Bill it, but ensure food security

After brushing away the structural flaws in the NAC's National Food Security Bill (NFSB) pointed out by the Rangarajan committee, government has introduced the NFSB in the parliament. Three aspects of the Bill need consideration: the target population and the amount of subsidy (quantum of food and its price); the demarcation of responsibilities between the state and the central governments; and the delivery u00a0mechanism.

The Bill guarantees food at subsidised prices to 'priority' households u00a0-- not less than 46 per cent of the rural and 28 per cent of the urban population being designated as Priority -- and 'general' households under the existing Public Distribution System (PDS). The entitlements of rice, wheat and coarse grains to priority households is proposed at Rs 3, Rs 2 and Rs 1 per kg respectively, and to general households at 50 per cent of Minimum Support Prices (MSP).u00a0

Although the Centre will send the entire quantity of grains to each state, the states are responsible for ensuring that the grains reach the target population. This includes setting up and maintaining storage facilities at the state, district and block levels, organising intra-state transport and delivering foodgrains, all at the state's cost. In case of a delay or failure, the state government must pay a Food Security Allowance out of its own coffers. States are naturally riled over NFSB's silence on the finances required by the states to do all this.u00a0

Manifestly, implementing the Bill is going to strain India fiscally. Although lowest estimates are in the range of Rs 30,000 crore, Food Minister has estimated an expenditure of Rs 300,000 crore for buying food grains and creating the infrastructure.u00a0

But is this too much a price to pay for keeping so many of our countrymen hungry and malnourished? That is the nub of the NAC's argument. Yes, no Indian should go hungry but good intentions do not automatically translate into good policy prescriptions. To put it bluntly, the current food security bill is incapable of providing food security.u00a0

Since the basic objective of the NFSB is to eliminate hunger and malnutrition, the distribution system must be able to efficiently deliver to the correctly beneficiary. The PDS, chosen as the delivery mechanism, is both ineffective and inefficient. PDS, a marketing channel of about half a million Fair Price Shops (FPS) devoted exclusively to the distribution of the subsidised food, is run by the government. Subsidised grain is not accessible elsewhere.u00a0

Currently, the PDS suffers from poor identification and targeting of beneficiaries, massive leakage of grain, low margins of FPS, creating perverse incentives for diversion of PDS foodgrains and a general lack of accountability. Estimates suggest that only 40 per cent of foodgrains reach the poor while a Planning Commission study found that government spends Rs 3.65 to transfer Re 1 to the poor via the PDS. NFSB neither attaches any conditions to reform the PDS nor does it touch upon alternatives to the PDS: food stamps, food coupons and generic smart cards which can be used both in the FPS and the open market.u00a0

The best alternative to the existing PDS is the use of smart cards. By using smart cards, food subsidy will be directly transferred to the beneficiaries instead of going to the owners of PDS stores. This will give the people an opportunity to go to any store of their choice and use their smart cards or food coupons to buy food. With the Aadhar biometric identification system, people will in fact have the freedom to migrate to any part of the country without the fear of losing their food rations.u00a0

As the poor will be paying the stores the same price for food grains as the other buyers do, the shopkeeper, including PDS stores, will have no incentive for selling adulterated grain to the poor. This will create incentives for PDS stores to be more efficient. Besides plugging leakages, it will reduce the carrying costs for the government and leverage the existing grain procurement and marketing system. Food security is an important policy idea that will transform the lives of millions of Indians. We cannot allow NAC's flawed food security bill to destroy that idea.

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