Going against the grain
The National Advisory Council (NAC) had been widely credited with framing three pro-people legislations -- the National Rural Employment Guarantee Scheme (NREGS), the Right to Information (RTI) and the Forest Rights Act -- under the UPA 1 government. So when NAC 2 began discussions on the Food Security Act in mid-2010, expectations were high. The initial vision of an act with a universal public distribution system (PDS), extensive children's entitlements and maternity benefits raised hopes further. However, from the much diluted final recommendations it appeared, last October, that the government had succeeded in taming the NAC.
But worse was in store. In November, the prime minister requested the Rangarajan committee (RC) to examine the NAC framework. The NAC recommendations included both PDS and non-PDS entitlements. The RC focuses on the PDS alone and ignores the latter entirely. On the PDS, its basic claim is that procurement on the required scale is not possible. Creating legal entitlements in a situation where they may not be honoured, the RC argues, is not advisable.
According to NAC estimates, the proposed framework requires procuring 64 million tonnes (mt) of foodgrain (including 8mt for non-PDS entitlements) three years from now. The RC raises this estimate to 69-74mt. However, some of the assumptions behind this upward revision, especially the offtake scenario, are questionable. For instance, in Tamil Nadu's universal PDS, which provides rice at Rs 1 per kg, National Sample Survey (NSS) data show that 32% of households in the richest quintile self-select out of the PDS. Be that as it may, even these inflated foodgrain requirements are possible. The agriculture ministry is on record saying that arranging for 60-70mt for the vulnerable sections doesn 't appear to be a constraint.
On the procurement question, the RC hasn't done its homework. It gives only two options for raising procurement higher minimum support price (MSP) or imports. Both can fuel inflation and raise the subsidy bill. Two cost-reducing options are also available: the Decentralised Procurement(DCP) scheme (mentioned only in passing) or procurement of maize and millets (not mentioned at all). Several states procure only a tiny fraction of the total production indeed, even of the marketed surplus. For instance, West Bengal contributes 15% of all paddy production but only 8% of it is procured. By fixing loopholes in the DCP, Chhattisgarh increased paddy procurement by a factor of three; in Madhya Pradesh, wheat procurement shot up from 0.06mt to 2.4mt within a year. DCP also encourages production and reduces costs (eg transport costs). As far as maize and millets are concerned, currently only 4% of output is procured. These so-called coarse grains are cheaper and nutritionally superior. The RC unjustifiably freezes procurement at 30% of production, contrary to a rising trend in the share of grain procured. In its 2009 election manifesto, the Congress promised to enact a Food Security Act. Apart from our shameful nutrition record, two years of spiralling food inflation have made this law all the more important. As the Centre turns a deaf ear to people's hardship, the only solace for the rural poor is that several state governments have started putting resources into food security. For instance, Tamil Nadu runs a universal PDS in rural and urban areas, providing rice, dals and edible oil to everyone. In Himachal too all cardholders are entitled to all three commodities. Chhattisgarh has expanded the PDS to cover 80% of rural households, instead of 45% subsidised by the Centre. The main rationale behind these measures is the huge exclusion errors in the current PDS according to NSS, half of rural households in the poorest monthly per capita expenditure (MPCE) quintile didn't have a BPL card. The RC is blind to this elephant in the room. These states have also shown that with adequate political will, plugging leakages is possible. Sadly, if the RC report is any indication, political will at the Centre is for weakening the PDS further by restricting access, reducing quantities and eventually moving towards targeted cash transfers. Reetika Khera is an economist and a visitor at the Centre for Development Economics, Delhi School of Economics The views expressed by the author are personal.