As the policymakers are patting themselves for the revised National Food Security Bill, they seem to have overlooked the hole it would burn in the exchequer’s pocket.
A major concern voiced by some economists is that various subsidies, including the food subsidy are critical in achieving the fiscal deficit target. With polls knocking at the door, the policymakers are eager to show that promises have been fulfilled even if it is at the cost of a bleeding economy.
Experts are critical of the cost of implementing the bill, which is not going to be less than Rs 1.20-1.25 lakh crore as 62-63 million tonnes of grain will have to be distributed. The government will have to invest in supporting facilities like railways and warehouses. Another challenge would be to plug the loopholes in the distribution system as a substantial amount of grain is not reaching target groups.
Once the Parliament passes this bill, 67 per cent population living below and above poverty line in the rural and urban areas will get rice and wheat at very nominal rates of rupees three and rupees two per kg respectively and other food grains at the rate of rupee one per kg. However, experts feel there is a mismatch between the goal and mechanism that would be used to achieve the target.
It is common knowledge that there was massive leakage under the present Targeted Public Distribution (TPD) system. In 2009-10, out of the offtake of 42 million tonnes, poor people got 60 per cent with 40 per cent having been lost on the way. Over the years, the food subsidy has ballooned from Rs 12,000 crore in 2001-02 to Rs 85,000 crore in 2012-13. The cost of production and procurement of wheat and rice has gone up due to 100 per cent rise in labour cost in the last three years.
Following a rise in the cost of labour and other raw materials, the government will also have to increase the cost of procurement or the minimum support price (MSP). Experts say that 75 million tonnes or 38 per cent of the production would have to be procured. For this, we need the machinery which is presently not efficient. Also, to ramp up the food production funds would be required. The department of agriculture has projected an expenditure of about Rs 110,000 crore over the next three years to increase agricultural output.
However, a group of farmers’ bodies say the revised bill would discourage small and marginal farmers, since it would encourage the government to restrict the MSP and therefore the retail price as well. This would lead to nationalisation of agriculture by making the government the biggest buyer shoving aside the interest of the small farmers and retailers.
Definitely, there are poor people who need to be helped by augmenting their income, and the best instrument would be to use a policy which gives them direct income support (read skill development) and lets them choose what sort of food they want.