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Change without reform

Source : BUSINESS_STANDARD
Last Updated: Wed, Mar 20, 2013 20:54 hrs
Economy may grow between 6.1 to 6.7%

The revised draft of the food security Bill, approved by the Cabinet Committee on Economic Affairs (CCEA) on Tuesday, marks some distinct changes over the draft introduced in Parliament in 2011. However, it may still not fully satisfy either the states or activists. While it retains the overall population coverage of 75 per cent rural and 50 per cent urban, it does away with the categorisation of households into "priority" and "general" groupings. Notably, it cuts down food entitlement for all beneficiaries to five kg per head from the seven kg envisaged for the poor in the original Bill. It, however, keeps intact the existing benefits to the poorest of the poor under the Antyodaya Anna Yojana. Though states have been given more flexibility in the identification of households for inclusion and exclusion under the new law, the critical issue of the extent of population coverage in each state under the overall cap of 67 per cent for the whole country has been left to the Planning Commission.



These amendments broadly conform to the suggestions of the parliamentary standing committee that reviewed the 2011 Bill, but they do not adequately address the various objections that the states have raised. Some states already have more expansive schemes; others demand full freedom to decide on the extent of population coverage. At last month's state food ministers' conference, several states expressed their disinclination to implement the Centre's food security statute. Activists, meanwhile, say five kg per head is insufficient, forcing poor households to supplement their ration with purchases from the open market at far higher prices.

The Bill raises many questions. But the most important question is: why now? India's macroeconomy is fragile, and the implications of this proposed measure remain truly worrisome. The food subsidy is budgeted at Rs 90,000 crore for 2013-14, but might hit over Rs 1.31 lakh crore after the legislation. This could possibly mean that the Bill will not be fully implemented in the next financial year, but observers - including global credit rating agencies - will draw negative implications about the path of fiscal consolidation anyway. Moreover, there is little sign that the Bill will be accompanied by necessary reform in the procurement and distribution systems.

The present open-ended grain procurement system causes the government to become the nation's biggest hoarder of food, starving the open market - this partly explains high food inflation even in times of surplus production. True, the estimated foodgrain requirement of 61.2 million tonnes to execute the new statute is less than the actual procurement of 63.3 million tonnes in 2011-12 (Economic Survey 2012-13). But there's also the thorny issue of how to reform the leaky public distribution system. The new Bill has no answers to any of these problems - so, although the Centre is keen to push the Bill through ahead of general elections, many issues remain unaddressed.

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