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NAC plan fails to pass muster with ministry by Liz Mathew

The department of food and public distribution has rejected both proposals of the National Advisory Council (NAC) to provide foodsecurity, saying the government risked running up against supply constraints and taking on an unsustainable fiscal burden.

The rejection by the ministry of consumer affairs, food and public distribution means that both NAC, headed by Congress party president Sonia Gandhi, and the government will have to go back to the drawing board and come up with a fresh alternative.

NAC, the political interface between the ruling United Progressive Alliance government and the Congress, has been pushing for a Right to Food legislation.

One of the two proposals it made called for introduction of a universal public distribution system (PDS), initially for only India’s 150 poorest districts, that would offer 35kg of rice/wheat at Rs3 for 80% of the families in rural areas and 33% in urban areas. In the remaining districts, families below the poverty line and above it will be allotted foodgrain at different quantities and rates.

The second sought to extend the benefit to 42% of all below poverty line (BPL) rural families and 33% of all BPL urban families at the same price and, in addition, provide 25kg of rice/wheat at either Rs5 or Rs7.50 per kg to above poverty line (APL) families in rural areas; urban APL households would be excluded.

NAC estimated that the foodgrain requirement for the first option would be 70.4 million tonnes (mt) and for the second 70 mt. The associated subsidy would be Rs90,264 crore in the first instance, and Rs85,156 crore (at an issue price of Rs5) and Rs79,181 crore (at an issue price of Rs7.50), it said.

The food department has, in an internal note that has been reviewed by Mint, concluded that the costs had been under-estimated.

NAC’s calculations exclude some beneficiaries who currently access PDS, but the department of food says existing beneficiaries cannot be kept out.

According to the ministry, the foodgrain requirement for the first proposal would be 76.94 mt though it would be lower at 63.54 mt for the second option.

The subsidy cost is higher, at Rs1.14 trillion for the first option and Rs86,643 crore for the second. Currently, the government spends Rs55,578 crore on food subsidies.

The food department argued that the foodgrain procurement for the implementation of NAC proposals would be challenging because the average annual procurement during the last 10 years has been 43.7 mt and in the last eight years 38.2 mt.

“This could mean resorting to imports if we have to meet the requirements of food security under the law. In such a situation, the international prices of these foodgrains could go up if our import requirements are substantial,” said the note.

“Indian farmers could complain if imports are made giving higher prices for the imported foodgrains.”

The food department also maintains that the 150 poorest districts will have to be reselected because the existing definition adopted by the National Food for Work Programme is outdated.

NAC, in its last meeting on 24 September, decided to hold further meetings with government officials to “listen” to their observations before making its final recommendations on a Right to Food legislation.

A top government official said the food ministry suggested that the proposed legislation broaden the definition of foodgrain to include coarse cereals such as maize, jowar and bajra, besides rice and wheat.

The department also suggested providing financial support for helping the states to reinforce their PDS and food storage facilities, which would require at least three years.

Listing its observations on the NAC proposals, the food ministry note says the advisory body has not taken into consideration the current provisions for base-level stocks (now 2 mt), strategic reserve requirements (5 mt) and for market intervention operations (5 mt).

“There are anomalies in the population calculations made by the NAC,” the official cited above said. The official didn’t want to be named.

The note also points out: “Different poverty ratios have been taken into consideration by NAC under different options.”

The 25.7% urban poverty ratio estimated by the Suresh Tendulkar committee has been raised by NAC to 33%, it said.

Another apprehension raised by the ministry is over the lower issue price for rice and wheat—Rs5 or 7.5 per kg— for APL families. Currently, the issue price of rice is Rs8.30 per kg and of wheat Rs6.10 per kg.

The note pointed out that such lower issue prices for APL card holders would mean increased demand from APL families. It may not be “manageable with the present level of procurement and distribution machinery” and “this large differential in market prices would also give scope for leakages and diversion,” said the note.

Further, it says, the APL entitlement in urban areas of food deficit states cannot be taken away suddenly in the name of national food security.