can win 2014 Lok Sabha Polls. Period.
No wonder the proposed Food Security Bill has been widely criticized for inadequate food entitlement, neglect of the nutritional needs of the people, a sloppy grievance redressal mechanism, opening door for cash transfer to substitute the PDS system, arbitrary coverage limits on rural and urban populations, and so on. Even the UPA allies lack enthusiasm.
The perceived success of the MGNREGA has sent the Congress Party lords into hallucination to come up with another mega social legislation, this time in the name of National Food Security Bill. Yet, no one has the slightest clue about the social, political or economic impact of the Rs 1,30,000 crore annual Act.
Even after exposures of scam after scam (all at grand and unprecedented scale: 2G, CWG, Coal mining allotment scams are merely the crown jewels) in its second innings, the UPA government has failed to realize that it has to actually learn to govern the country. If its heart is actually crying for the farmers, poor and hungry of the country it should be taking steps to eliminate wastage of food grain in the highly over stocked FCI warehouses and use that to bring prices down; bring sanity to its procurement policies by decentralizing it and encouraging local purchase and distribution of food grain, prevent farmers’ suicide; streamline the whole PDS system to make it transparent, efficient and corruption-free; provide universal coverage in the poorest 200 districts of the country along with taking care of all slum dwellers in the urban areas.
And it does not require any legislation to do these things; Indian Constitution has all the necessary provisions. But unfortunately providing effective governance and social leadership is not the forte of the current UPA alliance in power, waiting to be dismissed.
Therefore, the shortcut of bringing another new legislation: this time the Food Security Bill.
Even the agriculture minister has his reservations on the Bill: If a small farmer could get food grain for as little as Rs.1 per kg, as proposed in the Food Security Bill, why should he bother to grow his own?
Who will Clear This Mess
While no one can deny that India, with its largest number of under-nourished and under-fed people in the world, needs to provide food security to its hundreds of millions living with constant poverty and hunger. But doing that does not need another legislation; it requires clearing the mess of contradictions the country is currently in.
We all know the story of five blind men trying to describe what an elephant is, by holding a separate limb of the animal. The picture is not very different on the Food Security Bill; various ministries of the government and allies have their own ideas on the impact of the Bill, once passed by the parliament.
Cost of the Bill
The finance ministry, in the current year, allocated Rs 90,000 crore towards the food subsidy including the implementation of the food bill. The food ministry estimates that the subsidy will cost about Rs 1,30,000 crore in the current year.
The Commission on Agricultural Costs and Prices (CACP) puts the cost at Rs 2,41,000 crore in the first year of implementation. Over three years, it says, the outlay will be Rs 6,82,000 crore, including the Rs 1,1,000 crore required for upscaling food production.
Rising minimum support price (MSP)
Every year, the minimum support price (MSP) is likely to go up. Since 2003-04, MSPs of wheat and rice have more than doubled: wheat from Rs 640 to Rs 1,350 per quintal and rice, from Rs 550 to Rs 1,250. But the food subsidy tag has escalated more three times in the same period, from Rs 25,181 crore to Rs 85,000 crore, because of rising handling and storage costs.
Needless to say, the MSP is the net result of the annual tug of war between the ministries of food and agriculture. The former, as a buyer, does not want the MSP increased. The latter, advocate farmers interests and insists that it must increase. The MSP is clearly a political tool for the politicians and an economic necessity when looked from farmers’ lens.
The question everyone is asking is: Given annually escalating costs, will the Food security Bill cripple the economy? The answer depends upon where you come from: the corportate lobby, the civil society, the ruling alliance, or the opposition. As far as the farmers are concerned, they have come to expect procurement at the time of harvest — because this is when the market prices are below the MSP.
The vicious cycle of rising agriculture input cost, MSP, and food subsidy
The reformist government at the center, run by a galaxy of US trained economists, wants to cut and eliminate subsidies. Why? Because that’s what it has been told to by international lenders who belong to the corporate culture.
In 2009, the price of non-urea fertilizers was decontrolled. It led to increase in their prices. The use of chemical fertilizers is also problematic. In order to get the same yield of grain, more and more fertilizer is needed every year. It means rising expense year by year. The MGNREGA scheme has almost doubled the labor cost for the farmers. It puts severe pressure on the farmers and they have begun to wonder if farming in India is sustainable any longer. Thus, they are forced to lobby for an increase in MSP. The tight situation pushes them to debt. When trapped under debt, they often seek salvation in suicide.
A higher MSP raises the cost of procurement, which in turn raises the food subsidy tag. Therefore, trimming the fertilizer subsidy ultimately end up raising the net food subsidy. It is not the way to approach agriculture in India. Experts feel that in the current scenario farming simply isn’t viable without sufficient subsidies. They also point out that the Indian farmer gets only a fifth of the subsidy given to a US farmer.
Why India is nutrition deficit
A peculiar characteristics of our food economy is the over emphasis on on cereals to the exclusion of nutrient-rich items like pulses and oil seeds. Thus, we are forced to import them. The major drivers for food inflation have not been cereals, but the protein-rich food items. No wonder in malnutrition indices India is behind the Sub-Saharan Africa.
The problem is further aggravated by the high level of leakages from the PDS supply chain: variously estimated in the range at 40 – 55 percent. With the use of technology, the situation appears to be improving, but the leakages are still unacceptably high. To plug the leaks, the Bill proposes introducing direct cash transfer of the subsidy to the beneficiaries.
Government hoarding and export of food grains
An irrationally high stockpile of food grains with FCI has led to artificial shortage of food grain pushing up the domestic prices. Building up such a massive stock involves costs, besides leading to wastage due to mismanagement. Often the government is forced to manage the food grain stock by exporting. The government loses money on exports, whenever the international prices are below the government’s holding cost. The per metric tonne economic cost of wheat to FCI is about Rs 19,000. Export decisions are generally dictated by the need to decongest the warehouses.
This is a very funny situation: food grain is exported at subsidized rates to feed the cattle and pigs in other countries, but can’t be given to the poor of the country.
The irony is: providing food security is all about good governance of agriculture, procurement and distribution, not just reducing subsidies or passing a food Act. Even after the Food Security Bill is passed, the severe governance deficit will continue to stare at the face of the citizens.
You may also like to read a detailed National Food Security Bill 2013 Report