FOOD SECURITY BILL

Done by: Group 2

INTRODUCTION The Indian Nation Food Security Bill, 2013 was signed into the law September 12, 2013. The aim of the bill was to provide subsidized food grains to approximately 2/3rd of the citizens. Under these provisions of the bill, the beneficiaries are able to purchase 5 kg per eligible person per month of cereals at the following price. They are mentioned below: rice at 3 per kg wheat at 2 per kg Coarse grains (millet) at 1 per kg. Pregnant women and children are given free meals. This bill has been very controversial since the introductory stage.

FEATURES The features are as follows: 70% of the rural and 50% of the urban population are entitled for 3 years from enactment to 5 kg food grains per month at Rs.3, Rs.2 and Rs.1 per kg of rice, wheat etc. respectively. The states are responsible to determine the eligibility. Pregnant women are entitled to a nutritious take home ration of 600 calories and a maternity benefit of at least 6,000 Rs. for 6 months. Children between 6 months to 14 years are to receive free hot meals. The central government will provide funds to state in case of shortage of supplies of food grains. The current food grain allocation of the states will be protected by the central government for at least 6 months. The state government will provide a food security allowance to the beneficiaries in case of non- supply of food grains. The public distribution system is to be formed. The eldest woman in the family (above 18 years) is the head of the household when the ration card is issued. There will be state and district level redress mechanisms. State food commissions will be formed for the implementation and monitoring of the provisions under this act.

Vandita Nagvekar, Raveena Kuttikar, Rishikesh Sartadekar, Akshar Alornekar, Joyston .T. Brito, Shreya Vasta and Sumedha .K. Narvekar

PROS AND CONS Pros: Right to food is every citizens right: The proposed bill aims to provide legal right over subsidised food grain to 67 per cent of the population. The bill will have a uniform allocation of 5kg food grain per person (mentioned above). Continuance of Antyodana Anna Yojana: protection provided to 2.43 Crore poor families under AAY to supply of 35 kg food grains per month per family will continue. Nutritional support to pregnant women without any form of limitation. The bill will extend subsidized food to pregnant women and children under the age of 16. These include: pregnant women and lactating mothers, children between the ages of six months and 14 years, malnourished children, disaster affected persons, and destitute, homeless and starving persons. Free hot meals/ mid day meals to children between the age group of 6 - 14 years in all schools run by local bodies or government up to class VIII. A child below 6 months breastfeeding is promoted. Empowerment of women: the women become the head of the household after the ration card is issued. Utilize infrastructures that are existing like PDS: there will be no wastage of money to develop these infrastructures. Cons: The food grains will be distributed to the already existing infrastructure like PDS. The Public Distribution System might have loopholes such as leakages of food grains, and corruption. There is no exact figure as to how many poor families are there in the country. Different states are giving different figures. The cost of the bill is 1.24 Lakh Crore will be a burden on the government: The rising cost of the bill and the population are a matter of concern. This program will require huge food subsidy. The cost of it will go up from 0.8% of Gross Domestic Product to around 1.1% of GDP. This is a serious increase in a situation where the government does not have enough resources as it is. Thus will lead to fiscal deficit. As most of the food grains will be procured by Govt, exports will reduced, which is a big threat to the economy. Farmers will have to sell their food grains at procurement price rather than market price, farmers will be at a loss. Small farmers may shift to other crops, as they will get subsidized food grains. This will reduce production of food grains.

Vandita Nagvekar, Raveena Kuttikar, Rishikesh Sartadekar, Akshar Alornekar, Joyston .T. Brito, Shreya Vasta and Sumedha .K. Narvekar

COST OF THE BILL The government estimates suggest that food security will cost Rs 1, 24,723 crore per year. However many critics n economist have argued the claim. Andy Mukherjee, a columnist with Reuters, puts the cost at around $25 billion. The Commission for Agricultural Costs and Prices(CACP) of the Ministry of Agriculture puts the cost of the food security scheme over a three year period at Rs 6,82,163 crore. During the first year the cost to the government has been estimated at Rs 2,41,263 crore. Economist Surjit Bhalla in a column in The Indian Express put the cost of the bill at Rs 3,14,000 crore or around 3% of the gross domestic product (GDP).

In order to properly understand the situation we need to express the cost of food security as a percentage of the total receipts(less borrowing) of the government. The receipts of the government for the year 2013-2014 are projected at Rs 11,22,799 crore.

1) 2) 3) 4)

government estimates CACP Bhallas cost Andy Mukherjee

11,22,799 / 1,24,723 *100 = 11.10% 11,22,799 / 2,41,263 *100 = 21.5% 11,22,799 / 3,14,000 *100 = 28% $25 billion

Though the cost of the bill is surely all set to increase; this will be demonstrated by giving an example: If the government buys a particular food grain at an economic cost of Rs.18 per kg, this includes the price it pays the famers, the cost of stocking and distribution as well. The bill states that the government will sell the food to the ration card holders between 1 and 3 Rs. per kg., which is a subsidy of 16 Rs. The government says that it will provide 62 million tonnes of food and the size of the subsidy is estimated around $24 Billion. Even if the quantity of food remains same the next year, the subsidy bill will rise annually. The cost of food goes up due to many reasons like wages increase and oil price rise, the amount that the government sells the subsidized food for will remain the same. Due to rise in population, the quantity of food supplied will also increase. Thereby the cost of the scheme rises.

IMPACT OF FOOD SECURITY BILL National Food Security Bill seeks to provide highly subsidized food grains to nearly 67% of the population. As food is one of Mans most basic need and the government is trying to make it more accessible to the people who are below poverty line. 67% population means around 85 crore individual. The Food security bill guarantees 5 kgs of food grains per individual at a fixed price of Rs 3, 2, 1. Selling price of average quality rice is around Rs 20 per kg. So, if the Government is planning on selling it at Rs. 3 per kg, then the difference Rs. 17/- will be the subsidy the government is offering. So, for 5 kgs the subsidy is Rs. 85/- per person. The average
Vandita Nagvekar, Raveena Kuttikar, Rishikesh Sartadekar, Akshar Alornekar, Joyston .T. Brito, Shreya Vasta and Sumedha .K. Narvekar

selling price of all these items that come under this bill, subtract the selling price from market price, will end up with the total subsidy per person. This is on a monthly basis. This means, that the government will incur this subsidy bill every month and forever. An estimate by the Government suggests that the overall impact of this Food Security Bill will have on its tax payers which will be around 1.2 lakh crores. Economists and industry experts feel that this estimate is highly optimistic and may go up to 2.4 lakh crores. This estimate is just for the subsidy the government is offering. GDP stands for Gross Domestic Product and is the total value of all goods and services that are produced within our country. It does not refer to the total amount of money the Indian Government earns through taxes and other revenue channels. The projected income for India in the financial year 2013-14 is around 11.2 lakh crores. The government is proposing to spend between 10-20% of its gross income to meet cash needs of the food security bill which will put immense pressure on the nations fiscal deficit. If the government has to spend 10-20% of its income on this scheme, it means that the corresponding amount has to be reduced from other schemes like Infrastructure projects or educational projects and so on. The nations income is not going to go up by 20% to meet this additional cash requirement overnight. So, the finance ministry will have to either borrow to meet this additional cash demand or cut expenses on other projects to accommodate this. This will have significant impact on Indian Economy. Impact on economic growth The government would resort to borrowing to fund the Food Security Bill. When the government enters the borrowing market, in order to entice investors, it would have to offer good interest rates. The private sector too would have to hike their interest rates in order to stay competitive. This means, the Interest Rates will continue to remain high. High Interest rates is never good for economic growth. Impact on Food inflation Minimum Guaranteed prices means, farmers will have more incentive to grow rice/wheat and other grains covered under this scheme. This might result in vegetable production getting affected which will further affect the nations Food Inflation. In the last 5 years, food inflation contributes to over 41% of our overall Inflation. So, by subsidizing the price of rice, wheat and a few cereals, it might result in an unintended consequence of other items becoming costlier which will result in overall higher food inflation. Higher food prices mean higher inflation. Higher inflation means people will end up spending a higher % of their income to meet their day to day needs. This will result in much lower savings. Low savings and lower surplus income people will spend less on consuming good and services therefore economic growth will slow down further. The Food Security Bill guarantees food for the people covered under the scheme. So, if in a particular year, the in-country production of either rice or wheat is not sufficient we would be forced to import it. So, if we start importing rice, wheat or any other food grains, it will further widen the Current Account Deficit. Lower savings and wider current account deficit will impact the rupee. If India does not save enough money, it means that, people will have to borrow capital from foreign countries/investors. When these foreign borrowings need to be repaid, it will almost always be using dollars. This will put pressure on the rupee and lead to further depreciation against the dollar.
Vandita Nagvekar, Raveena Kuttikar, Rishikesh Sartadekar, Akshar Alornekar, Joyston .T. Brito, Shreya Vasta and Sumedha .K. Narvekar

SUGGESTIONS The scheme should strengthen and help the poor families as they are the ones who really need of this bill. Identify these families and secure their lives. The price of pulses have gone up in the recent months, the bill should have included subsidized rates for the poorest as its the only source of nutrition. Throw away corruption, and loopholes in the Public Distribution System, get rid of leakages of food grains and maintain transparency in the functioning of this system. Have a method to measure the number of poor families present in the country. This will allow us to get the exact figure and implement the bill accordingly. Define the beneficiaries: The bill says that States will provide the list of the poor but they have no such records. So make a list that the food grains reach to the right people. And any queries if the citizens need to be answered a help line number needs to be provided.

CONCLUSION Food Security is a boon, because it guarantees food to the public, which is a basic necessity. But there is a need to strengthen and get rid of the loopholes present in the PDS. Farmers need to be protected by increasing procurement prices. Proper implementation of bill can get eradicate malnutrition and hunger. -x-

Vandita Nagvekar, Raveena Kuttikar, Rishikesh Sartadekar, Akshar Alornekar, Joyston .T. Brito, Shreya Vasta and Sumedha .K. Narvekar