Recently, Union Minister for Consumer Affairs, Food & Public Distribution, Ram Vilas Paswan informed that the Government will not affect any increase in issue prices for food-grains under the National Food Security Act [NFSA] till June, 2018.
Under the Act, 5 kg of cereals per person per month is made available at heavily subsidized price of Rs 3 per kg rice, Rs 2 per kg wheat & Rs 1 per kg coarse cereals to 67% of India’s population [75% rural & 50% urban] or over 800 million persons. These prices shall be valid for a period of 3 years from the date of commencement of the Act and, thereafter, may be revised by the Central Government.
The NFSA came into force on July 5, 2013 [under the then UPA dispensation] and was implemented in only 11 States when the NDA Government – led by prime minister Narendra Modi – took over the reins in the year 2014. It was only by November, 2016, it got implemented in the entire country.
As per the provisions of the Act, the prices were to remain frozen for three years from the date of its coming into force. That deadline was over on July 4, 2016. Since then, almost two years have passed but there has been no increase nor, the government has any intent to hike till 2019 when the next general elections are due.
This may please a vast section of the population which continues to get food at price almost close to being ‘free’. But, this does not bode well for the economy and welfare of the people at large.
It is a matter of shame that six-and-a-half decade after independence, in 2013 when NFSA was enacted, our rulers still felt that more than 800 million people of this great country were so poor that they need be given food at throwaway price. The belief as embedded in this law also mocks at the official claim that the number of poor persons is 25-30% of the population; that India has achieved big success in bringing a large number of people above the poverty line.
Initially, Modi looked different. He was allergic to continuing with subsidies and strongly advocated the idea of empowering the poor and giving them opportunities to increase their income so that they could stand on their own without subsidy support. Under his model of development [albeit inclusive], subsidies would be phased out over a period of time, say 10 years.
Four years since, if the prices continue to remain frozen at those ridiculously low levels and will remain so until 2019, one needs to have a re-think. While, five years [read: 2014-19] may not be a long enough period to see the impact of major transformation that Modi intended but, at the least, some movement in that direction should be seen. But, ALAS that was not to be.
The extant policy has disastrous implications on almost every count. First, with low price covering barely 1/10th of the cost of food procurement, handling and distribution and the mammoth quantity delivered under NFSA, the food subsidy burden on the exchequer is huge Rs 140,000 crore [2017-18]. Including Rs 35,000 crore that government spent on the price support scheme for pulses and oilseeds, the total outgo was Rs 175,000 crore.
Further, in view of a group of ministers [GoM] under home minister, Rajnath Singh having approved nation-wide implementation of a market assurance scheme [MAS] covering 23 agricultural crops including wheat and rice, the food subsidy bill will reach a humongous Rs 220,000 crore. This is an increase of Rs 45,000 crore over the amount spent during 2017-18 and Rs 51,000 crore higher than the budget allocation of Rs 169,000 crore for 2018-19.
This will have a serious destabilizing effect on the union budget. This is more so, when steep increase in international price of crude oil, concomitant sharp hike in price of petrol, diesel, LPG etc and the need to protect consumers would impact fiscal deficit.
Second, the present system hits millions of marginal farmers who barely produce enough to meet even their own consumption needs. Since, the supplies under NFSA at low [albeit subsidized] price restricted to 5 kg per person per month barely covers 50% of the requirement [10 kg per month estimated by NSSO (National Sample Survey Organization)], they have to buy the balance from the market at much higher price. The condition of millions of landless workers is even more pitiable as they have no produce of their own and depend on purchase for all their requirements.
These category of persons are made to suffer primarily because of the massive coverage [read: 67%] under NFSA which includes millions of non-poor/better-off who can afford to pay for un-subsidized food. In early 2015, a committee under Dr Shanta Kumar had recommended reduction in coverage under NFSA from extant 67% to 40%, increase in entitlement of the very poor from 5 kg to 7 kg and requiring all others to pay 50% of minimum support price [MSP]. But, the government has not acted on these recommendations.
Third, the system is prone to leakages. True, digitalization of sale from fair price shops [FPS] and requirement of authentication with Aadhaar card has helped in reducing leakages. But, in a situation wherein, subsidized food is available at a mere 1/10th of the cost [or the likely market price], there is huge incentive for dubious operators to siphon-off and make profit. The direct benefit transfer [DBT] of food subsidy alone can kill this incentive and eliminate leakage but its implementation is a distant cry.
Fourth, the existing dispensation is surest invitation to inefficiency, high cost, inflated expenses etc in handling and distribution [besides MSP paid to farmers] all passing muster under omnibus food subsidy. These can be curbed only by removing controls on food procurement, pricing and distribution and letting market forces take charge in all areas of the supply chain. Of course, this will require that the poor are given financial support via DBT.
To sum up, Modi – government has maintained status quo with regard to NFSA and all the ills that go with it. Unless the Act is dismantled lock, stock and barrel and food supply chain unshackled with DBT to help the poor, India’s fiscal situation and welfare of people at large will continue to be seriously compromised.