Nov 8th 2010, Smita Gupta

The case of the Food Security Bill gets curiouser and curiouser. What started off as a fight between universalization and targeting has ended (or so it would seem) in a complete victory in the National Advisory Council (NAC), Government of India, for targeting through universalization (if such a thing was possible), with the honourable exception of Prof Jean Dreze, who has to be commended for his 'note of disagreement'.

The Proposal
On 30 August 2010, the Working Group of the NAC had recommended 'universalization with differentiated entitlements', dividing the poor into two categories, 42% in 'antyodaya' and the rest in 'aam'. They found the best way to kill a Bill: make it so complicated that it is completely unworkable in practice. A complicated Bill also means that there is immense scope for bureaucratic intervention and interpretation, with a high degree of arbitrariness. Too much power gets vested in the hands of the central government since an Act of this kind will leave more and more provisions to the Rules, where the executive has immense discretion and essentially needs to notify each decision without passage by the legislature. Often, Rules are in variance with the intent of Parliament.

This is precisely the direction in which the highly-awaited food security bill is headed in the NAC. When the initial attempts by the Government to target food security to a small section of India's hungry people met with stiff resistance, the Government decided to be more innovative and instead of an openly exclusionary approach, it decided to obfuscate issues in a confusing labyrinth of entitlements, categories, prices and phases. The 'Gist of Decisions' taken by them on 23 October 2010 rechristens (presumably) BPL as 'priority' and APL as 'general'. It increases the percentage of priority households for rural areas by 4 percentage points and for urban areas by 2 percentage points when compared to Tendulkar Committee estimates. The inter se share of each state is to be in accordance with the discredited Planning Commission ratios. To these households, it gives 35 kgs rice, wheat or millets at Rs. 3, Rs. 2 and Rs. 1, respectively. Thus, the Antyodaya entitlements are now to be given to all priority households. The general category households will comprise 44 per cent of the rural households and 22 per cent of the urban households, and will be entitled to 20 kgs per month at half the Minimum Support Price (MSP). Thus 90 per cent rural households and 50 per cent urban households are to be covered with unequal and differentiated entitlements. The mechanism and criteria for their identification/selection is left once again to the prime architect of the present disastrous system, namely, the Central Government.

Table 1 clearly shows the statistical skulduggery that is involved in an exercise by which the NAC in fact reduces the number of 'priority' households (a euphemism for BPL) by 2.11 crores (11 crore persons) as compared to the present number of actual cardholders. In fact, the current situation is that 56 per cent of the 2001 population has already got BPL cards. By a clever sleight of hand, this will come down by 14 percentage points in the NAC formulation, a removal of 3.4 crore households (a whopping 18.8 crore persons).

Table 1: The Number Game
1	Current BPL families in crores permitted by Planning Commission based on 1993-94 poverty level of 36% and 2001 population (projected from 1991) i.e., 99.69 crores and not actual 102.87 crores		6.52
2	Number of households (persons) left out in 2001 due to continued usage of projected rather than actual population of 2001 in crores		.39 (2.14)
3	If the currently applied 1993-94 poverty level (36%) is applied to the current population, number of BPL households in crores		7.92
4	Number of households (persons) left out in 2010 due to continued usage of projected rather than actual population of 2001 in crores (2010 population at 117.67 crores or 22 crore households)		1.4 (7.7)
5	BPL families actually issued cards in crores		11.04
6	Households holding cards as a % of 2001 population		56
7	If Tendulkar estimates’ 37.2% is given BPL status, their number in 2010 in crores		8.18
8	If existing share of 56% applied to 2010, number of BPL households in 2010 in crores		12.32
9	NAC priority households in rural areas (46%)		7.29
10	NAC priority households in urban areas (28%)		1.6
11	NAC priority households in 2010 in crores (total)		8.89
12	Reduction in number of eligible households (persons) as compared to present number in crores (Row 5 minus Row 11)		2.11(11.61)
13	Reduction in number of eligible households (persons) as compared to present percentage in crores (Row 8 minus Row 11)		3.43 (18.87)

Table  1  >> Click to Enlarge

Widespread Hunger Requires Universalization
In a country where a whole range of existence at sub-optimal levels of food consumption occupy the space between life and death, the argument in favour of a universal system of food security is so compelling that nobody, not even the most parsimonious fiscal expert, can refute it. The Government has always spoken about 'food security for all'. This is not surprising since endemic hunger continues to badly affect a large section of the Indian people. The International Food Policy Research Institute (IFPRI)'s Global Hunger Index (GHI) places India in the category of nations where hunger was 'alarming', ranking 66 out of the 88 developing countries. IFPRI estimate of the hunger index for the 17 major states in 2008 (more than 95 per cent of the population of India) put 12 into the 'alarming' category, and one into the 'extremely alarming' category. High levels of hunger are seen even in high growth states. Expectedly, the backward Eastern and Central region has the worst performance.

India's 80 per cent of the rural population, 64 per cent of the urban population, and 76 per cent of the total population suffer from inadequate calorie and food consumption. More than half of India's women and three-quarters of children are anaemic, with incidence among pregnant women an even higher 59 per cent. The proportion of underweight children remains at around 48 per cent for the past 20 years. 30% infants have low birth weight. One in every three adult Indian has a body mass index (BMI) below 18.5 indicating chronic energy deficiency (CED). The obvious strategy to tackle hunger and malnutrition is to universalize and strengthen the Public Distribution System (PDS) by making adequate food available at affordable prices. The Government must scrap targeting; universalize the PDS and delink entitlements from the Planning Commission's wobbly poverty estimates; include commodities like pulses, sugar, cooking oil and kerosene at subsidized rates; incorporate all food and nutrition schemes of the Central Government such as the mid-day meal scheme and ICDS nutrition programme in the proposed legislation. But NAC does not recommend this. Why?

Why Target?
“It would be so nice if something made sense for a change.” Why these miserly provisions that are not in line with what is required? When the experience with the Targeted PDS has shown that faulty exclusion and inclusion abound, and the exclusion is a direct violation of the right to life, why would any serious scholar, policy maker and activist agree to targeting?

There are three 'infeasibility' arguments against universalization articulated most strongly by the Planning Commission and the Chief Economic Adviser.

Let us begin with the 'production' argument. The most important point is that neither production nor procurement are rigid or fixed and are both highly responsive to government policy and intervention. India is far from reaching the upper limit of either, and the scope for reducing the slack is enormous.

Availability of foodgrain is an essential prerequisite for food security. Unlike what the Government proposed in the note prepared by the food ministry, compulsory procurement and imports are neither necessary nor desirable. For universal entitlements, self sufficiency in food production is necessary at the national level, is highly desirable at the regional level and is beneficial at the local level. Roughly a hundred million tonnes of cereals are required for a universal PDS (with 80 per cent offtake and 35 kgs per household), which is 57% of total production net of seeds and wastage. Currently, procurement is about 30% of production. Given the geographically unequal concentration of production and procurement in India, most of this is from 4-5 states. Expanding guaranteed procurement to all states and crops, announcing cost-covering MSP in advance, strengthening the decentralised procurement scheme, building storages and godowns in many more places, giving incentives to local doorstep procurement and making timely payments to farmers are simple measures to increase procurement.

These are of course steps to be taken immediately. In the medium term, it is essential to improve production and productivity of food production through public investment, provision of extension services, inputs at controlled prices, appropriate land use policies with guaranteed fair prices for farmers through a stronger network of geographically dispersed procurement centres. A special package for adivasi farmers and dryland farming will encourage the production of pulses, millets and coarse grains suited to dry and non-irrigated land.

In any case, the ground reality is not of a supply-constrained system but excessive stock-holding! The fact is that the Government is once again holding 60 million tonnes, well over the buffer norms. Since perverse fiscal conservatism does not permit its distribution, the holding in excess of storage capacity (roughly 15 million tonnes) is lying in the open, and often rotting even as vast sections go hungry. Since targeting is not going to reduce these stocks, and Rabi procurement is likely to be high due to a bumper crop, the bizarre situation of hunger amidst overflowing stocks will persist.

This has caused embarrassment, politically and from the judiciary, prompting the central government to accept the higher Tendulkar estimates on poverty, and increase APL allocations. The current stock and supply situation is more than comfortable, set to improve after rabi. This offers a golden opportunity to argue for universalization by distributing a minimum quantum of food at affordable prices to larger numbers across the country, and in the process to expand the PDS. Those who want to reduce subsidies will of course argue that food stocks should be reduced through open market sales and exports and future procurement should be reduced sharply along with targeting only the poor. This has to be resisted because as far as money is concerned, it is entirely a question of prioritization.

Compared to many advanced countries, India's tax-GDP ratio is very low (around 18% compared to 28% for USA and around 45-50% for Scandinavian countries). Compare this to the tax foregone by the Central Government on Corporate Income Tax, Personal Income Tax, Excise and Customs at Rs. 5,02,299 crores in 2009-10 (79.54% of the aggregate tax collection), and Rs. 4,14,099 crores in 2008-09 (68.59% of aggregate tax collection)(the budget documents say that this is an underestimation). This is over ten times the current food subsidy bill and four times the requirement for a universal PDS with 35 kgs per household at an average price of Rs. 2 per kg.

It is the fiscal concern to reduce subsidies that has led to the pricing policy that links the MSP or cost of acquisition to the issue price, to sell the food at some proportion of the economic cost. However, food security has two aspects, production and consumption. Farmers or producers need to cover their cost of production and if farming is to once again become a viable activity, profitability has to be maintained through assured procurement. Consumers on the other hand are constrained by their ability to pay, and prices for them have to meet the yardstick of affordability. If consumer affordability and producer profitability both have to be ensured for food security, the two prices cannot be the same. This rather devious attempt to legally link consumer subsidy to farmer subsidy will open the gates for political conflicts between the two and in many cases, where the farmer is also a net purchaser of foodgrain, giving MSP with one hand and taking away through higher food prices with the other.

There is no doubt that the PDS is very weak in some parts of the country. The solution that several Government economists offer is to go in for direct cash transfers or food coupons with biometrics and UID to plug leakages. Women are considered to be more efficient agents for these transactions due to their patriarchy-driven responsibilities. This ignores the problem of exclusion and inflation. Destroying an admittedly problematic PDS does not put food on the table. The obvious solutions to inadequacy, inefficiency and corruption are to increase infrastructure, accountability and reform the PDS through various measures. This cannot be used as an argument against the entitlement. After all, massive corruption did not stop the Commonwealth Games or defence deals or large infrastructure projects. A few Committees are set up, and the loot goes on unabated in the 'public interest' for 'national honour'. So why does the fear of corruption only become an effective roadblock for food security? Is there anything honourable about hunger and starvation?

Therefore, neither the fiscal nor the supply nor the governance constraint is operational, and an expanded PDS can in fact boost both production and growth and hence government finances. Recently, a rather odd argument against desirability of universalization has been attributed to the UPA Chairperson.

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