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LATEST NEWS UPDATES | Food Security Sans PDS: Universalization Through Targeting? by Smita Gupta

Food Security Sans PDS: Universalization Through Targeting? by Smita Gupta

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published Published on Oct 31, 2010   modified Modified on Oct 31, 2010

The case of the Food Security Bill gets curiouser and curiouser.  What started off as a fight between universalization and targeting has ended (or so it would seem) in a complete victory in the National Advisory Council, Government of India (NAC) for targeting through universalization (if such a thing was possible), with the honourable exception of Prof Jean Dreze, who has to be commended for his ‘note of disagreement’. On 30th August, 2010, the Working Group of the NAC had recommended ‘universalization with differentiated entitlements’, dividing the poor into two categories, 42% in ‘antyodaya’ and the rest in ‘aam’. They found the best way to kill a Bill; make it so complicated that it is completely unworkable in practice.

A complicated Bill also means that there is immense scope for bureaucratic intervention and interpretation, with a high degree of arbitrariness. Too much power gets vested in the hands of the central government since an Act of this kind will leave more and more provisions to the Rules, where the executive has immense discretion and essentially needs to notify each decision without passage by the legislature. Often, Rules are in variance with the intent of Parliament.

This is precisely the direction in which the highly awaited food security bill is headed in the NAC. When the initial attempts by Government to target food security to a small section of India’s hungry people met with stiff resistance, the Government decided to be more innovative and instead of an openly exclusionary approach, it decided to obfuscate entitlement in a confusing labyrinth of entitlements, categories, prices and phases. The ‘Gist of Decisions’ taken by them on 23rd October 2010 rechristens BPL as ‘priority’, APL as ‘general’. It increases the percentage of priority households for rural areas by 4 percentage points and for urban areas by 2 percentage points when compared to Tendulkar Committee estimates. The inter se share of each state is to be in accordance with the discredited Planning Commission ratios. To these households, it gives 35 kgs rice, wheat or millets at Rs 3, Rs 2 and Rs 1, respectively. Thus, the Antyodaya entitlements are now to be given to all priority households. The general category households will comprise 44 per cent of the rural households and 22 per cent of the urban households, and will be entitled to 20 kgs per month at half the Minimum Support Price (MSP). Thus 90 per cent rural households and 50 per cent urban households are to be covered with unequal and differentiated entitlements. The mechanism and criteria for their identification/selection is left once again to the prime architect of the present disastrous system, namely, the Central Government.
 
In a country where a whole range of existence at sub-optimal levels of food consumption occupy the space between life and death, the argument in favour of a universal system of food security is so compelling that nobody, not even the most parsimonious fiscal expert, can refute it. The Government has always spoken about ‘food security for all’. This is not surprising since endemic hunger continues to badly affect a large section of the Indian people. The International Food Policy Research Institute (IFPRI)’s Global Hunger Index (GHI) places India in the category of nations where hunger was ‘alarming’, ranking 66 out of the 88 developing countries. IFPRI estimate of the hunger index for the17 major states in 2008 (more than 95 per cent of the population of India), put 12 into the ‘alarming’ category, and one into the ‘extremely alarming’ category. High levels of hunger are seen even in high growth states. Expectedly, the backward Eastern and Central region has the worst performance.
 
80 per cent of the rural population, 64 per cent of the urban population, and 76 per cent of the total population suffer from inadequate calorie and food consumption. More than half of India’s women and three-quarters of children are anaemic, with incidence among pregnant women an even higher 59 per cent. The proportion of underweight children remains at around 48 per cent for the past 20 years. 30% infants have low birth weight. One in every three adult Indian has a body mass index (BMI) below 18.5 indicating chronic energy deficiency (CED). The obvious strategy to tackle hunger and malnutrition is to universalize and strengthen the Public Distribution System by making adequate food available at affordable prices. The Government must scrap targeting; universalize the PDS and delink entitlements from the Planning Commission’s wobbly poverty estimates; include commodities like pulses, sugar, cooking oil and kerosene at subsidized rates; incorporate all food and nutrition schemes of the Central Government such as the mid-day meal scheme and ICDS nutrition programme in the proposed legislation. But NAC does not recommend this. Why?
 
“It would be so nice if something made sense for a change.” Why these miserly provisions that are not in line with what is required? When the experience with the Targeted PDS has shown that faulty exclusion and inclusion abound, and the exclusion a direct violation of the right to life, why would any serious scholar, policy maker and activist agree to targeting?
 
There are four ‘infeasibility’ arguments against universalization.

1.  Supply constraint: production and availability of grain is not enough to match the potential demand of a subsidized universal system

2.  Financial constraint: a universal scheme with subsidized grain is too expensive and unaffordable since the Government does not have enough money

3.  Governance constraint: the PDS is already ‘groaning’, ‘overburdened’, ‘inefficient’, ‘costly’ and ‘corrupt’, and expanding it will lead to its imminent collapse

Let us begun with the ‘production’ argument. The most important point is that neither production nor procurement are rigid or fixed and are both highly responsive to government policy and intervention. India is far from reaching the upper limit of either, and the scope for reducing the slack is enormous.

Availability of foodgrain is an essential prerequisite for food security. Unlike what the Government proposed in the note prepared by the food ministry, compulsory procurement and imports are neither necessary nor desirable. For universal entitlements, self sufficiency in food production is necessary at the national level, is highly desirable at the regional level and is beneficial at the local level. Roughly a hundred million tonnes of cereals are required for a universal PDS (with 80 per cent off take and 35 kgs per household), which is 57% of total production net of seeds and wastage. Currently, procurement is about 30% of production. Given the geographically unequal concentration of production and procurement in India, most of this is from 4-5 states. Expanding guaranteed procurement to all states and crops, announcing cost-covering MSP in advance, strengthening the decentralised procurement scheme, building storages and godowns in many more places, giving incentives to local doorstep procurement and making timely payments to farmers are simple measures to increase procurement.

These are of course steps to be taken immediately. In the medium term, it is essential to improve production and productivity of food production through public investment, provision of extension services, inputs at controlled prices, appropriate land use policies with guaranteed fair prices for farmers through a stronger network of geographically dispersed procurement centers. A special package for adivasi farmers and dryland farming will encourage the production of pulses, millets and coarse grains suited to dry and non-irrigated land.

In any case, the ground reality is not of a supply-constrained system but excessive stock-holding! The fact is that the Government is once again holding 60 million tonnes, well over the buffer norms. Since perverse fiscal conservatism does not permit its distribution, the holding in excess of storage capacity (roughly 15 million tonnes) is lying in the open, and often rotting even as vast sections go hungry. Since targeting is not going to reduce these stocks, and Rabi procurement is likely to be high due to a bumper crop, the bizarre situation of hunger amidst overflowing stocks will persist.

This has caused embarrassment, politically and from the judiciary, prompting the central government to accept the higher Tendulkar estimates on poverty, and increase APL allocations. The current stock and supply situation is more than comfortable, set to improve after rabi. This offers a golden opportunity to argue for universalization by distributing a minimum quantum of food at affordable prices to larger numbers across the country, and in the process to expand the PDS. Those who want to reduce subsidies will of course argue that foodstocks should be reduced through open market sales and exports and future procurement should be reduced sharply along with targeting only the poor. This has to be resisted because as far as money is concerned, it is entirely a question of prioritization.

Compared to many advanced countries, India’s tax-GDP ratio is very low (around 18% compared to 28% for USA and around 45-50% for Scandinavian countries). Compare this to the tax foregone by the Central Government on Corporate Income Tax, Personal Income Tax, Excise and Customs at Rs.5,02,299 crores in 2009-10 (79.54% of the aggregate tax collection), and Rs.4,14,099 crores in 2008-09 (68.59% of aggregate tax collection)(the budget documents say that this is an underestimation). This is over ten times the current food subsidy bill and four times the requirement for a universal PDS with 35 kgs per household at an average price of Rs 2 per kg.

It is the fiscal concern to reduce subsidies that has led to the pricing policy that links the MSP or cost of acquisition to the issue price, to sell the food at some proportion of the economic cost. However, food security has two aspects, production and consumption. Farmers or producers need to cover their cost of production and if farming is to once again become a viable activity, profitability has to be maintained through assured procurement. Consumers on the other hand are constrained by their ability to pay, and prices for them have to meet the yardstick of affordability. If consumer affordability and producer profitability both have to be ensured for food security, the two prices cannot be the same.

There is no doubt that the PDS is very weak in some parts of the country. The solution that several Government economists offer is to go in for direct cash transfers or food coupons with biometrics and UID to plug leakages. Women are considered to be more efficient agents for these transactions due to their patriarchy-driven responsibilities. This ignores the problem of exclusion and inflation. Destroying an admittedly problematic PDS does not put food on the table. The obvious solutions to inadequacy, inefficiency and corruption are to increase infrastructure, accountability and reform the PDS through various measures. This cannot be used as an argument against the entitlement. After all, massive and unimaginable corruption did not stop the Commonwealth Games or defence deals or large infrastructure projects. A few Committees are set up, and the loot goes on unabated, in the ‘public interest’. So why does the fear of corruption only become an effective roadblock for food security?

Therefore, neither the fiscal nor the supply nor the governance constraint is operational and an expanded PDS can in fact boost both production and growth and hence government finances. Recently, a rather odd argument against desirability of universalization has been attributed to the UPA Chairperson.
 
4.   Political constraint: it is difficult to explain to the poor why the rich are getting the same

This is a rather pathetic attempt at using an unfounded psycho-sociological thought attributed to the poor to undermine their interests! The poor are not vindictive, perverse or self-destructive. If they get adequate and affordable food, they are unlikely to grudge someone better off getting the same. They know from experience that targeting subsidies in an unequal and hierarchical system creates incentives for the elite to fraudulently garner the benefit, which they do. They know that there are so many people who need food that selecting makes little sense. So it is better to include everyone since the exclusionary system will only work against the poor.

It is therefore time that the NAC and the Government stop prevaricating by putting forward specious arguments against a universal bill and instead use the current food stocks and the forthcoming rabi crop as an opportunity for full-fledged food security.

(The author is a Senior Fellow at Institute for Human Development, New Delhi)

Pragoti.org, 31 October, 2010, http://pragoti.org/node/4196


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