(Weekly Organ of the Communist Party of India (Marxist)
January 09, 2011
The Muddle over Food
C P Chandrasekhar
THOSE who are fundamentally inclined against pro-poor policies seem to dominate policy-making under UPA II. One obvious indicator is the tussle over the wage to be paid under the National Rural Employment Guarantee Scheme. The government is hiding behind the smoke-screen that it wants to hike the wage rate to neutralise for inflation. But the real issue is that as of now wages are below even the official minimum wage and the National Advisory Council (NAC) has been arguing that it has to be raised to that level. However, the Council’s demand, whose legitimacy is obvious, is being accused of delaying a much needed wage hike. The government is being nothing short of disingenuous.
But it is not in all instances that the NAC is on the right side. A case to the contrary is legislation that would guarantee the Right to Food to Indian citizens. Having promised to implement that in its effort to win power the UPA is now pulling back. In a process that reflects the pulls and pressures within the policy-making elite, the draft Food Security Bill has been diluted so much that it marks a reversal rather than an advance compared to the status quo.
Let us recall where the country stands in terms of provision of access to food. In principle, even after the implementation of the Targeted Public Distribution System (TPDS), all sections of the population had access to the PDS. They were of course split into Below the Poverty Line (BPL) and Above the Poverty Line (APL) households. But targeting essentially meant that access to food of these two sections were at different prices, both of which incorporated an element of subsidy. Though the original intention was to provide food to the BPL households at a subsidised price, while APL households were expected to pay the full economic cost, in practice, the central issue prices were not raised on a regular basis. Everybody became eligible for some subsidy relative to the economic cost incurred by the FCI to procure, stock and deliver the grain.
It is, of course, another matter that the inadequate spread of the public distribution system, inadequate allocations and other factors have ensured that not everybody eligible has necessarily had access to supplies at these prices. But as noted, in principle access to food was assured for all, even if at differential prices for BPL and APL families.
Given this background, improved management of the food economy, requires four initiatives.
The first is the setting of the minimum support prices at levels where the viability of cultivation is ensured and food production made remunerative so that investments in expanding supply in keeping with demands that would emerge from a food secure society can be met domestically. The second would be to ensure that the stocks procured are reached to all those who want to buy them at prices that are affordable. The subsidy provided should reach the consumer and not be diverted to the FCI to cover the costs of procurement and the carrying costs of stocks that remain unsold, as has been occurring in recent times. The third is to universalise access to subsidised foodgrain since targeting tends to exclude rather than include many needy consumers and is costly to implement. And, finally, there is need to substantially enhance public investment in rural infrastructure and expenditure on extension services so as to improve agricultural productivity. These ideas are not new. Ever since the Green Revolution strategy was adopted in India, the objectives have been to raise productivity and production, ensure a remunerative price to farmers and provide access at subsidised prices to consumers, each of which was seen as a requisite for the realisation of the other two.
Rather than follow this track, the UPA II government decided to approach the issue anew, for which it handed over the task of formulating the Food Security Bill to the reconstituted National Advisory Council (NAC). However, despite expectations created by the NAC’s previous track record with respect to the Right to Information and Employment Guarantee Acts, the NAC seems to have turned cautious. Rather than blaze a new trail it has ended up “recognising” the supply constraints that could hinder implementation of a bill guaranteeing universal access to food through a public distribution system
Hence, to start with, while admitting the need for a universal public distribution system, the NAC considered recommending the staggered implementation of the proposal. Some of its members reportedly argued that, since there is not enough food to distribute, attempting to offer every household 35 kgs of food at Rs 3 a kg would take demands to levels where supply would be short of demand. Hence, they argued, the shift out of the system of targeted distribution to a universal one should be initially restricted to 150 “most disadvantaged districts”.
Given the problems that are bound to accompany the implementation of such a scheme of “geographic targeting”, this proposal had to be dropped. Instead, the NAC decided to set a minimum to the degree and spread of food access that should be provided, on the grounds that, if supply and financial resources permitted the government could exceed this minimum and even opt for universalisation. There was no pressure of course to rise above the floor.
The minimalist proposal, which was openly criticised by NAC member Jean Dreze, not only went back on universal provision but also avoided the simplicity (of the kind that universal provision implies) that is a prerequisite for successful implementation. The NACs proposals restrict guaranteed access to 75 per cent of the population, consisting of 90 per cent of the rural population and 50 per cent of the urban population. Further, this segment of the population is to be divided further into a set of “priority” households amounting to 46 per cent of the rural population and 28 per cent of the urban population, and a set of “general” households consisting of 44 per cent and 22 per cent of the identified rural and urban populations. Priority consumers will be eligible for 35 kg of foodgrain at the rate of Rs1/kg for millets, Rs2/kg for wheat and Rs3/kg for rice. General consumers are to be eligible for 20kg per household at half the minimum support price for the grains. Moreover, the NAC has not given up on phased implementation since it is expected to reach in the current phase only 85 per cent of the rural population and 40 per cent of the urban population.
It should be obvious that this complicated scheme, which would suffer from all the weaknesses of a system of targeting, will if implemented successfully help achieve one goal. It would allow the government to manage with less supply since earlier both BPL and APL populations were eligible for 35 kg. It would also limit the subsidy relative to a situation where the government guarantees universal access at a uniform price.
Further, many states are already providing more and cheaper access to food than the NAC recommends. In Andhra Pradesh, Chhattisgarh and Tamilnadu, access to 35 kgs is being offered to a much larger share of the population than in BPL households. In addition, rice is being delivered through the PDS at Rs 2 per kg in a number of states and at Rs 1 per kg in Tamilnadu. If the centre implements the far more fiscally conservative proposals of the NAC, the states involved will have to find substantially more resources to sustain the programmes they are already implementing, raising the danger of a fiscal crisis in at least some of them.
Interestingly, when a confused policy of targeting is being proposed on the grounds that stocks adequate to support a universal PDS do not exist, the actual picture on the supply side seems to be one of excess stockholding by the government. Not only is the size of the government’s food grain stock much higher than the buffer stocking norm, but the judiciary, parliament and the media seems to be obsessed with the problem of inadequate storage leading to the rotting of food when the poor go hungry. With covered storage is limited, a substantial part of these stocks has to be stored in the open, leading to losses. Unless the NAC believes that its minimalist proposals are actually going to increase demand for food substantially, this problem of foodgrain rot in a country with hunger is likely to persist. Moreover the subsidy bill could turn out to be much larger than anticipated, since the FCI’s costs would have to be covered.
Dissenting member Jean Dreze was clear. His dissenting note stated that “an opportunity [had] been missed to initiate a radical departure in this field.” In his view: “The NAC proposals [are] a great victory for the government — they allow it to appear to be doing something radical for food security, but it is actually more of the same.
But this is not the end of the story. Once the NAC had succumbed to the limited supplies argument, its proposals could be easily attacked based on its own premises. In a surprising development, the ostensibly all-powerful NAC’s proposals were referred to another committee, headed by C Rangarajan, whose conservatism on matters fiscal are well known. As was to be expected the Rangarajan committee has reportedly declared even the NAC’s diluted proposals infeasible on completely spurious grounds.
According to newspaper reports, the committee has recommended that a legal entitlement to a given quantity of food at a fixed and subsidised price should only be granted to the “priority households”. The reasoning as expected was that that the government does not have assured access to foodgrain stocks to guarantee even the NAC’s minimalist food security principles for the “general households.” The argument seems to be that while we should talk about food security, we must reduce the actual reach of the PDS.
In a country where malnourishment is rampant, when a government chooses to guarantee food security, and that too through legislation that binds, it is adopting a proactive position. It is in essence declaring that given the scale of a particular problem (in this case inadequate access to food), the government plans to adopt a range of measures that would help it deliver on issues that matter.
If having set itself on that trajectory and making it an issue in the elections, it chooses to dilute the programme on the ground that prevailing circumstances limit its ability to deliver on its promise, it is clearly being duplicitous. But this should not surprise us. It has been an abiding characteristic of the Congress that it does not implement in practice what it preaches in its rhetoric. Unfortunately that ideology has served it a bit too well.