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Modi govt readies to cut flab out of UPA's flagship food security law

india Updated: Feb 02, 2015 00:21 IST
Zia Haq
Modi govt


Prime Minister Narendra Modi’s office has asked for a blueprint to implement the recommendations of a top panel that has suggested sweeping food reforms that include limiting subsidised grains to 40% of the population from the present 67%.

The PMO directive gives the clearest signal yet that the Modi government is looking to amend the National Food Security Act -- a cornerstone of the previous UPA regime’s welfare agenda. It could also set in motion the first real reforms in agriculture since the Indian economy opened up.

The food ministry has been told to come out with “specific deadlines” for implementing the Shanta Kumar-led panel report, sources said. A former Himachal CM, Kumar was the food minister in the Atal Bihari Vajpayee government.

The panel has called for an end to operations of the leakage-prone Food Corporation of India in traditional food-bowl states and raising the price at which all categories of beneficiaries get subsidised grains to 50% of minimum support price, barring the poorest households.

The panel also favours a switch to a cash transfer-based food-subsidy system. The PM-appointed panel submitted its report on January 21.

To boost growth, the government has moved swiftly to cut red tape, allow more foreign investment and make acquiring land easier. However, it had so far not said much about the reforms it would bring to the country’s antiquated farm sector.

Implementing all the reforms suggested by the panel could be fraught with political risks in a country where millions rely on state-subsidised food. It is still early to predict if Modi would go the whole hog.

Steps such as paring the food-security coverage and raising the price of cheap grains -- for the first time in decades -- are in line with the government’s goals of restricting all subsidies to the poorest.

The government’s view is that for high growth, India will need to slash subsidies and re-direct the spending to infrastructure sector so that more people can join the workforce.

The Ram Vilas Paswan-headed food ministry would meet on February 11 to start preparing the roadmap, sources said.

In the last budget, finance minister Arun Jaitley had announced an expenditure management commission to suggest comprehensive subsidy reforms, which, too, is likely to propose changes in food subsidy.

None of this can happen without altering the food security act. Yet, in a country where nearly half the children were either stunted or malnourished, ensuring access to food was critical.

India spends close to Rs 1.25 lakh crore, or 8% of the total government expenditure of Rs 18 lakh crore, on food subsidy alone. According to ratings agency Moody’s, annual spending on food subsidies grew 20% on an average over the past eight years, compared with a 16% rise in overall expenditure during the period.

The government’s spending on food in 2014 accounted for 18% of its fiscal deficit, which it is trying to curtail.