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Food law delay talks grow as political differences persist by Prabha Jagannathan

The food ministry seems to have given up the hope of seeing the Food Security Bill passed into a law this financial year. But the delay in the rollout of one of the government's most ambitious welfare schemes will surely bring joy to mandarins at the North Block , who have been battling to rein in the government's expenditure.

The food security law, which envisages subsidized grains for at least 90% of rural and 50% of urban households, would have definitely added to the government's mounting subsidy burden at a time when its revenues are headed for a squeeze.

"Realistically speaking, we will be very happy if the Act can be implemented at least for the last three months of this year," a senior official at the food ministry said. "Truth is it may not be possible until the next financial year."

The government has been trying hard to build a political consensus on the contours of the proposed law, but even if succeeds in the task, putting in place the institutional framework for the law will take time given the scale of grain movement envisaged.

The government has already faced a tough time in trying to evolve a middle path after a panel appointed by Prime Minister Manmohan Singh opposed the suggestions made by the Sonia Gandhi-led National Advisory Council (NAC).

The panel, headed by the Prime Minister's Economic Advisory Council Chairman C Rangarajan, had termed the law proposed by the NAC as too ambitious and called for a scaled down version. The NAC had proposed to extend the benefit of food security to 75% of India's population by the final phase of the scheme, but the Rangarajan panel suggested that only 41% of the population should be covered.

An empowered group of ministers set up to resolve the issue is expected to largely endorse the law suggested by the NAC. Even if the law is approved by the cabinet and introduced in the Parliament, it is likely to be referred to a standing committee for further deliberation.

The government may also decide on a phased rollout of the scheme in the current year, beginning with the country's poorest 150 districts.


A delayed rollout suits the finance ministry given the funds constraint it is facing and the impact the proposed law would have on the already high food inflation.

The law suggested by the NAC would require at least 75 million tonnes of grain in a year, according to the Rangarajan panel. At that level, the Centre would have to procure over 35% of the total marketable grain surplus as against 29% it buys at present, a food ministry official said. Such a high procurement could push inflation further up.

"A larger procurement has the danger of distorting the food prices in the open markets," the Ranagarajan panel has warned.

India's food inflation has moderated from over 20% at the beginning of the year to about 8% at present, but it is still considered way above the government's comfort zone.

Adelayed launch of the Food Security Act would help the government keep its expenditure low in a year that could be heavy on its finances. The Centre is expected to lose.`24,000 crore in the current year because of the duty cuts on crude and fuel products it announced last month.

Most experts say the government is unlikely to meet its fiscal deficit target of 4.6% of gross domestic product (GDP) in 2011-12. In the first two months of the year, the government has run a deficit of.`1.7 lakh crore against a budget estimate of .`4.1 lakh crore.

The government has provided about .`60,000 crore towards food subsidy in the current year. This figure would rise to over .`85,000 crore in the first phase of the food security scheme, according to the Rangarajan panel's estimates.