Change the PDS, dont save it……Milind Murugkar
How food security laws could hurt the poorest
How food security laws could hurt the poorest
A new food security law, with as-yet unknown details, is supposed to empower the poor with a right to food. Supposedly, this will provide a statutory basis for a framework that assures food security for all: families below the poverty line (BPL) will be entitled to 25 kg of rice or wheat monthly, at Rs 3 per kg. Making food security a right is laudable. But the law, as structured today, leaves open the possibility of disastrous consequences for the poor, both consumers and producers of grain. The eagerness to get this done in the first 100 days is understandable. But a proposal with such far-reaching consequences must be debated adequately.
There are four important aspects of the law which could potentially harm the poor.
First, the existing public distribution system is still the channel for distribution. But the PDS is broken. Recent National Sample Survey data reveals that 70 per cent of the poor cannot access it at all. This is inevitable; creating a separate grain market for subsidised food offers alluring opportunities for black marketers. The greater the price difference, the more the incentive for leakage. Providing grain at Rs 3 will thus further increase leakage; and BPL beneficiaries might end up getting less than what they get at present.
Second, supplying cheaper wheat and rice through the PDS is unfair to producers of coarse, local cereals jowar, bajra, ragi and such which are in many parts of India grown by the poorest of the farmers. In Maharashtra, the home state of the Union agriculture and PDS minister, almost all grain farmers are also producers of jowar and bajra. In hilly tribal areas, local cereals are mostly finger millets. These coarse cereals are rain-fed crops; producers of these cereals work under harsh conditions, deprived of the benefits of electricity or fertiliser subsidies. (The lack of irrigation makes pumping redundant and fertiliser use minimal.) Supplying ever-cheaper wheat and rice through the PDS sucks demand away from these cereals, lowering their prices. (The fact that PDS grain is diverted to the open market does not change the effect.) Supplying grain at Rs 3 will further hurt these poor farmers.
Third, the proposed scheme increases the governments role in the grain market, as it has to procure more; which is bad news in the sense that the distortions created by such a market player inevitably harm competition. Farmers, thus, might have no option but to remain satisfied at the support price the government offers. They will also have to bear the brunt of the Food Corporation of Indias inefficiency. Besides, whenever grain prices rise in the market, the government will be tempted to impose curbs and bans to cool the market so that it can procure cheaply. Farmers will never receive unfettered access to world markets.
Four, if the legislation makes it mandatory for the government to physically delver 25 kg foodgrain to the poor, then hopes for reforming the food delivery system through smart cards, food stamps, or direct cash transfer, are shattered. The vested interests in the present system will make use of the same law to thwart attempts to replace it. Direct transfer of subsidy to the poor through these mechanisms has great anti-leakage advantages; it is essential that the law leaves scope for these measures to be implemented.
One can imagine what would happen if such a law were passed. The difficulties of implementation would lead to litigation from civil society organisations pleading for the court to uphold the right to food; judicial intervention will result in the formation of monitoring committees at different levels. The conflict and litigation will, however, amount to nothing for the poor; the Supreme Court and its monitoring committees cannot materially alter the incentives that drive corruption in the PDS. If the government is serious about ensuring the food security of the poor it should first convert the PDS into a system of direct subsidy transfer. At current market prices, providing 25 kg rice at Rs 3 per kg amounts to a subsidy of Rs 300 per month, per family. This could instead be transferred directly, through various mechanisms, such as smart cards or food stamps. The subsidy amount can be indexed to the inflation in grain price, thus ensuring poor consumers continue to receive the same amount of food as they would from the supply of 25 kg grain at Rs 3 per kg. By eliminating dual markets, the problem of leakages is also eliminated. The system of cash transfers is also non-distortionary, as it does not discriminate against producers of coarse cereals.
The food security law is the governments response to sustained, painstaking and zealous campaigns from dedicated social activists, a series of efforts that deserve nothing less than complete respect. But expecting empowerment of the poor through a law that does not fundamentally reform the present system is misplaced idealism.
The writer is a policy researcher associated with Pragati Abhiyan express@expressindia.com