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Farmers' bodies flay food security Bill
-The Financial Express


Leading economists who fear that the cost of the food security law on the exchequer would be much higher than estimated by the government have a seemingly unlikely ally - farmers' groups.

A couple of national-level farmers' organisations have opposed the National Food Security Bill, saying it would "lead to nationalisation of agriculture by making the government the biggest buyer, hoarder and seller of foodgrains".

Farmers' representatives from a dozen states, led by Shetkari Sanghatana founder Sharad Joshi and Bharatiya Kisan Union's Bupinder Singh Mann, said the "nationalisation of agriculture" would "greatly distort the market mechanism and reduce the bargaining power of farmers". In a memorandum to Prime Minister Manmohan Singh, they have urged the government to stop what they call "the downslide of Indian agriculture".

"The food security Bill will significantly increase the fiscal deficit at a time when the Indian economy is not showing any sign of recovery. This will increase the pressure on the government to restrict the minimum support price, while keeping the selling price of subsidised foodgrains very low. The farmers will get squeezed both by the government procurement price and by the depressed market price in the short term," Joshi said in a statement.

The government has budgeted R90,000 crore for food subsidy during 2013-14, but officials told FE that the actual subsidy might touch R1,24,747 crore (including R10,000 crore for a scheme for lactating mothers) if the Bill is made an Act and implemented, which would be R23,800 crore more than the subsidy the government may have to bear if the Act isn't implemented in the next fiscal. This is at a time when the government targets to trim the fiscal deficit to 4.8% of GDP in 2013-14 from 5.2% in the current fiscal.

The Cabinet cleared the revised draft food security Bill on Tuesday, which is expected to be introduced in the current session of Parliament. The Bill provides legal entitlement for 5 kg of heavily subsidised food grains to each beneficiary per month, which would cover around 70% of the country's population. The beneficiary would get rice, wheat and coarse grains at R3, 2 and 1 per kg, respectively.

The farmers' groups said by offering the grains at heavily subsidised rates, the government "will take away the incentive for small and marginal farmers to grow foodgrain". "This will actually increase food insecurity, shortages and fuel food inflation, in a way similar to MGNREGS, which has added to labour cost without contributing meaningfully towards increasing agricultural productivity," Joshi said. The government needs around 61 million tonnes of grains a year to implement the Act, which is nearly one-fourth of the country's total foodgrain output.

Although the Bill is touted to be the UPA's biggest populist measure, several analysts have also expressed concerns about its impact on government finances. A team of experts headed by Commission for Agricultural Cost and Prices chairman Ashok Gulati says in a report that the government's stated expenditure of R1,20,000 crore annually in the the National Food Security Bill is merely the tip of the iceberg.

The report says the government would have to shell out as much as Rs 6,82,163 crore over three years to implement the Bill and would hurt the farm sector in the long run as well.

However, the costs projected by the experts include not just food subsidy burden, but the likely expenditure in the farm sector to ramp up production to cater for the need to procure more, and the cost of establishing a whole set-up as well as storage facilities, among others, to broaden the scope of procurement and distribution.