National Food Security Act: Way Forward to Success

National Food Security Act: Way Forward to Success
Deepti Goel
Mantosh Kumar

December 01, 2013 | Deepti Goel, Mantosh Kumar   Web Exclusives, Deepti Goel, Mantosh Kumar, Food

Despite ensuring ample availability of food, existence of food insecurity at the micro-level in the country has remained a formidable challenge for India. The recently introduced National Food Security Act (NFSA) aims to address this and marks a paradigm shift in addressing the problem of food security—from the current welfare approach to a rights based approach.

Feasibility of Right to Food Approach

Despite buoyant economic growth in recent years, around one-third of India’s population, i.e. 400 million people, still lives below the poverty line (in 2010) as per World Bank’s definition of USD 1.25/day. Using the multi-dimensional poverty index of UNDP, India ranks at 75 among 109 countries in 2011, much worse than the other BRIC countries indicating extent of deprivation in terms of living standards, health, and education. All these estimates point to the existence of food insecurity at the micro-level in terms of either lack of economic access to food or lack of absorption of food for a healthy life. Besides, hunger stems from disempowerment, marginalization and poverty. People are not hungry because we produce too little, they are hungry because they can’t afford the food that is available on the markets or because they lack the necessary resources to produce food themselves; they are thus hungry because they lack economic access to adequate food. It is for this reason that the recognition of food as a human right can be vital to achieving sustainable, long-term food security. Therefore, by making these programs legal entitlement, permanency is ensured resulting into hunger free country and healthy youth.

Besides expanding the coverage of the Targeted Public Distribution System (TPDS), the Act confers legal rights on eligible beneficiaries to receive entitled quantities of foodgrains at highly subsidized prices. It also confer legal rights on women and children and other special groups such as destitute, homeless, disaster and emergency affected persons and persons living in starvation, to receive meals free of charge or at an affordable price.

Seventy five percent of rural and 50 percent of the urban population are entitled for three years from enactment to five kg food grains per month at Rs.3, Rs.2,and Rs.1 per kg for rice, wheat and coarse grains (millet), respectively. Pregnant women and lactating mothers are entitled to a nutritious "take home ration" of 600 Calories and a maternity benefit of at least Rs 6,000 for six months. The state governments will provide a food security allowance to the beneficiaries in case of non-supply of food grains. The broader aim of right to food is to alleviate chronic hunger and poverty in India existing from long time.

Although this would perhaps be the biggest ever experiment in the world to distribute subsidized grain to achieve food and nutritional security, it is felt that before proceeding we need to consider our current economic scenarios. Besides, we have had already a basket of social welfare schemes (PDS and many more) with the objective to provide food security to vulnerable groups from long time. We need to precisely learn from challenges faced during implementation, monitoring and supply of foodgrains under these schemes. The following challenges should be appropriately recognized to ensure food security to all.

Public Distribution System

One of the support systems for food security which India has been using since the world war is Public Distribution System (PDS). PDS provides rationed amounts of basic food items (rice, wheat, sugar, edible oils) and other non-food products (kerosene, coal, standard cloth) at below market prices to consumers through a network of fair price shops disseminated over the country. With a network of more than 4.99 lakh fair price shops (FPS) distributing commodities worth more than Rs 30,000 crore annually to about 160 million families, the PDS in India is perhaps the largest distribution network of its kind in the world.

Both the central and state governments shared the responsibility of regulating the PDS. While the central government is responsible for procurement, storage, transportation, and bulk allocation of food grains, State governments hold the responsibility for distributing the same to the consumers through the established network of Fair Price Shops (FPSs). State governments are also responsible for operational responsibilities including allocation and identification of families below poverty line, issue of ration cards, supervision and monitoring the functioning of FPSs.

The Government initiated the steps to revamp the PDS to improve its reach based on an area approach. Preference was planned to be given in this revamped system to the population living in the most difficult areas of the country. This included areas such as the drought prone areas, desert areas, tribal areas, certain designated hilly areas and the urban slum areas. Revamped Public Distribution System (RPDS) was thus launched in June 1992 in 1700 blocks.

Since June 1997 PDS turned into the Targeted Public Distribution System. The latent problem was that a sizeable number of marginalized people, in the absence of cash income that can be transformed into purchasing power are excluded from the planning process because they do not constitute effective demand. This system divides the potential beneficiaries into families Below Poverty Line (BPL) and those Above Poverty Line (APL). The state governments were assigned the task to streamline the PDS by issuing special cards to BPL families and selling essential items under TPDS to them at specially subsidized prices, with better monitoring of the delivery system.

Challenges of PDS

• An important institutional concern is that of the economic viability of FPSs, which appears to have been badly affected by the exclusion of APL population from the PDS. The virtual exclusion of the APL population has led to a big decline in offtake. With fewer ration cards to serve, lower turnover, and upper bounds on the margins that can be charged to BPL consumers, the net profits of FPS owners and dealers are lower under the TPDS than before. Since there are economies of scale here, for instance, with respect to transport, the distribution of smaller quantities is likely to make many shops unviable. When FPSs are economically viable, there are fewer incentives to cheat. The number of ration cards attached to a FPS, their BPL-APL break-up, offtake of grains (and other commodities), margin on commodities, cost incurred on transport and handling, rents, etc. are the determinants of viability of FPSs. Only 22.7% FPSs are viable in terms of earning a return of 12% on capital.
• There are large errors of exclusion and inclusion and ghost cards are common. PDS suffers from diversions of subsidized grains to unintended beneficiaries (APL households) because of Error of Inclusion. Some States have issued more cards than the number of households, while some others have the problem of unidentified households. It also questions the BPL methodology used for identification of households at State level. The survey estimated that TPDS covers only 57% BPL families.
• The PDS is also infected with leakages. The major part of leakages is due to diversion of food grains to open market because of wide spread prevalence of corrupt practices. Leakage and diversion imply a low share of the genuine BPL households of the distribution of the subsidized grains. In aggregate, only about 42% of subsidized grains issued by the central pool reach the target group, according to a Planning Commission study released in March 2008 and for every Rs 4 spent on the PDS, only Rs 1 reaches the poor.
• There are considerable regional disparities in the distribution of PDS benefits. For example, offtake per BPL cardholder is high in WB, Kerala, Himachal Pradesh, and Tamil Nadu as compared to that in Bihar, Madhya Pradesh, Uttar Pradesh and Rajasthan which account for largest amount of poverty in India.
• Despite the mounting food subsidy bills, the system has failed to translate the macro level self-sufficiency in food grains achieved by the country into household level food security for the poor. The annual food subsidy involved in maintaining the system is huge (figure: 1). The food subsidy for 2002-03 was budgeted at Rs. 21,200 crore, which has increased to Rs.75, 000crore in 2012-13.

In spite of being a food surplus nation where buffer stock are more than the stipulated level that is required for food security, thousands still die of malnutrition and hunger. While the objective of food security has been reached, the fundamental individual right for food has not. According to National Family Health Survey (NFHS-3) conducted in 2005-06, 20 per cent of Indian children under five years old were wasted (acutely malnourished) and 48 per cent were stunted (chronically malnourished). The HUNGaMA (Hunger and Malnutrition) Survey conducted by Nandi Foundation [http://www.naandi.org/CP/HungamaBKDec11LR.pdf] conducted across 112 rural districts of India in 2011 showed that 42 percent of children under five are underweight and 59 percent are stunted.

Additional Expenditure Required

The Ministry of Agriculture's Commission on Agricultural Costs and Prices (CACP) has referred to the Act as the "biggest ever experiment in the world for distributing highly subsidized food by any government through a ‘rights based’ approach." The CACP calculated the cost to exchequer in December 2012 and found that food subsidy will cost Rs. 6, 82,163crore in the first phase of NFSA. It was estimated that Rs. 2, 41,263 crore, Rs.2, 23,416 crore and Rs. 2, 17,485 crore would be spent in first, second and third year respectively during the first phase of NFSA. Table 1 provides the break-up of cost to exchequer as estimated by the CACP:

Table 1: Calculation of cost to exchequer

All figures in Rscrores	Year 1	Year 2	Year 3	Total
Economic Cost (EC)
Rice	98658	108524	119376
Wheat	56154	61769	67946
Total EC – Grain	154812	170293	187323	512428
Sale of grain
Rice - Priority @ Rs 3 per kg	7127	7127	7127
Rice - General @ 50% of MSP	6408	6311	6942
Wheat – Priority @ Rs 2 per kg	3441	3441	3441
Wheat – General @ 50% of MSP	3138	3592	3951
Total Sale of Grain	20114	20470	21460
Subsidy (A-B)	134698	149823	165862	450383
Other Expenditure
Agriculture Production Enhancement Costs	66000	33000	11000
Infrastructure and logistics cost	10000	10000	10000
National & State Food Commission per annum	146	155	164
District Grievance Redressal per annum	320	339	360
New Scheme for special groups	8920	8920	8920
Maternity Benefit per annum-cash scheme	14512	14512	14512
Misc Costs ( PDS reforms, Addl. Staff & office etc)	6667	6667	6667
Total Other Expenditure	106565	73593	51622	231780
Total outflow from Govt (C+D)	241263	223416	217485	682163

The assumption of annual requirement of foodgrains under NFSA is approximately 70 million tonnes. Quantity required for issue under PDS is calculated as 40.96 million tonnes for priority category and 11.63 million tonnes for general category as per provisions of NFSA. Around 20 million tonnes would be required for buffer stocks and other welfare schemes. The composition of stocks is assumed as 42% wheat and 58% rice which is the ratio of the two in total offtake during 2009-10 to 2011-12. Economic Cost for Year 1 is calculated for 2012-13 at current levels viz Rs 19100 per tonne for wheat &Rs 24300 per tonne for rice. For year 2 & year 3, economic cost is assumed to increase by 10% per annum. MSP for year 2 and year 3 is assumed to be 70% of the estimated Economic Cost. For year 1, the current levels of MSP are taken. The estimates on other expenditure are as per internal calculations by various Departments/Ministries. Administrative costs on Food Commissions and Grievance Redressal are assumed to increase by 6% per annum in Year 2 & 3.

The Gross Domestic Product (GDP) in India expanded 4.40 percent in the second quarter of 2013 over the same quarter of the previous year. Most of the macroeconomic indicators are performing below the expected level of outcome in the recent years. Thus, the declining trend in growth is a major challenge to meet the expenditure incurred during the first phase of the NFSA.

International scenario of Food Security

Many countries have introduced the right to food in their constitution. These include Nicaragua, Brazil, Guatemala and many more. In order to address the problem of food insecurity, Brazil had started its Fome Zero (Zero hunger) strategy in 2003. The strategy has helped to achieve significant reductions in child mortality (dropped 73% since 2002), levels of malnutrition, and poverty since its inception. Under this strategy, various initiatives have been taken such as popular restaurants or food banks, cash transfer to poor families and national school feeding program.

The institutionalization of programs that contribute to the implementation of the right to food have significantly contributed to their effectiveness and sustainability. It has led to improvement in accountability of the administration responsible for implementation, particularly if courts or other independent institutions are empowered to monitor implementation. These programs ensured the participation of the people in the formulation of recommendations to the government on food security issues. However, there are concerns about the capacity of these institutions to fulfill the objectives of right to food program since these institutions are underfunded and are unable to adequately work towards their objectives. This does not only imply that they need only financial support but there is also need to ensure that the local-level authorities have the required capacity to work towards the realization of the right to food, which requires adequate training and monitoring.

The Way Forward

The PDS needs to be restructured and there is a need to explore the possibility of introducing innovative ideas such as smart cards, food credit/debit cards, food stamps and decentralized procurement, to eliminate hunger and make food available to the poor, wherever they may be, in cost-effective manner. Beside, leakages in PDS system should be minimized, administrative reforms are needed at grassroots level and improvement in distribution process should be monitored efficiently, keeping in view, other challenges prevailing in current system.

Indian economy is under declining trend in recent years as GDP is growing at the rate of 4-5%; additional expenditure required for implementation of NFSA would impose extra burden on exchequer. Therefore, it is ideal to implement it in an efficient manner to prevent the fiscal imbalances in the economy. It also raises questions on sustainability of the Bill in the long term.

Programs such as Right to Food cannot depend on foodgrain imports. India will need to do its level best to enhance its foodgrain production. Regions where change in incremental output of agriculture productivity is higher, viz. Bihar, West Bengal, Orissa, Assam and other Eastern States should be paid attention. Sustainability of food security could be ensured with huge public investment in these regions over irrigation, CAD and particularly flood control.

The institutions that are set up as a part of national strategy for the realization of the right to food should be sufficiently well resourced. The right to food will only be truly realized where victims have access to an independent judiciary or other complaints mechanisms to complain about violations of the right to food. Moreover, potential victims should be adequately informed about their rights. In this context, we have to learn from the experiences of Brazil where crisis of funds affected the efficiency of strategy to be implemented.