A threat to food security

_May 2, 2013

The workings of the traditional farm economy have been overlooked.

The National Food Security Bill, a high risk venture of UPA government, is more a product
of soft politics than hard economics. The Bill promises to supply, at subsidised prices, 7 kg
of foodgrains to each Indian, every month, at 1/8th of the economic cost of grains in the
first year,
r, ending up at 1/9th of the economic cost in the third year.
It aims to envelop two-thirds
thirds of the population. Its huge reach measures its vote
vote-bank
potential. Finding itself in Catch
Catch-22
22 situation, the opposition would hate the ruling party to
succeed in garnering votes through the scheme but, would not oppose it as that would be
politically suicidal. With the entire political spectrum backing the Bill, the public discourse
on the Bill is mute, if not muffled. What the nation is not conscious of is that, b
because of the
lack of rigorous intellectual scrutiny, the Bill threatens the food security of the whole
country --- even as it seeks to address the food security of two thirds of its people.
The national debate has so far touched two aspects of the Bill. One, its impact on the
Budget. The elephantine scheme would torpedo government's plans to make the future
budget deficits Kelkar Report- compliant. It looks unaffordable even at the optimistic
growth targets of economy.
The additional dent it will cause iin
n the first budget after its advent is likely to be twenty
times the effective extra provision of Rs 5,000 crore made in the Budget for 2013
2013-14, if the
Bill is passed in the current Budget session (See Food Bill will torpedo Budget, Business
Line, March 21, 2013).

MORE FARM OUTPUT

The second aspect of the discourse is operationally more critical. The Discussion Paper of
the Commission on Agricultural Costs and Prices (CACP) titled National Food Security
Bill Challenges and Options says that, on a procur
procurement-production
production ratio of 35 per cent,
the current production of rice and wheat (of 190 million tonnes) would yield 67 million
tonnes of stocks.
The scheme requires 75 million tonnes. So, a further 8 million tonnes need to be procured.
As much of the additional
tional production and procurement will have to be dispersed outside
Punjab and Haryana, the procurement ratio will be less at 30 per cent and so national
grain production has to rise by 25 million tonnes to achieve the additional 8 million tonne
procurement.
So the second aspect of the debate is about how to increase food production by 25 million
tonnes to work the scheme. And, how to procure 75 million tonnes, and for that, how build
the logistics storage, transport, and handling. The first part of the discourse seems to
assume the second part as a done deal and the second part seems to assume the first part as
done, when neither is done.

SMALL FARMERS IMPACT

What is as yet not seen in the radar of discourse is the impact of the Food Bill on Indian
farming. Particularly on small farmers. And, on the village and agricultural economy
which is substantially backward- integrated to the small farmers kitchen and also the
kitchen of most landless labour.
The government intends to procure 75 million tonnes to supply food grains to some 750-800
million people a third of the population. The first question is: from whom will the
government procure the supplies and to whom does it intend to supply?
What is shocking is that most of the persons in rural areas to whom the government will
supply grains at highly subsidised rates under the scheme are the very small and marginal
farmers from whom it will have to procure the supplies! See how this crazy agro-economics
works.
According to Census 2011, the urban Indian population is 377 million and the rural, 743
million. Like the two thirds of urban population (251 million), two-thirds of the rural
population (495 million) will also benefit under the scheme. Now, look at the structure of
the beneficiaries in the rural population. Out of some 138 million farm households, 117
million are small and marginal farmers owning less than 2 hectares (State of Agriculture
Report 2012-13).
The average farm family size being five, some 690 million people live on 138 million farms.
About a third of the landless rural households with a population of 75 million cultivate as
tenants, leaving some 50 million as totally landless labour. After accounting the entire 75
million landless as beneficiaries under the scheme, the balance 420 million beneficiaries will
be from the small and marginal farming family.
These small and marginal farmers who produce substantial foodgrains, also consume and
use a large part of what they produce. Generally, all farmers consume and use a large part
of what they produce.

Traditional system
According to the Working Group on Agricultural Marketing Infrastructure and Policy
Required for Internal and External trade (Eleventh Plan) out of the total foodgrains
produced, farm families consume and use 60 per cent for their needs and sell only 40 per
cent called the marketable surplus. But, small and marginal farmers retain more than 60
per cent for personal use and for market they set aside less than 40 per cent.
Here are some details for urbanites to understand why and how the farmers use up 60 per
cent of their produce. Apart for their family consumption, which is in excess of a third of
their production, they retain the produce for paying permanent and temporary farm

labour in kind; for feeding farm animals and as seeds; for payment in kind for farm
equipments, customary dues, repayment of loan and irrigation charges. Thus, small and
marginal farmer ends up largely feeding the farming family and paying in kind to the
landlord and landless alike in kind, which distributes the foodgrain within the village.
So, 60 per cent of the grain produced is shared within the village for farm families own
consumption and by way of traditional barter which makes grain available to those,
including labour, who do not own any land or cultivate.
This is how the food security of the villages is traditionally secured outside the modern
market system. Only the balance produce moves into urban India and into trade within
and outside India.

FOOD BILL effect

Now, let us see how the national food security scheme adversely impacts on the traditional
food security system at work.
The 117 million small and marginal farm families with population of 585 millions,
constitute almost 78 per cent of the rural population. They now produce food for
themselves, and also for others. They produce food more efficiently than medium and large
farmers. While their families consume most of the foodgrains they produce, they also
contribute a significant part of the national kitty of food production for others. If they stop
producing foodgrains, the national kitty of food production will go down significantly.
Now under the Food Security Bill, most of their families will qualify for subsidised food
grains. And they will get grain supply at less than 1/8 of the price at which they produce
and sell grains to the government. If the government would supply them grain at 1/8 price,
why should they till and toil on their land and produce 51 per cent of national food using 46
per cent of the cultivated area, particularly when their cost of cultivation per acre as
compared to medium and large players is higher
(http://www.igidr.ac.in/pdf/ publication/WP-2012-014.pdf)
Rice and wheat cultivation is the most difficult and least gainful farm operation which is
already haunted by shortage of labour and skyrocketing wage and input costs. Giving
highly subsidised foodgrains to small and marginal farmers is the best way to dissuade
them from farming for their family's food supplies.

PRODUCE MORE
How then to help the small and marginal farmers? According to the FAO the small and
marginal farmers supplied as much as 7.2 million tonnes of food grains to the national
grain market as early as in 1990. Another FAO publication titled, Smallholder farmers in
India: Food security and agricultural policy (March 2002) concluded: Indias agricultural
economy and food security depend vitally on the small-holder farmers...It is socially

beneficial to the nation that the number of small-holdings should continue to increase. It is
therefore incumbent upon the nation to assist the small-holder families to increase their
productivity and to augment their assets and entitlements.
Assisting them means to make them produce more and not less, by incentivising their
production and productivity by direct cash subsidies. The Food Bill is bound to encourage
the small and marginal farmers to go for easy alternatives like commercial crops and
horticulture.
Most States are deficient in food production. If in those States small and marginal farmers
shift away from foodgrains, the country will face huge dent in food security.
That is precisely what the Food Security Bill is likely to end up achieving by large scale
state intervention that threatens to disincentivise and turn some 700 million producers of
food into consumers of food-dependent government supplies at subsidised rates. Will the
nation wake up before it is too late?
by Shri S Gurumurthy ji

(The author is a commentator on political and economic affairs, and a corporate adviser.)