Cabinet clears revised food security Bill

Cabinet clears revised food security Bill

The extra burden on the food subsidy would be about `20,000 crore from the current level, while foodgrains requirement is expected to be 61.23 million tonnes. Photo: Hindustan Times

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Updated: Wed, Mar 20 2013. 12 17 AM IST

New Delhi: The cabinet on Tuesday approved the revised food security Bill that, when passed by Parliament, will commit the government to provide subsidized foodgrains to two-thirds of the country’s population.

The government will introduce the Bill in the Lok Sabha on Thursday. The legislation seeks to provide 5kg of foodgrains per person per month to 67% of the population.

Food security was among the promises made by the United Progressive Alliance (UPA) in the campaign for the 2009 general election that brought the coalition back to power for a second consecutive term. The government wants to make sure the legislation is in place with national elections a year or less away.

Prime Minister Manmohan Singh is betting on the legislation, the drafting of which was overseen by Congress president Sonia Gandhi, to woo voters. The programme may increase the government’s food subsidy bill to about Rs.1.25 trillion annually from Rs.85,000 crore this year, widening the fiscal deficit amid forecasts for the weakest economic growth in a decade, Bloomberg reported.

Abheek Barua, chief economist at HDFC Bank Ltd, said: “(Finance minister) P. Chidambaram during the press conference post the budget had said that he would provide additional money than budgeted for if needed for the implementation of the food security Bill. The amount of Rs.1.25 lakh crore is significantly higher than the budgeted amount. There is a possibility of slippage. The additional burden will come at cost of Plan expenditure and that may hurt growth. A staggered approach would have been better.”

Even some members of the government have raised concerns about the challenges the legislation would bring in terms of the quantity of foodgrains required to meet its objectives and the financial burden it would entail.

According to a person familiar with the development, in the special meeting on Tuesday, both Chidambaram and agriculture minister Sharad Pawar reiterated their concern over the financial implications and foodgrains availability, respectively, in the implementation of the Bill.

But defence minister A.K. Antony and coal minister Sriprakash Jaiswal intervened, saying it is a political decision and was a promise given by the UPA, so it will have to go ahead with that.

“This is a good step, but taken at a time when the government is facing serious challenges in economic and political fronts,” said Satish Misra, an analyst at the Observer Research Foundation in New Delhi. “The time is not suitable as growth is weakening, exports are not very positive and there’s a huge fiscal deficit.”

Rice may be sold at Rs.3 per kg, wheat at Rs.2, and millet at Rs.1 in the first three years under the plan, food minister K.V. Thomas said. That compares with market prices of Rs.28 a kg for rice and Rs.19 a kg for wheat in Delhi, according to data from the consumer affairs ministry. The Bill will enable widows, senior citizens, pregnant women and schoolchildren to receive cooked food, according to Thomas.

The government earlier proposed to supply 7kg of rice or wheat or millet a month for every Indian falling within the so-called priority category and at least 3kg per person per month for general households, according to the Bill first approved by the cabinet in December 2011. As much as 75% of the rural population and 50% of the urban population were proposed to be covered under the Bill.

The food Bill will fulfil an election pledge by Singh’s Congress party in 2009 that it will supply 25kg of rice or wheat at below-market rates to poor families each month if voted back to power. About two-thirds of the population live on less than $2 (around Rs.110 today) per day, based on World Bank data.

The changes to the Bill were proposed by a panel of lawmakers, Thomas said. These included identifying a single category of beneficiaries with a uniform entitlement at 5kg per person per month.

The government will need 61.2 million tonnes (mt) of foodgrains to implement the law compared with its annual purchase of about 73 mt from farmers, according to the food ministry.

State stockpiles of rice and wheat were 62.8 mt as of 1 March, compared with 54.4 mt a year earlier, according to state-run Food Corporation of India.

In the budget for fiscal 2013-14, the finance minister has set aside Rs.90,000 crore for food subsidies.

“The subsidized prices of foodgrains will now be fixed for a period of three years,” said a senior government official on condition of anonymity.

He said the Antyodaya Anna Yojana—a scheme to provide foodgrains to the poorest that covers 25.2 million families who currently get 35kg of foodgrains a month—will continue even as the proposed law is implemented.

In order to ensure that the beneficiaries receive the promised foodgrains at the subsidized rates fixed in the Bill, the Union government will bear the transportation costs—now borne by consumers under the public distribution system—and later work out a formula for sharing the cost with state governments.

The final draft included changes suggested by the parliamentary standing committee that had cleared the Bill in January.

Gandhi, who heads the National Advisory Council (NAC) that provides policy inputs to the government, has strongly backed the legislation and exerted pressure on the government to move towards its implementation.

“These are very good decisions. The government, however, will not be able to implement these unless a state-wise ratio of the beneficiary population is determined,” said N.C. Saxena, a member of NAC. “The government also needs to focus on upgrading technological support to check foodgrain leakages. They may even have to re-look at the export policy if the foodgrain requirement under the Bill is likely to be 61 mt. Domestic availability of foodgrains should be maintained.”

Thomas, in an interview to Mint on 22 February, said his ministry had requested the Planning Commission to spell out guidelines to decide the share of each state; the states will have the flexibility to decide the criteria for determining the beneficiaries of the programme.

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