FOOD SUBSIDY
The National Food Security Act (NFSA) enacted by the then UPA – government in 2013 guarantees availability of 5 kg of cereals per person per month at Rs 3 per kg rice, Rs 2 per kg wheat and Rs 1 per kg coarse cereals to 67% of India’s population (75% rural & 50% urban). The cost of making food available being substantially higher, this entails massive subsidy payment.
Subsidy is financial supports given by government to enable a person buy a commodity which he cannot afford with his limited income. Prudence demands that this should be given for a temporary period to avoid perennial burden on the exchequer. This period should be used to enable him earn more so that he can pay cost-based/market price when subsidy is withdrawn.
In food, successive governments threw this prudence to the winds as they kept on giving subsidy on an increasing scale. Only the nomenclature of platform carrying it changed; initially public distribution system (PDS) then, targeted PDS (TPDS) from mid-90s and now NFSA. The ruling class proceeded on an unsaid premise that people will remain poor and hence, need subsidy eternally.
Prime Minister Narendra Modi whom people gave a resounding mandate on the promise of inclusive development (and good governance) says he is committed to create more jobs and increase income. Accordingly, the government has implemented a number of schemes such as Jan Dhan Yojna, Start-up India, Stand-up India, Make in India, Digital India etc. It also aims to double farmers’ income by 2022.
When these initiatives start delivering [it should happen within a time frame of say five years from now], people including a majority of the poor are expected to have more purchasing power in their hands. At that stage, why would they need subsidy support? Has the government thought through a road-map for scaling down subsidy with the ultimate objective of eliminating it?
But, looking at food subsidy bill (Rs 1,40,000 crore during 2015-16) which will shoot up after NFSA is implemented in all the states, the answer is a clear ‘no’. Still worse, the government has not even taken any steps to exclude the better-off from purview of subsidy.
Last year, the Shanta Kumar committee had recommended reduction in coverage under NFSA from 67% of the population to 40%. Even within 40%, it proposed that only poorest of poor households included under Antyodaya Anna Yojna (AAY) should be entitled to supply of food at Rs 3/2/1 per kg with the proviso that they get 7 kg of food grains per person per month. The rest will get access at 50% of MSP (minimum support price) paid to farmers.
Considering that as per National Sample Survey Organisation (NSSO) census, a poor person consumes on an average 10 kg/month, the provision for only 5 kg under extant NFSA is grossly inadequate. To that extent, committee’s recommendation for increasing this to 7 kg would offer relief by reducing dependence on market purchase at a much higher price.
The package offered by the committee strikes a judicious blend between the overriding need to fully protect the most vulnerable sections of the society on one hand (read households under AAY) and reducing subsidy burden on the exchequer on the other. Yet, these recommendations have been put in cold storage.
The list of beneficiaries under extant TPDS suffers from flaws such as wrong categorisation {for example, those with higher income are included in below poverty line category) or a large number of ‘bogus’ households. All states were required to take a look at the list de novo, correct anomalies and upload verified/ authenticated data on the website.
CAG audit
The exercise should have been completed three years ago when the NFSA was to take effect from July, 2013. Yet, according to an audit by Comptroller and Auditor General, only half of the targeted beneficiaries have been identified by states and Union Territories (UTs) so far. Old data bases of beneficiaries are still in use in these regions.
In Bihar, for instance, the Group D government employees have been identified as beneficiaries under the scheme. In Karnataka, 8,90,000 bogus and ineligible ration cards were found (June 2015) during seeding of voter identity card details. Instead of cancelling these bogus cards, the state continued to issue food grains to them. In Maharashtra, the ration cards were revalidated by merely affixing stamps on the existing cards under different categories.
In short, even as 18 states and UTs continue to stick to TPDS regime (with all its attendant maladies), even those who have declared to be NFSA compliant have not got rid off ‘bogus’ beneficiaries or better-off camouflaging as AAY. Together with continued mismanagement of food procurement and distribution [a glaring example is disappearance of stocks worth Rs 12,000 crore in Punjab], it is business as usual.
The biggest worry under NFSA is the stipulation for sale at ridiculously low price of Rs 1/2/3 per kg. The market price being many times more, this gives a strong incentive for pilferage and black marketing. Any degree of vigilance/ monitoring/surveillance (at present, even this is missing) cannot stop this.
In this regard, the Shanta Kumar committee had recommended direct transfer of subsidy to beneficiaries in their bank account using biometric identification with Aadhaar. At one stroke, it can solve the problem of pilferage and black marketing of food. That again is miles away. For now, the government is only running the scheme in three UTs on a pilot basis.
The Modi government has completed two years in office. If it does not walk the talk on food subsidy reform in the third year, then it is unlikely that it would happen during its term.
(The writer is a New Delhi-based policy analyst)
http://www.deccanherald.com/content/548839/exclude-better-off.html