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Resource centre on India's rural distress
 
 

Food Security Bill on shaky turf -KP Prabhakaran Nair
-The New Indian Express


In 1948 when the United Nations passed the covenant ensuring the right to food, vis-à-vis the right to proper livelihood, to which India became a signatory, it did not envisage that the whole issue would be caught up in such an imbroglio - political and economic - as one witnesses today. The original covenant in article 25 ensures the "right to work and livelihood" and right to food was only an ancillary issue. But, the implication was always there. It is such a shame that more than six decades after independence, we still are dabbling with an issue that is so very vital to the very existence of India as a sovereign nation.

There are very crucial issues related to the Food Security Bill (FSB) that is in Parliament now, pending passage. Whatever disagreement on the FSB, because of political expediency which drove it, the magnitude of the fiscal burden that it would impose on the national exchequer cannot be lightly brushed aside. Data from the Reserve Bank of India (RBI) clearly show that the food security bill will lead to empty coffers.

India has already recorded a gross fiscal deficit (GFD) of Rs 5,20,925 crore (5.2 per cent of Gross Domestic Product, GDP) in 2012-13, which is expected to increase to Rs 5,42,499 crore (4.6 per cent of GDP) in 2013-14. And the food subsidy, according to budget estimations, will increase from Rs 85,000 crore to Rs 90,000 crore over this period. The expert committee headed by C Rangarajan had indicated in 2011 that the cost implications of the FSB would be quite large. The Commission for Agricultural Costs and Prices (CACP) provided a starkly high estimate, meticulously calculated in its discussion papers released in December 2012 and May 2013. CACP estimates an expenditure of Rs 6,82,183 crore in the first three years of launching the FSB, with Rs 2,41,263 crore in the first year itself. If the scheme is initiated in 2013-14, which the United Progressive Alliance (UPA) is in a great hurry to, the GFD of the central government would shoot up to 6.7 per cent of the GDP, a level reached in 1993-94. This is only an optimistic level, given the lackadaisical performance on the industrial front. What additional burden the FSB would leave on India's economy is anybody's guess. Given the grim national industrial production, depressing external environment and International Monetary Fund forecasts, revenue from direct and indirect taxes could be lower than budget estimates. India's industrial production contracted 2.2% in June, more than expected from a year earlier.

International investors and rating agencies closely watching the Indian economic scenario and the fiscal trends will be unforgiving in their decisions, which will ultimately adversely impact foreign investment in the country, especially reliable foreign direct investment (FDI).

To add to fiscal burden, fiscal health of some states, irrespective of the party in power, is clearly shaky. RBI data are clearly worrisome. These figures exclude impact of government guarantees, which every state government has extended. Hence, initiating the FSB in select states will spiral the nation into competitive political populism, given the election year, and may imply an irreversible nosedive into the country's fiscal abyss. The FSB needs reconsideration in view of the recently released National Sample Survey Organisation data showing that population below poverty line has declined from 37.2 per cent in 2004-05 to 21.9 per cent in 2011-12.

To meet the government's target, New Delhi has to procure a lot more grain from farmers, and, perhaps resort to imports as well. To be self-sufficient, farmers must be ensured a definite incentive to produce more, reflected in higher procurement prices and access to better farming methods. The latter is a big question mark, despite the country's heavy investments in agricultural research. Look at the varieties of principal cereals like rice and wheat. Each year an agricultural varsity or research institute supported either by the Indian Council of Agricultural Research or state governments claim that so many new varieties have been released for commercial cultivation by the Central Varietal Release Committee. A critical appraisal shows they differ from one to another only marginally. There is no variety that stands out spectacularly. When the super cyclone "Aila" swept the Sunderbans in eastern India in May 2009, thousands of hectares of rice were ruined overnight, and the area was completely submerged in salt water. Traditional farmers who had sown three salt-tolerant rice varieties from the meticulous collection of Dr Debal Deb, a very committed rice agronomist working in a sleepy hamlet in Odisha's Rayagada district, only could harvest some rice following the winter. All the so-called "miracle hybrid" rice varieties being peddled by research "experts" were down under the water.

The Rangarajan committee constituted by the PMO to "review" the National Advisory Council's version of the FSB had suggested the government should procure only 30 per cent of the country's total food (grain) production from farmers, and anything more than this will result in "distortion of food prices in the open market". Against the backdrop of the country's lackadaisical R&D efforts on the food front this is wishful thinking!

Ironically, the UPA is yet to pay farmers market prices, leave alone above them. Assuming the UPA does it for smooth FSB passage, the G33 proposal is unlikely to gain any traction at the World Trade Organisation (WTO) negotiating table. The European Union, led by France, is unrelenting to bring down agricultural subsidies. The UPA has finally realised that the FSB cannot work without resolving both these concerns. Its hectic efforts to curry favour with the WTO will be unsuccessful. The US will staunchly oppose the G33 proposal at the forthcoming Bali meet in December. Without WTO's sanction, India cannot incentivise its grain farmers, without stumbling on its international commitments. If India determinedly goes ahead, the West is certain to raise the crippling trade counter measures. With the EU-India free trade agreement waiting to be inked, Europe will push through its cheap import of agricultural and dairy products into India, and, our farmers will be crippled economically - a very daunting scenario.

Admittedly, the FSB has lofty intentions, but New Delhi has to grapple with serious economic implications that go with it. I have only narrated the most worrying ones. Political populism is no substitute to down-to-earth pragmatism.

(The author is an international agricultural scientist and can be reached at drkppnair@gmail.com)