ARTICLE 1 ON FOOD SECURITY BILL

(PRESS THE HINDU(BUSINESS LINE) | PUBLISHED ON APRIL 14, 2013)

1. Preliminaries

The Bill extends to the whole of India and shall be deemed to have come into force on the
5th day of July 2013. [NB: This is the date when the National Food Security Ordinance 2013
came into force.]

2. Entitlements

Public Distribution System (PDS)

Priority households are entitled to 5 kgs of foodgrains per person per month, and Antyodaya
households to 35 kgs per household per month. The combined coverage of Priority and
Antyodaya households (called eligible households) shall extend up to 75% of the rural
population and up to 50% of the urban population. The PDS issue prices are given in
Schedule I: Rs 3/2/1 per kg for rice/wheat/millets. These may be revised after three years.

Childrens Entitlements

For children in the age group of 6 months to 6 years: an age-appropriate meal, free of charge,
through the local anganwadi. For children aged 6-14 years, one free mid-day meal every day
(except on school holidays) in all government and government-aided shools, up to Class VIII.
For children below six months, exclusive breastfeeding shall be promoted. For children
who suffer from malnutrition, meals will be provided to them free of charge through the
local anganwadi.

Entitlements of Pregnant and Lactating Women

Every pregnant and lactating mother is entitled to a free meal at the local anganwadi (during
pregnancy and six months after child birth) as well as maternity benefits of Rs 6,000, in
instalments.
[Notes: (1) Meal is defined as hot cooked or pre-cooked and heated before its service meal
or take home ration, as may be prescribed by the Central Government. All meals have to
meet nutritional norms specified in Schedule II. (2) The entitlements of women and children
are to be delivered by state governments through schemes in accordance with guidelines to be
prescribed by the Central Government.]

3. Identification of Eligible Households

The Bill does not specify criteria for the identification of households eligible for PDS
entitlements. The Central Government is to determine the state-wise coverage of the PDS
(proportion of the rural/urban population). Then numbers of eligible persons will be
calculated from Census population figures. The identification of eligible households is left to
state governments, subject to the schemes guidelines for Antyodaya, and subject to
guidelines to be specified by the state government for Priority households. The
identification of eligible households is to be completed within 365 days. The lists of eligible
households are to be placed in the public domain and displayed prominently.

4. Food Commissions

The Bill provides for the creation of State Food Commissions. The main function of the State
Commission is to monitor the implementation of the Act, give advice to the states
governments and their agencies, and inquire into violations of entitlements. State
Commissions also have to hear appeals against orders of the District Grievance Redressal
Officer and prepare annual reports.

5. Transparency and Grievance Redressal

The Bill provides for a two-tier grievance redressal structure, involving the District
Grievance Redressal Officer (DGRO) and State Food Commission. State governments must
also put in place an internal grievance redressal mechanism which may include call centres,
help lines, etc.

Transparency Provisions

Mandatory transparency provisions include: (1) placing all PDS-related records in the public
domain; (2) conducting periodic social audits of the PDS and other welfare schemes; (3)
using information and communication technology to ensure transparent recording of
transactions at all levels; (4) setting up vigilance committees at all levels to supervise all
schemes under the Act.

District Grievance Redressal Officers

DGROs shall be appointed by state governments for each district to hear complaints and take
necessary action according to norms to be prescribed by state governments. If a complainant
is not satisfied, he or she may file an appeal before the State Food Commission.

Penalties and Compensation

The Food Commissions have powers to impose penalties. If an order of the DGRO is not
complied with, the concerned authority or officer can be fined up to Rs. 5,000. The
Commission can authorise any of its members to act as an adjudicating officer for this
purpose. In case of non-supply of the entitled quantities of foodgrains or meals to entitled
persons, such persons will be entitled to a food security allowance from the state
government, as prescribed by the central government.

6. Other Provisions

PDS Reforms

In Chapter V, the Bill states that central and state governments shall endeavour to
progressively undertake various PDS reforms, including: doorstep delivery of foodgrains;
end-to-end computerisation; leveraging aadhaar (UID) for unique identification of entitled
beneficiaries; full transparency of records; preference to public institutions or bodies in
licensing of fair price shops; management of fair price shops by women or their collectives;
diversification of commodities distributed under the PDS; full transparency of records; and
introducing schemes such as cash transfer, food coupons or other schemes to the targeted
beneficiaries in order to ensure their foodgrain entitlements as prescribed by the central
government.

Obligations of Government and Local Authorities

The main obligation of the Central Government is to provide foodgrains (or, failing that,
funds) to state governments, at prices specified in Schedule I, to implement the main
entitlements. The Central Government has wide-ranging powers to make Rules in
consultation with the state government.

The main obligation of state governments is to implement the relevant schemes, in

accordance with the Central Government guidelines. State governments also have wide-
ranging powers to make Rules. They are free to extend benefits and entitlements beyond what
is prescribed in the Bill, from their own resources.

Local Authorities and Panchayati Raj Institutions are responsible for proper implementation
of the Bill in their respective areas, and may be given additional responsibilities by
notification.

7. Schedules

The Bill has four schedules (these can be amended by notification). Schedule I prescribes
issue prices for the PDS. Schedule II prescribes nutritional standards for midday meals,
take-home rations and related entitlements. Schedule III lists various provisions for
advancing food security. Schedule IV specifies a minimum foodgrain allocation for each
state; in the case of states that might lose otherwise under the Act, this essentially means a
continuing of existing allocations.

Summary of National Food Security Bill 2013 prepared by Jean Drze on behalf of
TEHELKA

The additional allocation in grain and money terms will neither distort the grain market nor
place a burden on the fisc.

Many recent commentators have portrayed the National Food Security Bill (NFSB) as an
unbearable burden on the exchequer. The facts, however, do no substantiate the claim.

The NFSB has been trashed from time to time in the English dailies. For instance, Business
Line (March 21, 2013) published an article titled Food Security Bill will torpedo Budget.
Another national daily claims that the Bill has a fundamental flaw that places an
unbearable burden and distorts agriculture (Indian Express, March 19, 2013). Quite often,
the claims are partly due to a misconception that the government is making new financial and
grain commitments under the NFSB.

In fact, the NFSB does little more than turning into legal entitlements pre-existing food
security schemes such as the Integrated Child Development Services (ICDS) Scheme, Mid-
Day Meal (MDM) Scheme, Public Distribution System (PDS) and maternity entitlements.

UNJUSTIFIED FEARS

Some commentators have said that it is precisely the legal commitment that will lead to
problems in the future for example, the fear of the emergence of a government monopoly
in the grain market. This fear is not borne out by the facts.

Under the PDS, ICDS and MDM, the government currently allocates about 58 million tonnes
of grain. To meet this commitment, the government currently procures about 30 per cent of
grain. The NFSB commits 62 million tonnes, i.e., an additional 4 million tonnes.

The Budget of 2013-14 allocates Rs. 31,000 crore for two children's food schemes school
meals and the ICDS which reaches children under six. The Budget allocation for the food
subsidy in 2013-14 is Rs 90,000 crore.

According to our estimates, the food subsidy will increase from Rs 80,000 crore (in 2012-13)
to Rs 1,11,221 crore, under the NFSB.

Thus, the NFSB implies an increase of just over Rs 30,000 crores in financial terms and 4
million tonnes in real (grain) terms.

Can India afford this? Speaking at a panel discussion at IIT Delhi in February, Deputy
Chairperson of the Planning Commission, Montek Singh Ahluwalia, said it would be
dishonest to say that we cannot afford the Food Bill, and that the subsidies that we need to
target are those enjoyed by the middle classes (e.g., fuel).

Speaking at the same discussion, Amartya Sen made a pertinent point that the reason why
it is more difficult to reduce subsidies enjoyed by the middle classes (fuels such as LPG,
petrol and diesel) is that the beneficiaries of those are more vocal than the rural poor or
children under six who benefit from the food subsidies.

DOUBLE STANDARDS

This point is well illustrated by the events following last year's Budget. The Budget 2012-13
announced a 1 per cent excise duty on unbranded jewellery and doubled custom duty on gold
to 4 per cent. Gold is the country's second biggest import, after crude oil. This burden on the
current account deficit was an important reason for doubling the customs duty.

Following this, the All India Gems and Jewellery Trade Federation and others initiated a
strike which went on for 21 days. They argued that the industry, including the large number
of people it employs, and buyers of gold, would suffer. A massive media campaign was
launched, following which the Finance Minister withdrew the excise duty.

According to the revenue foregone statement presented along with the Budget 2013-14, the
revenue foregone from the gold and diamond industry for the previous financial year was Rs.
65,000 crore.

Such tax breaks are often justified on the grounds of the employment potential of the gems
and jewellery industry. According to Invest India, a website of the Ministry of Commerce and
Industry, The sector provides employment to around 1.8 million people. In the next five
years, the sector is expected to create additional employment for around 1.1 million people.

According to the National Sample Survey Organisation, 2009-10, the size of the Indian
workforce is between 430-471 million persons. If the gems and jewellery industry employs 3
million people as per the Ministry's target, this would be 0.7 per cent of the workforce.

An industry that employs less than one per cent of the Indian workforce is currently enjoying
tax benefits amounting to Rs 65,000 crore (nearly 20 per cent of all revenue foregone). The
Food Bill will benefit 67 per cent of the population at an additional cost of Rs 30,000 crore,
yet it is said that it will torpedo the Budget.

NOT ENOUGH
If anything, the NFSB does not go far enough. The NFSB tabled in Parliament in December
2011 included special provisions for the destitute and other vulnerable groups (e.g.,
community kitchens and social security pensions).

These have been discarded in the version cleared by Cabinet on March 19, 2013. In many
rural areas, the Block is already too far to go to complain, yet for violations of rights under
the NFSB, grievance redressal only begins at the District level.

Viewed in this comparative perspective (for example, it is approximately 1 per cent of the
GDP), few can question the affordability or desirability of the NFSB. In absolute terms it is
not a small amount. One might argue whether such expenditure is worth it, given the fact
that the programmes in its ambit, for example, the PDS, are dysfunctional (Indian Express,
March 19, 2013).

However, recent data from the National Sample Survey of 2004-05 and 2009-10 suggest that
while the functioning of the PDS is far from perfect, we do need to update our facts. In
joint research with Jean Drze, we show that the implicit subsidy from the PDS eliminates 18
per cent (14 per cent) of the poverty gap or the difference between the poverty line level
of income and the median income (or monthly per capita consumption expenditure) of poor
households among poor rural (urban) households.

Again, there are marked inter-State contrasts in Tamil Nadu the corresponding figure is 60
per cent and in Chhattisgarh and Andhra Pradesh it is nearly 40 per cent.

The real question then is not whether India can afford to have a right to food but as the Food
Minister said in a recent interview, Can we afford not to?

ARTICLE 2 ON BALI PACT

Representatives of the 159 member countries of the World Trade Organization (WTO) have
agreed on a deal aimed at boosting global trade.
The deal was confirmed on December 7 after marathon negotiations on the Indonesian island
of Bali.
It marks the first global agreement struck by all the WTO's members since the organizations
founding in 1995.
WTO Director-General Roberto Azevedo said: "We have put the 'world' back in World Trade
Organization...For the first time in our history, the WTO has truly delivered."
Indonesia's conference chair Trade Minister Gita Wirjawan called the accord "historic."
"The deal that we had struck will benefit all WTO members," he said. "It will provide new
opportunities for business in our poorest members, the least developed countries. [It] provides
governments with assurance that they can implement food security programs without fear of
facing dispute action in WTO. But it also offers a safeguard that such programs will not be
used in a manner which distorts trade and adversely affects farmers in other countries."
The pact includes commitments by WTO members to facilitate trade by simplifying customs
procedures, pledges to limit agricultural subsidies, and policies to aid least-developed
countries.
Earlier this year, the Washington-based Peterson Institute for International Economics
estimated in a report that the customs measures could give a $1 trillion boost to the world
economy and 21 million jobs if properly implemented. It did not detail how those figures
were calculated.The deal was clinched after negotiators resolved objections by Cuba and
India.India threatened to veto the package, saying it should be allowed to subsidize grain,
under its new food security law, while other members said the program broke WTO rules. A
compromise was found calling for a solution to the issue within four years. Cuba, meanwhile,
said the package did not do enough to press the United States to lift its trade embargo on the
island, but was eventually persuaded to accept the wording of the agreement.
Analysts said the agreement could help revive the WTO's broader Doha Round of trade
negotiations, which despite 12 years of talks, have so far failed to result in a deal to remove
global trade barriers.For the Bali Ministerial Conference, WTO members have been working
on four proposals out of a much larger package that has been on the table in the Doha Round
agriculture negotiations since 2008.The four are on export subsidies and other policies known
collectively as export competition

a proposal to deal with the way a specific type of import quota (tariff quotas) is to
be handled when the quota is persistently under-filled

developing countries food stockholding for food security

a proposed list of general services of particular interest to developing countries that

would be added to the Green Box the category of domestic support that is
 considered not to distort trade (or to distort minimally) and therefore allowed without
any limits.

INDIAs Position
A deal originally looked unlikely this week as Indias Commerce Minister Anand
Sharma said the countrys food security was non-negotiable. India had sought to exempt
food-security plans from being counted under subsidy spending caps, while the U.S. was
concerned that a surplus from Indias food program may get dumped onto world markets.

India speaks for the vast majority of poor people in the developing countries and the poor
countries, Sharma told reporters in Bali this week.
India Prime Minister Manmohan Singhs Congress-led coalition allocated 900 billion rupees
($15 billion) in food subsidies in the fiscal year ending March 31, up 6 percent from last year.
His party has championed rural programs in a nation with 1.2 billion people that is home to a
third of the worlds poor, according to the World Bank.
Singhs government, facing elections due by May 2014, has seen its popularity fall because of
graft scandals, the weakest economic growth in a decade and consumer inflation that has
exceeded 9 percent for 20 months
Limited scope

However, a closer look at what was achieved shows an agreement quite limited in scope and, as some
would argue, heavily tilted in favour of the developed countries.

The one major thing that was agreed upon in Bali was a trade facilitation pact to smoothen
the flow of goods between borders by upgrading port infrastructure, reducing paperwork and
cutting down on clearance time.

US, EU victory
The agreement was largely a victory for the US and the EU that had been lobbying hard for it.
Since developed country infrastructure is already state-of-the-art, the pact puts the onus on
developing countries and least developed countries (LDCs) to pull up their socks or face
action. In return for their acceptance of the trade facilitation agreement, India and other
developing countries (G-33 group) whose farm procurement subsidies are close to breaching
prescribed limits got an interim relief from legal action.
The documentation required and other conditions attached to it, however, could make it very
difficult for India to take advantage of the waiver.
India is hopeful that it would get a full exemption for its food procurement subsidies when a
final solution is worked out in 2016.The Bali pact has very little to offer beyond the trade
facilitation pact and the interim relief given to India and the G-33 group.
"For India, food security is non-negotiable. Need of public stockholding of foodgrains to
ensure food security must be respected. Dated WTO rules need to be corrected. The G-33
proposal was mooted precisely for this purpose," commerce and industry minister Anand
Sharma said in his address, even as most members including the US, China and the European
Union spoke in favour of pushing through a deal at Bali. Sharma's statement was the first
official interjection at the ministerial conference with engagements so far restricted to the
sidelines.
Brazil, Mexico, China and Indonesia are part of G-33 that is pushing for changes in WTO
rules for developing countries for a potential breach in the ceiling on food security currently
pegged at 10% of the value of production. For India, it will mean lower procurement or
restrictions on the minimum support price at a time when the government has announced the
National Food Security Act. While WTO members have agreed on a four-year peace clause
that will stop disputes if a country goes past the ceiling, India wants the truce to be in place
till a permanent solution is found.

Apart from India, Brazil was the sole dissenter among the first 15 trade ministers who spoke
at the plenary session, arguing in favour of a strong package on agriculture, while the
developed countries are pushing the trade facilitation agreement, which will be the first since
WTO was set up 19 years ago. "We had hoped for more since agriculture is where we find the
maximum distortions," Brazilian trade minister Luiz Alberto Figueiredo Machado, while
flagging concerns over the trade facilitation package for LDCs and pointing to food security
as an important element.
Mexico was another country that identified food security as an issue. While several of India's
allies have suggested a softer approach, India has not diluted his stand so far. "The due
restraint provision, in its current form, cannot be accepted, It must remain in force till we are
able to agree on a lasting solution and provide adequate protection from all kind of
challenges," Sharma said.
India and Brazil made a case for putting development issues, especially agriculture at the
forefront of negotiations. "For over 12 years, we have struggled to bring complex
negotiations of the Doha Round to conclusion. The continuing stalemate has led to frustration
and cynicism when this was the only round dedicated to development," Sharma said.

Despite concerns raised by the United States and Canada, the outcome of the Bali WTO
meeting would not affect Indias food security programme, commerce and industry minister
Anand Sharma told Parliament on Tuesday.

ARTICLE 3 ON CAUSES OF FOOD SECURITY BILL

(PRESS INFOCHANGE NEWS AND FEATURES |POSTED BY SACHIN KUMAR ON JAN

2012)

Food Security Bill: Making sense of the numbers

We are already spending Rs 67,310 crore on food subsidies. The National Food Security Bill
will increase this by only Rs 30,000 crore, just 4% of the corporate taxes that are being
booked as revenues foregone, saysSachin Kumar Jain. The added expenditure will still mean
a subsidy of only Rs 3.25 per person per day

Amidst the cacophony surrounding the Lokpal Bill, the National Food Security Bill 2011 was
quietly tabled in the Lok Sabha. What the Government of India has fleshed out in the bill is
actually in line with its constitutional obligations (Section 47) and obligations under various
international conventions. The bill has been conceived in the larger context of prevailing food
and nutritional insecurity in one of the fastest growing economies of the world.

The National Food Security Bill serves only to register the fact that hunger is a real cause for
concern, as in its present form, the bill is not adequately endowed with a vision to address the
structural causes of Indias food and nutritional insecurities.

Three basic issues need to be highlighted. First, the bill dwells on targeting vis--vis
universalisation, re-invoking the contentious BPL-APL issue (priority and non-priority
households). Intended benefits will be provided to people based on these categories. It is a
well-known fact that successive governments have failed to identify the poor. As a result, a
large part of the countrys population continues to struggle with hunger in various forms. In
such a grim scenario, the government should be talking about universalisation, which is an
integral part of the fundamental right to life. Second, the bill provides for the supply of 7 kg
of subsidised foodgrain per person per month to priority households, whereas a person
needs 14 kg a month to fulfil her basic food requirements. Third, the proposed entitlements
do not deal with the problem of nutritional insecurity. People in India suffer
undernourishment mainly due to protein and fat deficiencies. To cope with this problem, the
government should have included pulses (to compensate for protein) and edible oil (to
replenish fat). The preamble of the bill says: the Supreme Court of India has recognised
the right to food and nutrition as integral to the right to life

Today development is understood only in the narrow sense of economic growth and GDP.
Successive governments have not stepped out of this familiar paradigm to address
improvements in living standards and enhancement of peoples wellbeing. How can we
accept a growth trend wherein 70% of total GDP is directly under the control of 8% of Indias
elite? Growth is important, as it helps create a conducive environment for people to better
their living standards. But we cannot accept a growth trajectory that curtails opportunities for
the common man and grabs common property and natural resources for short-term gain.
While Indias economy has been growing at 6-9% in the last 12 years, undernutrition among
her children has dropped a mere 1% in the eight-year period 1998-99 to 2006. Should we
accept a token 0.1% decline in childhood hunger per year? We need to understand that
underfed people are unable to contribute, even if provided with opportunities, because of lack
of capability. We must therefore build an environment of empowerment with nutritional
security.

Indias growth story has a flip side. Present levels of malnutrition result in a 2-3% decline in
GDP. It causes delays in education, triggers learning disabilities, affects the overall physical
and cognitive development of children at an early age. Every year, India loses 1.3 million
children under the age of 5 due to undernutrition and non-availability/inaccessibility to basic
healthcare.

Neighbouring Bhutan measures its development according to a happiness index. With the
developed world in the grip of a debilitating economic crisis and the citizens of many
countries protesting against prevalent economic policies, India must decide whether peoples
wellbeing takes precedence over creating a tiny island of opulence for a handful of people.
We contribute 40% to the worlds overall maternal, neo-natal, infant and child deaths. We
have half the worlds undernourished children. Fifty-four per cent of our women suffer from
anaemia. We have to end this national variety of colonialism where corporations rule over our
farmers and labourers and traders indulge in the business of education and health services and
keep people deprived of the very basic services in the name of growth. The resources
generated through growth should go towards the wellbeing of all people. Not to subsidise
corporations.

The proposed bill reposes great faith in targeting the so-called poor and non-poor (under
priority and general households). Lets remind ourselves that we have been hopelessly
unsuccessful in identifying the poor and continue to implement our most crucial food/social
entitlement programmes along exclusionary poverty lines.

I take the argument further by citing the fact that over 1.6 million hectares of land have been
transferred for real-estate and industrial development purposes; natural forest cover is rapidly
declining; water resources are drying up and becoming polluted; agricultural production costs
have gone up by 189% in the last 20 years; small and marginal farmers have seen no policy
interventions aimed at structural protection against the marauders of the open market.

We are talking about a growth scenario wherein India needed to create employment
opportunities for 45 million people; it could provide employment to only 2.1 million.

All these factors are at the root of hunger. Professor Arjun Sengupta, in his report on the
unorganised sector, mentions that 77% of Indias population survives on Rs 20 a day. On the
other hand, NNMB (National Nutrition Monitoring Bureau) figures show that 76.8% of the
population does not receive the prescribed amounts of nutrition!

In the two decades of our new economic policy, one thing emerges strongly: 90% of Indias
population received no benefit from it. They manage to survive on the fringes of our political
economy.

Although our country is being run by economists, they sound helpless and ill-informed. Has
anyone from the Planning Commission, PMO or RBI ever said publicly that the government
doled out almost Rs 6.22 lakh crore as tax revenue subsidy in the financial year 2011-12?
This is registered as taxes foregone, and accounts for 65% of the governments total revenue.
Last year, the figure was Rs 5.36 lakh crore. A total of Rs 23 lakh crore in six years has been
stashed away in the corporate worlds coffers. No one has questioned this. Meanwhile, the
agriculture subsidy has been converted into direct loans to farmers; petrol has been handed
over to the market; public expenditure on basic services like health, education and access to
clean water is dropping. Why the hue and cry about NFSA expenditure?

We are already spending Rs 67,310 crore on food subsidies; there will be an increase of only
another Rs 30,000 crore (a mere 4% of taxes being usurped by the corporate-economist-
government nexus). And what will that do? It will restore the dignity of the people of India. It
will help feed the 77 crore people sleeping hungry. The Government of India will only be
giving a subsidy of Rs 1,188 per person per year, or Rs 3.25 a day. And still we have
ministers, economists, policymakers and consultants who are unhappy with the idea!

This is the outcome of welfare politics which has become imperative in the last decade or so.
We have been running the Integrated Child Development Services programme with a plan to
spend Rs 80,000 crore in the next five years; the midday meal scheme is already in place. We
have a 17 crore under-6 child population, 45% of which is undernourished. But we barely
spend Rs 1.62 per child per day on their growth and nutrition.

The fact of the matter is that the private food market will lose out on profits due to this
legislation, and there will be a control over inflation. The market finds this unacceptable.
Take the example of the second and third quarter of 2011-12. While the growth rate came
down to 6.8%, food inflation also declined from 16% to 1.7%.

There is an argument that it would be better for the government to focus on productivity
enhancement rather than on doling out subsidies at the expense of taxpayers. But these two
things are not mutually exclusive, they are complementary. India is not a food-deficit
country; we produce surplus foodgrain, we throw it in the sea, we export it. But, for various
reasons, it does not reach our hungry people.

Part of this discussion is linked to public procurement and a minimum support price. If the
government stops subsidising agriculture, profit-makers will benefit and consumers will have
to pay high prices. Take the example of pulses. We pay Rs 36 per kg as the minimum support
price to the farmer for tur dal, but the market price was Rs 110 some time ago. There is an
urgent need to ensure maximum public procurement, and this can only be done and applied
through the public distribution system.

The second aspect deals with policy. For the last 20 years, per capita food production in India
has been stagnant at around 460 grams per person per day. Although pulses are a key source
of protein, their availability has gone down from 70 grams per day in the 1960s to 42 grams
in recent times. We adopted new technologies -- hybrid seeds, chemical fertiliser and
pesticides -- in order to increase agricultural production. Punjab sacrificed its community
techniques and blindly used chemicals resulting, finally, in steep declines in soil fertility.

ARTICLE 4 ON EFFECTS OF FOOD SECURITY BILL

(SOURCE: BLOGSPOT.COM | POSTED BY ANAND VIJAYAKUMAR ON 28 AUGUST

2013)

Impact on Interest Rates

The government would resort to borrowing to fund it. When the government enters the
borrowing market, in order to entice investors, it would have to offer good interest rates. The
private sector too would have to hike their interest rates in order to stay competitive. This
means, the Interest Rates will continue to remain high. High Interest rates is never good for
economic growth.

Verdict:

Impact on Food Inflation

Have you heard of the term - "Minimum Support Price or MSP"?
This is something the government sets/declares every year as the price at which it buys grains
from farmers. This grain is then used by the government for all its various schemes. The
grains to be distributed under this Food Security Program too will be procured like this.
Minimum Guaranteed prices means, farmers will have more incentive to grow rice/wheat and
other grains covered under this scheme. This might result in Vegetable production getting
affected which will further affect the nations Food Inflation.

In the last 5 years, food inflation contributes to over 41% of our overall Inflation. So, by
subsidizing the price of rice, wheat and a few cereals, it might result in an unintended
consequence of other items becoming costlier which will result in overall higher food
inflation.
Verdict:

Impact on Overall Inflation:

An alternate to funding this scheme is for the government is to "Print Money". World History
is full of classic examples where governments resorted to printing more currency to fund its
cash requirements. This is never a good idea and will result in the country's overall Inflation
going higher.

Verdict:

Impact on Savings
Higher food prices mean higher inflation. Higher inflation means people will end up spending
a higher % of their income to meet their day to day needs. This will result in much lower
savings.

Verdict:

Impact on Economic Growth

Lower Savings and lower surplus income means - people will spend a lower amount of
money on consuming good and services and therefore the economic growth will slow down
further.
Verdict:

Impact on the Current Account Deficit:

We all know that Importing of Gold and Petroleum products is the biggest contributing factor
to our nations Current Account Deficit. Right?
The Food Security Bill guarantees food for the people covered under the scheme. So, if in a
particular year, the in-country production of either rice or wheat is not sufficient we would be
forced to import it. So, if we start importing rice, wheat or any other food grains, it will
further widen the Current Account Deficit.

Verdict:

Impact on the Rupee

The Rupee is bleeding left, right and center. It is falling freely and god knows when it will
stop. Anyways, lower savings and wider current account deficit will impact the rupee.
If India does not save enough money, it means that, we will have to borrow capital from
foreign countries/investors. When these foreign borrowings need to be repaid, it will almost
always be using dollars. This will put pressure on the rupee and lead to further depreciation
against the dollar.
On top of this, buying rice or wheat from the international market means, we will be paying
in dollars. This will lead to increased demand for the dollar and result in further depreciation
of the rupee.

Verdict:
Impact on Fertilizer and Power Subsidy:
In order to grow food grains, farmers use fertilizers and electricity. Both of these items are
already heavily subsidized for farmers. The procurement needs of the Food Security Bill will
result in intensive cultivation using more fertilizer and power, which will push up central
subsidies on fertilizer and state subsidies on power.
So, in order to procure enough food grains, the government will be forced to shell out more
subsidies for both fertilizers and power which again will leave a big dent in the nations
budget

Verdict:

ARTICLE 5 ON IMPLEMENTATION

Interim Budget 2014: Subsidy bill pegged marginally higher at Rs. 2.5 lakh crore

(PRESS TRUST OF INDIA | UPDATED ON: FEBRUARY 17, 2014 14:45 (IST))

New Delhi:As government seeks to roll out the food law, Finance Minister P Chidambaram
today sought to raise total subsidies on fuel, food and fertilizers marginally to over Rs. 2.46
lakh crore in the 2014-15 fiscal. The government has increased the food subsidy by a
whopping Rs.23,000 crore to Rs. 1,15,000 crore for 2014-15 fiscal mainly for
implementation of the National Food Security law.
According to the interim Budget proposals, subsidy bill on food, petroleum and fertilizers is
estimated at Rs. 2,46,397 crore for 2014-15 fiscal against Rs. 2,45,452 crore in the revised
estimates for this fiscal.
Interestingly, the revised estimates for this fiscal are higher by 11 per cent compared to the
budget estimate of Rs. 2,20,971.50 crore.
"Non-plan expenditure in 2014-15 is estimated at Rs. 12, 07,892 crore. Of this, the
expenditure on subsidies for food, fertilizer and fuel will be Rs. 2, 46,397 crore. This is
slightly more than the revised estimate of Rs. 2, 45,452 crore in 2013-14.," Chidambaram
said while unveiling the Interim Budget 2014-15 proposals in the Lok Sabha.
As much as Rs. 65,000 crore has been allocated for fuel subsidy, he added.
"We have this year (2013-14) absorbed the rollover of Rs. 45,000 crore from the fourth
quarter of 2012-13 (fiscal) and we will rollover only Rs. 35,000 crore from the fourth quarter
of this year into the next year," the Minister said.
On the Food Security Act, Chidambaram said, "Rs. 1,15,000 crore has been allocated for food
subsidy keeping in mind the government's firm and irrevocable commitment to implement
the National Food Security Act throughout the country."
The oil subsidies, given to state-run oil marketing firms like IOC, BPCL and HPCL for
selling diesel, domestic LPG to households and kerosene through the PDS system, below
cost, is estimated lower.
It is pegged at Rs. 63,426.95 crore for 2014-15 fiscal against a revised estimate (RE) of Rs.
85,480 crore in 2013-14 fiscal, the budget document said.
"Decrease is due to fewer requirements under compensation to oil companies' under
recoveries on account of sale of petroleum products," it added.
The food subsidy given to run the public distribution system is estimated to rise to Rs. 1.15
lakh crore next fiscal from the RE of Rs.92, 000 crore in 2013-14.
Food subsidy seeks to meet the difference between the economic cost of food grains and their
sales realization at the Central Issue Price fixed under the public distribution system (PDS)
and other welfare schemes.
Out of Rs. 1.15 lakh crore on food subsidy, the government has provided Rs. 88,500 crore for
the Food law.
Of the total fertiliser subsidy of Rs. 67,970 crore in 2014-15 fiscal, subsidy for imported urea
is pegged at Rs. 12,300 crore, domestic urea is Rs. 31,000 crore and sale of de-controlled
fertilizers (like phosphoric & potassic fertilizers) is Rs. 24,670 crore.

ARTICLE 6

( SOURCE: FORBES INDIA MAGAZINE ON 03 MAY, 2013)

The Food Security Bill (FSB), which had been in the works since UPA took office for the
second time in 2009, finally received the nod from the cabinet in March. But, contrary to
expectations, it was panned by many sections of the press. An editorial in The Indian Express
implied that the bill had a fundamental flaw, while the one in Mint explained why it will not
work. The bill received adverse reactions from the aam admi too, as was evident by the
comments readers of the Financial Press left on the website.

But the FSB is not an idea that the government came up with overnight. Its been debated
over several years and across several platforms. Then why is Indias biggest social welfare
policy measure facing such flak?

THE ORIGIN OF THE CAMPAIGN

The right to food campaign started when the Rajasthan unit of the Peoples Union for Civil
Liberties filed a writ petition in the Supreme Court in April 2001 demanding that the
countrys food stocks be used to alleviate hunger and malnutrition. The prolonged battle
between the PUCL and the Union of India led to many interventions, like instituting food
commissioners, to ensure universalisation of welfare schemes like mid-day meals for
schoolchildren.

Meanwhile, the UPAs first stint had achieved two very important results that propelled the
right to food campaigners to push forward their agenda: The government had passed the
National Rural Employment Guarantee Act (now the MGNREGA) and ensured that India
grew at over 9 percent for successive years. With the country riding at such a high, the
activists had asked the UPA a simple question when it took over the second time in 2009:
How can India be among the worlds fastest growing economies and yet have hunger and
malnutrition levels worse than that of Sub-Saharan Africa?

It turned out to be a potent argument and, despite much dilly-dallying, the UPA approved the
bill in March.

WHY SO SERIOUS?
But by now, the argument had lost its edge primarily due to the sharp deceleration in Indias
growth rate. From growing at an average of 9 percent between FY06 and FY11, India is
huffing and puffing to even touch the 5 percent mark now. Slower growth has meant a steep
fall in tax revenues.

The fiscal deficit is also a major concern and if India further slips on its promised 5.2 percent
growth rate in FY14, the credit rating agencies could downgrade the countrys investment
climate to junk status. If that happens, corporate India would find it harder, and costlier, to
raise loans for investment.

The government has passed it [the FSB] with great reluctance and obviously corporate India
is not very happy, says Biraj Patnaik, a senior campaigner for the right to food. Reason: The
bill is likely to cost the government Rs 1.25 lakh crore each year.

But this entire amount is not new expenditure for the government. India is already spending
close to Rs 1.16 lakh crore on schemes that are listed as entitlements under the FSB. For
instance, food subsidy (Rs 85,000 crore), mid-day meal (Rs 13,215 crore), Integrated Child
Development Scheme (Rs 17,700 crore) and maternity entitlements (Rs 450 crore).

So, the additional expenditure is around Rs 8,635 crore, an increase of 0.09 percent of the
GDP. But its impact on fiscal deficit is an old issue that had largely been overcome when the
growth was good. Opposition against the FSB now came from different quarters.

Hunger vs Malnutrition
The new reason for disapproval stems from the different ways in which hunger and
malnutrition are defined. Naysayers argue that eradication of malnutrition requires more than
just removal of hunger. Simply providing for the basic minimum food is unlikely to do
enough to improve Indias ignominious malnutrition levels. Food security is necessary but
not sufficient for nutrition security.

For nutrition, you need to focus on children and women. The FSB does take a step ahead in
that direction, though it could have done more on those fronts, says Reetika Khera, professor
at IIT-Delhi.

The other area of concern is increased government involvement when it comes to procuring
grains from the market. The fear is that the FSB will significantly raise the amount of food
grain procured from the market and distort agriculture prices in the process. The government
procures just under one-third of the total production. The bulk of food grain trade is in the
private sector and it will remain there. This is because the current allocation for the food
schemes covered by the bill is about 56 MT [million tonne] of grain; this will increase to
approximately 62 MTan increase of just four MT, says Khera.
Food Over Facts
Montek Singh Ahluwalia, deputy chairman of the Planning Commission, and considered as
one of those unhappy with the entitlement mode adopted by the UPA, settled the debate while
addressing students at IIT-Delhi recently. This is no longer about facts. This is about a moral
recognition that something is wrong. There is now a broad consensus (among policymakers)
and that is new.