Ensuring Food Security in India Challenges and Future

Food Security
WHO Website The World Food Summit of 1996 defined food security as existing when all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life. Commonly, the concept of food security is defined as including both physical and economic access to food that meets people's dietary needs as well as their food preferences. In many countries, health problems related to dietary excess are an ever increasing threat, In fact, malnutrion and foodborne diarrhea are become double burden. Food security is built on three pillars: Food availability: sufficient quantities of food available on a consistent basis. Food access: having sufficient resources to obtain appropriate foods for a nutritious diet. Food use: appropriate use based on knowledge of basic nutrition and care, as well as adequate water and sanitation. Food security is a complex sustainable development issue, linked to health through malnutrition, but also to sustainable economic development, environment, and trade. There is a great deal of debate around food security with some arguing that: There is enough food in the world to feed everyone adequately; the problem is distribution. Future food needs can - or cannot - be met by current levels of production. National food security is paramount - or no longer necessary because of global trade. Globalization may - or may not - lead to the persistence of food insecurity and poverty in rural communities. Issues such as whether households get enough food, how it is distributed within the household and whether that food fulfils the nutrition needs of all members of the household show that food security is clearly linked to health. Agriculture remains the largest employment sector in most developing countries and international agriculture agreements are crucial to a country's food security. Some critics argue that trade liberalization may reduce a country's food security by reducing agricultural employment levels. Concern about this has led a group of World Trade Organization (WTO) member states to recommend that current negotiations on agricultural agreements allow developing countries to re-evaluate and raise tariffs on key products to protect national food security and employment. They argue that WTO agreements, by pushing for the liberalization of crucial markets, are threatening the food security of whole communities. Related issues include: What is the net impact of the further liberalization of food and agricultural trade, considering the widely differing situations in developing countries?

To what extent can domestic economic and social policies - and food, agricultural and rural development policies - offset the diverse (and possibly negative) impacts of international policies, such as those relating to international trade? How can the overall economic gains from trade benefit those who are most likely to be suffering from food insecurity? Do gains trickle down to enhance economic access to food for the poor? How can food and agricultural production and trade be restrained from the over-exploitation of natural resources that may jeopardize domestic food security in the long term? How to ensure that imported food products are of acceptable quality and safe to eat?

Food security in India

The Hindu - Businessline The focus on accelerated foodgrains production on a sustainable basis and free trade in grains would help create massive employment and reduce the incidence of poverty in rural areas. INDIA AT present finds itself in the midst of a paradoxical situation: endemic masshunger coexisting with the mounting foodgrain stocks. The foodgrain stocks available with the Food Corporation of India (FCI) stand at an all time high of 62 million tonnes against an annual requirement of around 20 million tonnes for ensuring food security. Still, an estimated 200 million people are underfed and 50 million on the brink of starvation, resulting in starvation deaths. The paradox lies in the inherent flaws in the existing policy and implementation bottlenecks. Challenges ahead India's food security policy has a laudable objective to ensure availability of foodgrains to the common people at an affordable price and it has enabled the poor to have access to food where none existed. The policy has focused essentially on growth in agriculture production (once India used to import foodgrains) and on support price for procurement and maintenance of rice and wheat stocks. The responsibility for procuring and stocking of foodgrains lies with the FCI and for distribution with the public distribution system (PDS). Minimum support price: The FCI procures foodgrains from the farmers at the government announced minimum support price (MSP). The MSP should ideally be at a level where the procurement by FCI and the offtake from it are balanced. However, under continuous pressure from the powerful farmers lobby, the government has been raising the MSP and it has now become higher than what the market offers to the farmers. Also, with quality norms in the procured grains not strictly observed, farmers pressurise the FCI to procure grains beyond its procurement target and carrying capacity. The MSP has now become more of a procurement price rather than being a support price to ensure minimum production. The rich farmers and traders have cornered most of the benefits under the support price policy. The small farmers lack access to FCI and being steeped in poverty resort to distress selling. Constricted warehousing facility has further aggravated their miseries. At times, the same farmers later pay more to buy it from PDS. Input subsidies: Over the years, to keep foodgrain prices at affordable levels for the poor, the government has been imposing restrictions on free trade in foodgrains. This has suppressed foodgrain prices in the local market, where the farmers sell a part of their produce and as compensation, they are provided subsidies on agriculture inputs such as fertilizers, power and water. These subsidies have now reached unsustainable

levels and also led to large scale inefficiencies in the use of these scarce inputs. Overuse of fertilizer and water has led to waterlogging, salinity, depletion of vital micronutrients in the soil, and reduced fertility. The high subsidies have come at the expense of public investments in the critical agriculture infrastructure, thereby reducing agriculture productivity. Besides the high MSP, input subsidies and committed FCI purchases have distorted the cropping pattern with wheat and paddy crops being grown more for the MSP they fetch, despite therebeing relatively less demand for them. Punjab and Haryana are classic examples here. This has also led to a serious imbalance in inter-crop parities despite no significant increase in the yield of wheat and paddy. Issue price: The people are divided into two categories: below poverty line (BPL) and above poverty line (APL), with the issue price being different for each category. However, this categorisation is imperfect and a number of deserving poor have been excluded from the BPL fold. Moreover, some of the so called APL slip back to BPL, say with failure of even one crop and it is administratively difficult to accommodate such shifts. To reduce the fiscal deficit, the government has sought to curtail the food subsidy bill by raising the issue price of foodgrains and linking it to the economic cost at which the FCI supplies foodgrains to the PDS. The economic cost comprises the cost of procurement, that is, MSP, storage, transportation and administration and is high mainly because of the artificially inflated MSP and also due to the operational inefficiencies of the FCI. This has pushed the issue price to APL category higher than the market rates and to BPL category beyond their purchasing power, resulting in plummeting of offtake from the PDS. Also, the low quality of PDS grains and the poor service at PDS shops have forced many people to switchover to market, which offers better quality grains, allows purchase on credit and ensures flexibility to purchase in small quantities. Also, the high-priced, low-quality Indian rice and wheat find little place in the international market. Recently, two Indian consignments were rejected even by Iraq on quality considerations. The result is bulging stocks with FCI amidst widespread starvation. Market demand: The PDS entitlement meets only around 25 per cent of the total foodgrain requirement of a BPL family and it has to depend more on the market for meeting its needs. Also with the APL families essentially opting for market purchases, the market demand has risen. However, the massive FCI procurement has crowded out the market supplies, resulting in a relative rise in rates. The poor are the most hurt in this bargain. Food-for-work scheme: The government is running food-for-work scheme to give purchasing power to the poor who get paid for their labour in cash and foodgrains. The scheme is, however, not successful, since the Central Government is required to

meet only the foodgrain component and the cash strapped States are expected to meet the cash component (almost 50 per cent of the total expenditure). In many States the scheme has even failed to take off. Suggested recommendations There is a need to shift from the existing expensive, inefficient and corruption ridden institutional arrangements to those that will ensure cheap delivery of requisite quality grains in a transparent manner and are self-targeting. Futures market and free trade: The present system marked by input subsidies and high MSP should be phased out. To avoid wide fluctuations in prices and prevent distress selling by small farmers, futures market can be encouraged. Improved communication systems through the use of information technology may help farmers get a better deal for their produce. Crop insurance schemes can be promoted with government meeting a major part of the insurance premium to protect the farmers against natural calamities. To start with, all restrictions on foodgrains regarding inter-State movement, stocking, exports and institutional credit and trade financing should be renounced. Free trade will help make-up the difference between production and consumption needs, reduce supply variability, increase efficiency in resource-use and permit production in regions more suited to it. Food-for-education programme: To achieve cent per cent literacy, the food security need can be productively linked to increased enrolment in schools. With the phasing out of PDS, food coupons may be issued to poor people depending on their entitlement. Modified food-for-work scheme/ direct subsidies: With rationalisation of input subsidies and MSP, the Central Government will be left with sufficient funds, which may be given as grants to each State depending on the number of poor. The State government will in turn distribute the grants to the village bodies, which can decide on the list of essential infrastructure work the village needs and allow every needy villager to contribute through his labour and get paid in food coupons and cash. Community grain storage banks: The FCI can be gradually dismantled and procurement decentralised through the creation of foodgrain banks in each block/ village of the district, from which people may get subsidised foodgrains against food coupons. The food coupons can be numbered serially to avoid frauds. The grain storage facilities can be created within two years under the existing rural development schemes and the initial lot of grains can come from the existing FCI stocks. If culturally acceptable, the possibility of relatively cheap coarse grains, like bajara and ragi and nutritional grains like millets and pulses meeting the nutritional needs of the people can also be explored. This will not only enlarge the food basket but also

prevent such locally adapted grains from becoming extinct. The community can be authorised to manage the food banks. This decentralised management will improve the delivery of entitlements, reduce handling and transport costs and eliminate corruption, thereby bringing down the issue price substantially. To enforce efficiency in grain banks operation, people can also be given an option to obtain foodgrains against food coupons from the open market, if the rates in the grain banks are higher, quality is poor or services are deficient. A fund can be set up to reimburse the food retailers for the presented coupons. This competition will lead to constant improvement and lower prices. It must also be mandatory to maintain a small buffer stock at the State level, to deal with exigencies. Enhancing agriculture productivity: The government, through investments in vital agriculture infrastructure, credit linkages and encouraging the use of latest techniques, motivate each district/ block to achieve local self-sufficiency in foodgrain production. However, instead of concentrating only on rice or wheat, the food crop with a potential in the area must be encouraged. Creation of necessary infrastructure like irrigation facilities will also simulate private investments in agriculture. The focus on accelerated foodgrains production on a sustainable basis and free trade in grains would help create massive employment and reduce the incidence of poverty in rural areas. This will lead to faster economic growth and give purchasing power to the people. A five-year transitory period may be allowed while implementing these. Thus, India can achieve food security in the real sense and in a realistic timeframe. Prashant Goyal Secretary to Government Chief Secretariat, (The views expressed here are the author's personal) Pondicherry

India may settle for compromise solution to Food Security issue at WTO
NEW DELHI, OCT 7: THE HINDU BUSINESS LINE India may have to settle for a temporary solution to its concerns about the validity of its Food Security legislation at the World Trade Organisation in return for its consent for a pact to facilitate movement of goods across borders being pushed by developed countries. A peace clause that would allow developing countries like India legal protection against action by other members for breaching food subsidy limits for a two-three year period is what developed countries seem to be willing to offer at the moment. WTO members are trying to arrive at an agreement on a small package of issues that includes Trade Facilitation and Food Security at the forthcoming Ministerial meeting in Bali, Indonesia. 'Long-term solution after Bali' There is appreciation of legitimacy of food security concerns in India and other developing countries. Work is going on intensely to find a solution which will probably include a peace clause and a conversation for a long-term solution will happen very meaningfully after Bali, visiting WTO Director-General Roberto Azevedo said at a press conference on Monday. Azevedo is in India to seek the countrys support for a successful Ministerial in Bali. The Doha Development Round, launched 12 years back, remains stuck, but members are hopeful that a limited agreement in Bali would give the Round a much-needed boost. Although India had been demanding a change in the WTOs Agreement on Agriculture to remove limits on public stockholding and food aid, it now seems willing to go in for a compromise solution. The Agreement allows so called market distorting subsidies up to a limit of 10 per cent of total production. India is apprehensive that once its Food Security legislation is fully implemented, its food subsidies will breach the 10 per cent mark. Sharma said that India was in favour of a trade facilitation pact too as long as it was balanced and served the interests of both developed and developing countries.

Stressing the importance of the December Ministerial in Indonesia, Azevedo said that it was absolutely critical in establishing the conditions for moving forward in areas other than the deliverables which members were looking for in December, not only in the Doha Development Agenda, but also in other issues that are trade related and also of interest to member countries. Bali is not the end of the road. It is one first step towards an agenda that we have to define for the WTO and that delivers on areas of interest in developing countries and developed countries alike, the DG added. amiti.sen@thehindu.co.in (This article was published on October 7, 2013)

The global implications of India's food security law

Balancing duty to the poor while mitigating 'policy externalities' arising out of the food bill is India's latest challenge Business Standard The government has fought all odds to get the food security bill an entitlement programme that covers 67% of Indias 1.2 billion large population under a subsidised grain regime, passed in the Parliament. But the battle now shifts to the global stage with India having to convince negotiators, particularly the United States, at the WTO meeting in Bali, that this new law will not have market distorting effects on trade. Commerce Minister Anand Sharma will meet the new WTO Chief Roberto Azevedo on October 7, and at the core of their discussions is likely to be Indias demand for the amendment of the Agreement on Agriculture (AoA). In a nutshell, this agreement restricts India and other developing nations from exceeding market distorting subsidies that it gives to farmers, beyond 10% of total production. This is also called de minimis support. According to Martin Khor, executive director of the South Centre (an inter-governmental organisation of developing countries based in Geneva), India is among the countries that risks exceeding this 10% threshold, with the ambitious food security programme being rolled out. In case of paddy India has already breached the 10% threshold. We are at 24% currently. India will have to defend its right to subsidise, because the livelihood security of small farmers is at stake. We allowed the US to boost its subsidies, now it is their turn to let us fulfill our domestic commitments. Else let us approach the dispute panel of the WTO, Devinder Sharma, a food and trade policy expert told Business Standard It is critical that New Delhi, backed by the G-33, bargains hard at the WTO table to seek these exemptions to uphold its sovereign duties, adds Sharma. Even if it means a dj vu of the Doha round that ended in a colossal failure. India will spend about $20 bn (Rs 1.2 lakh approximately) annually on food subsidy. That is a pittance compared to the $400 bn that rich countries spend subsidising their farmers. Khor in his column in The Star, Malaysia says it is discriminatory and

hypocritical on the part of developing countries like the US to pressure India into adhering to the AoA. How India navigates through the WTO round in December remains to be seen, but what is clear is that the world community is going to increasingly harden scrutiny on the potential implications of the food security bill and the global imbalances it might create. Nomura had warned months ago that the scale of Indias food entitlement programme has the capacity to send global food grain prices soaring in a year when the monsoon is deficient and India has to import grains. Andy Mukherjee, a Reuters Breakingviews columnist, reiterated this concern warning that India will start exporting food inflation in the years to come to poor countries like Nigeria, Senegal, Bangladesh and Indonesia if Indias imports swell in a drought year. It is imperative for the Indian government then, to prudently balance its role as one of the worlds biggest exporters and consumers of food grain, (of rice, sugar and wheat), while sticking on to its commitment to the poor of this country. The only sustainable way to reconcile these dichotomous demands is to continually increase farm productivity, maintain consistently high stockpiles (without letting them rot), which means increased investment in irrigation, and creating efficient supply chains. Indias food grain production reduced from 259.29 million tonne in 2011-12 to 250 million tonne in 2012-13 because of poor rains. Reducing our dependence on monsoons and improving agri-infrastructure is critical to curbing import distortions during drought years, if we are to avoid a backlash from the global community. At the same time, it is also absolutely necessary for India to cut a winning bargain at the WTO bearing in mind the fact that with the food bill now a reality, procurement from small farmers will have to be stepped up (to 70 million tonne from 45 million tonne presently), which means minimum support prices will also go up, making it impossible for India to stick to AoA norms. The challenge, then, is very clearly to defend our national obligations while giving due credence to mitigating the policy externalities (the consequences of a policy that extends outside the policymakers domain) that may arise out the passage of the food bill.

Is The Food Bill Enough To Feed Indias Hungry?

The Centres proposal still has many flaws. Learning from Chhattisgarh could fix them BHAVDEEP KANG Consider the two best-known facts about Indias food economy. On the one hand, 42 percent of our little children are malnourished. On the other, our godowns are bursting with foodgrain. Can we join the dots by drawing a straight line from the warehouse to the homes of the hungry? Thats only the most obvious of our food systems glaring contradictions. Subsidies on food and agriculture have shot up and bumper crops have been harvested, but instead of bringing down food prices, it seems to have had the opposite effect. Farmers are being paid more than double than what they were 10 years ago for their foodgrain, and retail prices of food have gone up but they are still committing suicide. We congratulate ourselves on record foodgrain exports at a time when the per capita food availability at home is declining and we lose money on every tonne that we export. Exporters make profits, but the exchequer loses. Into this crazy picture, the UPA government proposes to introduce the National Food Security Bill. No one knows what impact it will have economic, political, social but it appears set to become law nonetheless. Will it fix the problem or cripple the economy? The success of the MGNREGA, which was passed in the teeth of considerable opposition, is held up as an example of a positive social legislation that worked. So why should the Food Security Bill not prove an even bigger game-changer? It is not a perfect Bill and has been variously criticised for low food entitlements, inadequate attention to nutrition, too much discretion to state governments in identifying beneficiaries, a poor grievance redressal mechanism and providing scope for substituting the Public Distribution system (PDS) with cash transfers. However, theres no argument against a framework law on the right to food per se. When asked whether India could afford to have a statutory right to food, Food minister KV Thomas answered, Can we afford not to? Agriculture minister Sharad Pawar voiced his doubts in the Union Cabinet. If a small farmer could get foodgrain for as little as Rs 1 per kg, as proposed in the Food

Security Bill, why should he bother to grow his own? And what would happen in a bad crop year, or successive bad years? Policymakers clearly have little idea how much implementing the Right to Food will cost. In the current year, Finance minister P Chidambaram has allocated only Rs 90,000 crore towards the food subsidy, of which Rs 10,000 crore is the additional amount for implementing the Food Security Bill. The food ministry estimates that the subsidy bill in the current year is likely to cross Rs 1.3 lakh crore. And even this is inadequate, according to a paper by the Commission on Agricultural Costs and Prices, which puts the cost at Rs 2.41 lakh crore in the first year of implementation. Over three years, it says, the outlay will be Rs 6.82 lakh crore, including the Rs 1.1 lakh crore required for upscaling food production. Whatever the figure, the fact is that every year, the minimum support price (MSP) will go up and impact the food subsidy bill. Since 2003-04, MSPs of wheat and rice have more than doubled, from Rs 640 to Rs 1,350 per quintal in the case of wheat, and from Rs 550 to Rs 1,250 for paddy. But the food subsidy bill has gone up more than three times in the same period, from Rs 25,181 crore to Rs 85,000 crore. This is because handling and storage costs have gone up as well. Small wonder that there is an annual tug of war between the ministries of food and agriculture. The former, as the purchaser, does not want the MSP increased. The latter, representing farmers, insists that it must be. The MSP is a political and an economic necessity; it is especially relevant to farmers who have the means to produce surplus foodgrain for the market. Farmers have come to expect procurement at the time of harvest this is because market prices are known to fall below the minimum prices set by the government during the harvest glut. According to Thomas, We are bound to provide food and to procure when the farmers who have grown the grain are waiting for you to procure, can you say no? Given annually escalating costs, will the Food Security Bill cripple the economy? The head of a leading global commodities major observed, You will run your ship into the ground. If you implement the Food Security Bill today, Indias credit rating will fall by two points tomorrow. But economist Jean Drze says the Bill makes sense, not merely on civilisational, but economic grounds. The government has sought to balance the Budget by cutting back on the fertiliser subsidy. In 2009, a nutrient-based subsidy regime was introduced, whereby the price of non-urea fertilisers was decontrolled. The retail prices of fertilisers (except urea) increased, with the popular di-ammonium phosphate (DAP) going up almost 30 percent over 2011 and muriate of potash (MOP) by 40 percent. Already burdened by a 100 percent increase in labour costs due to the MGNREGA, the hike in fertiliser prices has inflated input costs to the point of making farming

unsustainable, so that farmers are forced to lobby for an increase in MSP. It also drives farmers into debt, the leading cause of farmers suicides. Once the MSP goes up, so does the cost of procurement and therefore, the food subsidy bill. So, trimming the fertiliser subsidy pushes the food subsidy up: a catch-22 situation. The case for reducing subsidies on fertilisers goes something like this: fertiliser consumption has gone up much faster than crop production. To get the same quantum of grain, you use more fertiliser every year. By making fertiliser unaffordable for farmers, you force him to look for cheaper and more soil-friendly alternatives, like bio-manure. At the same time, policymakers lament the fact that Indias fertiliser use is low, far below optimum levels. According to Ajay Jakher of the Bharat Krishak Samaj, farming simply isnt viable without subsidies and the Indian farmer gets a fifth of the subsidy given to a US farmer. He believes a drop in farm subsidies would lead to a fall in consumption and a drop in production. If fertiliser subsidy is withdrawn, production could drop 18 percent, says Jakher. That would be catastrophic for food security. Currently, production and availability of foodgrain for implementing the Food Security Bill does not appear to be an issue. We have had bumper crops every year 259.32 million tonnes in 2012-13 and have enormous buffer stocks. The Food Corporation of India (FCI) expects to procure some 44 million tonnes of wheat this rabi season, so its stocks may well touch 100 million tonnes. On 1 March, Indias food stocks stood at 62.8 million tonnes. Stockpiling by the FCI has led to an artificial shortage of wheat despite bumper crops and pushed up domestic prices. Food policy expert Biraj Patnaik sees no sense in building up such massive stocks at a huge cost. And then, unable to manage them, the government resorts to exports. You are exporting foodgrain at subsidised rates feeding cattle and pigs in other countries instead of giving it to the poor. FCI Chairman Amar Singh admits it has lost money on exports. Given that the economic cost of wheat is Rs 19,100 (per metric tonne) and the minimum export price for wheat fixed by the government is in the region of Rs 16,200, the losses are estimated at Rs 1,700 crore for the previous year. According to The Wall Street Journal, Global prices have tumbled in the past week below the government fixed minimum export price of $300 a metric tonne to about $270. Even so, the government is considering further exports to decongest its godowns. On the one hand, there appears to be a glut. On the other, per capita availability of foodgrain stands at 462.9 gm in 2011 less than 170 kg per person per year. This makes our food security situation look quite precarious, especially given the fact that the average food availability for 2006-10 was 404.62 gm per capita. Declining per capita availability of foodgrain has been a major concern in India, says the economic survey for 2012-13.

Another characteristic of our food economy is the focus on cereals to the exclusion of nutrient-dense items like pulses and oilseeds, with the result that we are importdependent for both. Protein and cereal consumption in both rural and urban areas is declining, giving the lie to the specious argument that calorie consumption has fallen because Indians are shifting to high-protein diets. As Patnaik points out, the major drivers for food inflation have not been cereals, but protein-rich food items. Little wonder our malnutrition indices are worse than those of sub-Saharan Africa. Compounding these problems is the leakage from the PDS, variously estimated by researchers at 40 to 55 percent. Although the situation appears to be improving, the leakage is still unacceptably high. To plug the leaks, the Centre has proposed introducing direct cash transfer of the subsidy to the beneficiaries. Chhattisgarh, the only state to have enacted a food security law, also has the best performing PDS after Tamil Nadu. A combination of policy, policing and administrative measures opting for wider coverage rather than targeted distribution, putting ration shops in the hands of those trusted by the community they serve, incentives for those running the fair price shops, computerised tracking of foodgrain, weeding out bogus BPL (below poverty line) cards and zero tolerance for pilferage has resulted in efficient delivery of foodgrain to 74 percent of the population. The Chhattisgarh Food Security Act extends coverage to 90 percent of the population. Significantly, apart from grains, beneficiaries are entitled to 2 kg of pulses at Rs 5- Rs 10 per kg. The Chhattisgarh model would argue that the Food Security Act can work without sinking the economy. But then, the state first fixed its leaky PDS and gave its farmers incentives before enacting the law. So, tackling silent hunger may well be about the governance gap, not the fiscal deficit. letters@tehelka.com (Published in Tehelka Magazine, Volume 10 Issue 15, Dated 13 April 2013)

Food Bill is the biggest mistake India might have made till date
First Post Historians often ask counterfactual questions to figure out how history could have evolved differently. Ramachandra Guha asks and answers one such question in an essay titled A Short History of Congress Chamchagiri, which is a part of the book Patriots and Partisans.

In this essay Guha briefly discusses what would have happened if Lal Bahadur Shastri, the second prime minister of India, had lived a little longer. Shastri died on January 11, 1966, after serving as the prime minister for a little over 19 months.

The political future of India would have evolved very differently had Shashtri lived longer, feels Guha. As he writes Had Shastri lived, Indira Gandhi may or may not have migrated to London. But even had she stayed in India, it is highly unlikely that she would have become prime minister. And it is certain that her son would have never have occupied or aspired to that officeSanjay Gandhi and Rajiv Gandhi would almost certainly still be alive, and in private life. The former would be a (failed) entrepreneur, the latter a recently retired airline pilot with a passion for photography. Finally, had Shastri lived longer, Sonia Gandhi would still be a devoted and loving housewife, and Rahul Gandhi perhaps a middle-level manager in a private sector company.

But that as we know was not to be. Last night, the Lok Sabha, worked overtime to pass Sonia Gandhi's passion project, the Food Security Bill. India as a nation has made big mistakes on the economic and the financial front in the nearly 66 years that it has been independent, but the passage of the Food Security Bill, might turn out to be our biggest mistake till date.

The Food Security Bill guarantees 5 kg of rice, wheat and coarse cereals per month

per individual at a fixed price of Rs 3, 2, 1, respectively, to nearly 67% of the population.

The government estimates suggest that food security will cost Rs 1,24,723 crore per year. But that is just one estimate. 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 in a research paper titled National Food Security Bill - Challenges and Optionsputs 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). Ashok Kotwal, Milind Murugkar and Bharat Ramaswami challenge Bhalla's calculation in a column in The Financial Express and write the food subsidy bill should...come to around 1.35% of GDP, which is still way less than the numbers he(i.e. Bhalla) put out.

The trouble here is that by expressing the cost of food security in terms of percentage of GDP, we do not understand the seriousness of the situation that we are getting into. In order to properly understand the situation we need to express the cost of food security as a percentage of the total receipts(less borrowings) of the government. The receipts of the government for the year 2013-2014 are projected at Rs 11,22,799 crore. The government's estimated cost of food security comes at 11.10%(Rs 1,24,723 expressed as a % of Rs 11,22,799 crore) of the total receipts. The CACP's estimated cost of food security comes at 21.5%(Rs 2,41,623 crore expressed as a % of Rs 11,22,799 crore) of the total receipts. Bhalla's cost of food security comes at around 28% of the total receipts (Rs 3,14,000 crore expressed as a % of Rs 11,22,799 crore). Once we express the cost of food security as a percentage of the total estimated receipts of the government, during the current financial year, we see how huge the cost of food security really is. This is something that doesn't come out when the cost of food security is expressed as a percentage of GDP. In this case the estimated cost is in the range of 1-3% of GDP. But the government does not have the entire GDP to spend. It can only spend what it earns.

The interesting thing is that the cost of food security expressed as a percentage of total receipts of the government is likely to be even higher. This is primarily because the government's collection of taxes has been slower than expected this year. The Controller General of Accounts has put out numbers to show precisely this. For the first three months of the financial year (i.e. the period between April 1, 2013 and June 30, 2013) only 11.1% of the total expected revenue receipts (the total tax and non tax revenue) for the year have been collected. When it comes to capital receipts(which does not include government borrowings) only 3.3% of the total expected amount for the year have been collected. What this means is that the government during the first three months of the financial year has not been able to collect as much money as it had expected to. This means that the cost of food security will form a higher proportion of the total government receipts than the numbers currently tell us. And that is just one problem. It is also worth remembering that the government estimate of the cost of food security at Rs 1,24,723 crore is very optimistic. The CACP points out that this estimate does not take into account additional expenditure (that) is needed for the envisaged administrative set up, scaling up of operations, enhancement of production, investments for storage, movement, processing and market infrastructure etc. Food security will also mean a higher expenditure for the government in the days to come. A higher expenditure will mean a higher fiscal deficit. Fiscal deficit is defined as the difference between what a government earns and what it spends. The question is how will this higher expenditure be financed? Given that the economy is in a breakdown mode, higher taxes are not the answer. The government will have to finance food security through higher borrowing. Higher government borrowing by the government as this writer has often explained in the past crowds out private borrowing. The private sector (be it banks or companies) in order to compete with the government for savings will have to offer higher interest rates. This means that the era of high interest rates will continue, which will not be good for economic growth. Also, it is important to remember that the food security scheme is an open ended scheme. As Nitin Pai, Director of The Takshashila Institution, writes in a column The scheme is open-ended: there's no expiry date, no sunset clause. It covers around two-thirds of the population-even those who are not really needy. This means that the outlays will have to increase as the population grows. This might also lead to the government printing money to finance the scheme. It was and remains easy for the government to obtain money by printing it rather than taxing its citizens. F P Powers aptly put it when he said that money printing would always be the first device thought of by a finance minister when a large quantity of money has to be raised at once. History is full of such examples. Money printing will lead to higher inflation. Prices will rise due to other reasons as well. Every year, the government declares a minimum support price (MSP) on rice and wheat. At this price, it buys grains from farmers. This grain is then distributed to

those entitled to it under the various programmes of the government. The grain to be distributed under the food security programme will also be procured in a similar way. But this may have other unintended consequences which the government is not taking into account. As the CACP points out Assured procurement gives an incentive for farmers to produce cereals rather than diversify the productionbasketVegetable production too may be affected - pushing food inflation further. And this will hit the very people food security is expected to benefit. A discussion paper titledTaming Food Inflation in India released by CACP in April 2013 points out the same. Food inflation in India has been a major challenge to policy makers, more so during recent years when it has averaged 10% during 2008-09 to December 2012. Given that an average household in India still spends almost half of its expenditure on food, and poor around 60 percent (NSSO, 2011), and that poor cannot easily hedge against inflation, high food inflation inflicts a strong hidden tax' on the poorIn the last five years, post 2008, food inflation contributed to over 41% to the overall inflation in the country. Higher food prices will mean higher inflation and this in turn will mean lower savings, as people will end up spending a higher proportion of their income to meet their expenses. This will lead to people spending a lower amount of money on consuming good and services and thus economic growth will slowdown further. It might not be surprising to see economic growth go below the 5% level. Lower savings will also have an impact on the current account deficit. As Atish Ghosh and Uma Ramakrishnan point out in an article on the IMF website The current account can also be expressed as the difference between national (both public and private) savings and investment. A current account deficit may therefore reflect a low level of national savings relative to investment. If India does not save enough, it means it will have to borrow capital from abroad. And when these foreign borrowings need to be repaid, dollars will need to be bought. This will put pressure on the rupee and lead to its depreciation against the dollar. There is another factor that can put pressure on the rupee. In a particular year when the government is not able to procure enough rice or wheat to fulfil its obligations under right to food security, it will have to import these grains. But that is easier said than done, specially in case of rice. Rice is a very thinly traded commodity, with only about 7 per cent of world production being traded and five countries cornering three-fourths of the rice exports. The thinness and concentration of world rice markets imply that changes in production or consumption in major rice-trading countries have an amplified effect on world prices, a CACP research paper points out. And buying rice or wheat internationally will mean paying in dollars. This will lead to increased demand for dollars and pressure on the rupee. The weakest point of the right to food security is that it will use the extremely leaky public distribution system to distribute food grains. As Jagdish Bhagwati and Arvind Panagariya write in India's Tryst With Destiny - Debunking Myths That Undermine Progress and Addressing New Challenges A recent study by Jha and Ramaswami estimates that in 2004-05, 70 per cent of the poor received no grain through the pubic distribution system while 70 per cent of those who did receive it were non-poor. They

also estimate that as much as 55 per cent of the grain supplied through the public distribution system leaked out along the distribution chain, with only 45 per cent actually sold to beneficiaries through fair-price shops. The share of food subsidy received by the poor turned out to be astonishingly low 10.5 per cent. Estimates made by CACP suggest that the public distribution system has a leakage of 40.4%. In 2009-10, 25.3 million tonnes was received by the people under PDS while the offtake by states was 42.4 million tonnes- indicating a leakage of 40.4 percent, a CACP research paper points out. Bhagwati and Panagariya also point out that with the subsidy on rice being the highest, the demand for rice will be the highest and the government distribution system will fail to procure enough rice. As they write recognising that the absolute subsidy per kilogram is the largest in rice, the eligible households would stand to maximize the implicit transfer to them by buying rice and no other grain from the public distribution system. By reselling rice in the private market, they would be able to convert this maximized in-kind subsidy into cash...Of course, with all eligible households buying rice for their entire permitted quotas, the government distribution system will simply fail to procure enough rice. The jhollawallas' big plan for financing the food security scheme comes from the revenue foregone number put out by the Finance Ministry. This is essentially tax that could have been collected but was foregone due to various exemptions and incentives. The Finance Ministry put this number at Rs 480,000 crore for 2010-2011 and Rs 530,000 crore for 2011-2012. Now only if these taxes could be collected food security could be easily financed the jhollawallas feel.

But this number is a huge overestimation given that a lot of revenue foregone is difficult to capture. As Amartya Sen, the big inspiration for the jhollawallas put it in a column in The Hindu in January 2012 This is, of course, a big overestimation of revenue that can be actually obtained (or saved), since many of the revenues allegedly forgone would be difficult to capture - and so I am not accepting that rosy evaluation. Also, it is worth remembering something that finance minister P Chidambaram pointed out in his budget speech. There are 42,800 persons - let me repeat, only 42,800 persons - who admitted to a taxable income exceeding Rs 1 crore per year, Chidambaram said. So Indians do not like to pay tax. And just because a tax is implemented does not mean that they will pay up. This is an after effect of marginal income tax rates touching a high of 97% during the rule of Indira Gandhi. A huge amount of the economy has since moved to black, where transactions happen but are never recorded.

To conclude, the basic point is that food security will turn out to be a fairly expensive proposition for India. But then Sonia Gandhi believes in it and so do other parties which have voted for it. With this Congress has firmly gone back to the garibi hatao politics of Indira Gandhi. And that is not surprising given the huge influence Indira Gandhi has had on Sonia. As Tavleen Singh puts it in Durbaar When she (i.e. Sonia) refused to become Congress president on the night Rajiv died, it was probably because she knew that if she took the job, she would be quickly exposed. In her year of semi-retirement she learned to speak Hindi well enough to read out a speech written in Roman script, and studied carefully the politics of her mother-in-law. There were rumours that she watched videos of the late prime minister Indira Gandhi so she could learn to imitate her mannerisms. Other than imitating the mannerisms of Indira Gandhi, Sonia has also ended up imitating her politics and her economics. Now only if Lal Bahadur Shastri had lived a few years more... Vivek Kaul is a writer. He tweets @kaul_vivek

India's New Food Security Bill Makes Right to Food a Law

By Paromita Pain, Occupy.com | truth-out.org Manju is 34. She lives in Kolkata, India, and has two school-age children. She works as a cook in six different homes, making a salary that enables her children to live in a reasonably safe place. Manju cooks many delicacies for the different families she works for, yet her children make do with a basic rice and lentil dish for most meals. They dont starve, but if Manju cant work, food is the first thing they will miss. Manju and her family are luckier, however, than four-year-old Surjo Basfore who lives with his seven-year-old sister on Platform No. 4 of the Kalyani Railway Station in Kolkata. They beg for a living. A usual breakfast is about half a puri (a staple of fried flour cake), which brother and sister share. Lunch is about two handfuls of dal (boiled lentils) and rice. Surjo Basfore and Manju are the human face of Indias grim hunger epidemic and the dismal health conditions of those too poor to afford even basic food. The National Family Health Survey for 2005/06 stated that more than 40 percent of Indian children under the age of three are underweight, 33 percent of women aged 15 to 49 have a body mass index that is below normal, and nearly four out of five children aged 6 to 35 months are anemic. It is for these people that the Indian government recently announced an ambitious $19.5 billion National Food Security Bill. Passed by the legislature in the first week of September, the bill promises heavily subsidized wheat and rice for those who live below the poverty line about 67 percent of the population.

As reported in the legislation, a total of five kilograms of food grains per month will be provided at a fixed price of Rs 1-3 ($0.02 to $0.05) per kilogram through ration shops across the country. If the food security bill works as planned, it will become one of the worlds largest welfare schemes. This bill makes the right to food a law, says Chintan Kalra, a food security activist from Mumbai. However, Kalra is aware of the many ways the bill can fail, which is why implementation will play a huge role in what the bill really achieves. Overall, the legislation has aroused perhaps more skepticism than hope. While the bill's supporters say it is a welcome and needed change, critics call it a shameful tactic to win elections scheduled for early next year. Kavita Srivastava of the People's Union for Civil Liberties contends one problem of the bill is that no time frame has been set for garnering results. The Guardian reported that while the average Indian adult requires 14 kilograms of food grains per month, and children need seven kilograms, the new bill provides entitlements of just five kilograms per person per month, thus ensuring only 166g of cereal per person per day. India has a long history of food welfare programs, the country's midday meal scheme for school children being the most famous. But the recent tragedy in Chhapra in the state of Bihar, which saw 23 children die after they ate poison-laced food, underlined the degree of corruption and lack of care that plague even the best plans. The Indian Anganwadi system, started in 1975 to provide basic healthcare in the rural areas, offer focal points of nutrition and care for children and pregnant women. And strengthening those centers will mean more people getting access to what the current food security bill promises.

But Dr. Jayakumar Christian, who leads World Vision India, stressed the importance of the distribution system in making the bill a success. At this point the Anganwadis become the most important link in fulfilling the purpose of the bill. The bill states that it 'provides for food and nutritional security in human life cycle approach,'" said Dr. Christian. "Then it should address the gaps and have provisions for strengthening the current system." The work of identifying eligible households for the program has been left to the states. Indias Planning Commission has said that those living on Rs 29 a day (about $0.50) are eligible for the Below Poverty Line, or BPL, cards. It is also important that no person is robbed of his/her right to access food because they dont have adequate documents or they live in inaccessible places," added Christian. The Right to Food Campaign, an informal network of organizations and individuals committed to realizing the right to food for everyone in India, agrees. It stated that the Act must include strong accountability and grievance redressal provisions, including mandatory penalties for any violation of the Act and compensation for those whose entitlements have been denied. Yet, in the whole issue of making sure basic food grains are available, the question of nutrition is often overlooked. India is among the third largest economies in Asia, but the poor are barely feeling the progress being made. And it isn't food alone that is lacking. Health, safe water and access to education are equally important, especially in our overcrowded cities, said Dr. Julan Ghosh, who runs a womans group in Kolkata.

India ranks 65 out of 79 countries on the Global Hunger Index. In their recent book, An Uncertain Glory: India and its Contradictions, writers Amartya Sen and Jean Dreze argue that the countrys failure to adequately feed its women and children demonstrate "catastrophic failures, with wide-ranging implications not only for the people of India today but also for the generations to be born in the near future." Sonia Gandhi, the head of the Congress Party, emphasized in simple terms the importance of the new bill: The question is not whether we can do it or not," she said. "We have to do it.

WTO chief raises concerns over India food security law

The Hindu Asserting that India will soon be breaching their Aggregate Measurement of Support (AMS) commitments to WTO due to its new food security programme, the newly elected Director General, Roberto Azevedo on Monday sought a positive solution to the issue before the Bali Ministerial to be held in December as some countries have expressed concern over the procurement and distribution of highly subsidised foodgrains. Speaking separately at the events organised by CII and FICCI, Mr. Azevedo said India had asked the WTO to work out a solution as it was keen to win legitimacy for its ambitious food security law that promises highly subsidised foodgrain to rural and urban poor. We have agreed in Geneva on a certain issue and are working on a peace clause to find a permanent solution to the issue. India would soon be breaching their AMS commitments in the WTO. So, they are asking for some kind of action in Geneva that could allow those programme to continue to work unaffected till a final solution is found, the WTO Director General said. He said Bali Ministerial meet will look at how this permanent solution will come. The Peace Clause in Article 13 of the agreement on agriculture (AOA) has been there for 9 years. India is open to accepting a Peace Clause as an interim mechanism till an acceptable final solution. India is also ready to commit that procured food grains would not be released for international trade and the management of public stocks would be done in a transparent manner, the official said. The UPA II government is presently implementing the Food Security Act which entitles 82 crore people to 5 Kg of foodgrain per person per month at the rate of Rs. 13 per Kg. The country needs 62 million tonnes of foodgrain in a year to implement the law. The initial proposal on food security, which was tabled by G-33 was immediately rejected by many countries for different reasons. However, we have made lot of progress since that point of time. From upfront rejection, we now are building an environment for very constructive engagement that will try to address this issue in a positive manner, Mr. Azevedo said. Mr. Azevedo underlined the need for national governments to show flexibility and reasonability to evolve a consensus on a multilateral trade package that is meaningful

and doable. Time was running out and it was imperative that Trade Ministers actively engage with one another in the weeks ahead to find a common ground, failing which plurilateral, multilateral and bilateral agreements will proliferate and many countries will be denied the benefits of a rule-based approach to trade liberalisation. The markets will then open on non-MFN basis and the ticket to admission into these agreements will be far more expensive than a WTO-led multilateral trading system, he added.