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LATEST NEWS UPDATES | Problems with the Food Bill by Arvind Panagariya

Problems with the Food Bill by Arvind Panagariya

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published Published on Jan 1, 2012   modified Modified on Jan 1, 2012

While some may view the food security Bill as the instrument of combating poverty, this distinction belongs to the National Rural Employment Guarantee Scheme, the flagship anti-poverty programme of the United Progressive Alliance government. The proponents of the food security Bill at the National Advisory Council have promoted it as the instrument of fighting widespread and rising hunger, instead.

But what is the empirical basis of the claims of widespread and rising hunger in India? Surely, we cannot go by the claims of the Food and Agricultural Organization, World Bank and many NGOs who themselves prosper from propagating the view that India and Africa suffer from ever-rising hunger and poverty. It so happens that successive expenditure surveys of the National Sample Survey Organisation (NSSO) have asked Indian households whether they have had enough to eat throughout the year. The proportion of those replying in the negative was a high 19% in rural and 7% in urban areas in 1983. But the proportion has steadily shrunken, dropping to less than 3% in rural and less than 1% in urban areas in 2004-05.

In what sense then does India suffer from widespread and rising hunger? In their support, the proponents of the food security Bill point to the decline in calorie and protein consumption intake and rise in fat consumption over the years. According to the NSSO, the per-capita calorie consumption across all individuals fell from 2,266 to 2,047 between 1972-73 and 2004-05 in rural India, and from 2,107 to 2,020 in urban India over the same period. A similar trend has been observed in protein intake while the reverse trend has obtained in fat intake.

This decline in calorie consumption is, however, reconciled with the sharp decline in the proportion of individuals reporting lack of food once we recognise that economic development has reduced the need for calorie consumption. Thus, increased mechanisation in agriculture and construction improved means of transportation and the shift away from physically-challenging jobs has reduced physical activity. Simultaneously, better absorption of food following improved epidemiological environment means that less calories must be consumed to produce a given amount of energy. Improvements in adult height and all other vital health indicators such as life expectancy, infant mortality and child nutrition reinforce this argument.
Even so, let us be generous to the proponents for a moment and accept that hunger, as they wish to measure it, has risen and is widespread. The million-dollar question then is whether the food security Bill will provide the necessary correction. A moment’s reflection shows that the answer is an unequivocal no.

The Bill entitles the poor to 7 kg of grain per person per month at prices of Rs. 1, Rs. 2 and Rs. 3 per kg for coarse grain, wheat and rice, respectively. So, if I were someone living in abject poverty in Rajasthan, what will be my response?

Each month, I will claim 35 kg of rice from the ration shop for five members of my family at the total cost of Rs. 105. I will then sell this rice at Rs. 25 per kg for Rs. 875 in the open market, buy the usual 25 kg of coarse grain my family consumes in the open market for Rs. 250 (at Rs. 10 per kg) and net the handsome profit of Rs. 520. I would then use the profit to send a child to the neighbourhood private school and perhaps buy myself a little extra liquor to celebrate!

While the proponents of the Bill may harbour the illusion that the poor will consume what they buy at the ration shop, you can count on the poor themselves being a lot savvier: they will demand at the ration shop their entire entitlement in rice (since it carries the maximum subsidy) and then convert it into whatever consumption basket they desire in the open market.

Therefore, if the government is serious about offering the poor the grain of their choosing as in the Bill, even assuming zero leakage, it better be prepared to procure 41 million tonnes of rice per year to fulfil its promise to 490 million individuals in ‘priority’ households alone.

There is clearly a mismatch here between the objective of pushing calorie consumption and the instrument chosen. Given that calorie consumption has declined at all income levels in the face of steadily rising incomes, lack of affordability is not behind the decline. Besides, the decline has taken place in the presence of an extensive public distribution system. Todate, the groups pushing the food security Bill on the basis of reduced calorie consumption have not explained why the food subsidy in this Bill will reverse the process while exactly the opposite has been the case under the existing public distribution subsidy. The fact of the matter is that subsidised grain, which can be readily converted into cash in the open market, will do precious little to alter the consumption pattern of the beneficiaries.

Add to this the possibility that the real nutrition problem for many may be low protein and high fat intake rather than low calorie consumption. Therefore, while food subsidy may make us feel good, it is scarcely the answer to the problem at hand.

The government needs to separate the objectives of transferring purchasing power and persuading people to opt for the right consumption basket. The latter requires nudging the public toward a more nourishing diet and, more importantly, getting wholesalers and retailers to fortify various foods with nutrients in ways that people find appealing.

The Economic Times, 28 December, 2011, http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETD/2011/12/28&PageLabel=14&Enti


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