A flawed approach to food security
Recent proposals on allocation of foodgrains abound in old ideas and contradictory economic explanations
Recent proposals on allocation of foodgrains abound in old ideas and contradictory economic explanations
The expert group constituted by the Prime Minister to evaluate and comment on the proposals of the National Advisory Council (NAC) on food security has finally given its verdict. The committee, chaired by C. Rangarajan, who also heads the Prime Ministers economic advisory council, has suggested that the National Food Security Act (NFSA) should only guarantee food to the below poverty line (BPL) households, and not to the above poverty line (APL) households. The latter should be provided foodgrains not as part of a legal entitlement, but through an executive order as and when grains are available. The committee has also suggested reduction in entitlements for APL households to 50% of what NAC had suggested.
It does not require much intelligence to understand that the Rangarajan committee proposals are nothing but a rehash of the existing public distribution system (PDS), with no change in entitlements. The expansion of the BPL category to 46% in rural areas and 28% in urban areas is also not the committees largesseit is a consequence of the government accepting the Tendulkar poverty estimates as official.
The only change is in lower prices for BPL households and higher prices for APL ones. Even this will benefit the poor in only a few regionsmost states already provide food to the BPL population at less than or equal to the price proposed by NAC and the Rangarajan committee. And these states dont claim to have changed the architecture of food security in the country. If the NFSAs purpose were only to change food prices, it would be better to do this through an executive order rather than a legislative act.
There are two major arguments that the committee has made to arrive at this decision. The first is that it differs with NACs assumption that the foodgrain off-take will be 95%. The committee suggests that the actual off-take be calculated at 100%. It has also faulted NAC for using a population estimate that is marginally lower than the projections used by it.
What would be the actual off-take? Nobody seems to have an answer to this hypothetical question. But historical and contemporary empirical evidence suggests both NAC and the Rangarajan committee are way off the mark.
The National Sample Survey Organisations consumption expenditure surveys clearly show that actual off-take has been less than 30% in the case of universal PDS as was the case before 1997. Even in Tamil Nadu, which has universal coverage and prices lower than the proposed NAC prices, the off-take has been less than 80%. In Chhattisgarh, with near-total coverage, the off-take is less than 50%.
The basis for assuming 100% off-take by the Rangarajan committee is the actual combined off-take of BPL and APL foodgrains by the states. What the committee seems to have forgotten is that the allocation for APL category households since 2006 is itself based on the off-take reported by states prior to 2006. The actual off-take of food grains for the APL category before 2006 was less than 30%. Accordingly, the allocations themselves were revised. Now using the same APL off-take to suggest that the actual off-take in case of APL households is 100% is at best a case of circular logic.
The second case made out by the Rangarajan committee is that increasing the procurement of foodgrains would put upward pressure on prices. Given the rampant hoarding of food grains, this may well be true. But it has little economic logic. Stocks of rice and wheat as on 1 January were 47 million tonnes, compared with the buffer requirement of 25 million tonnes. Prices are determined by the total demand and supply of foodgrains in the market, and so long as the government does not contribute to reducing supply by hoarding, as it is doing now, prices will remain unaffected. In fact, by procuring at market prices and selling at lower prices, the prices will actually fall.
Incidentally, the same government and the same set of advisers have advocated the opposite solution for other commodities. For both pulses and onions, one of the measures adopted by the government was to procure from the market and sell at lower prices through select outlets. This was claimed to reduce prices in the open market. When the same measure is expected to reduce prices for onions and pulses, how can it be expected to add to inflationary pressure in the case of rice and wheat?
However, there is a more fundamental problem that a targeted approach may face. And that is related to its complete reliance on the targeting mechanism. It is not unlikely that somebody who has been denied food because he has been wrongly identified as above the poverty line will go to court questioning the identification exercise itself. Since the Act will guarantee entitlements based on BPL/APL cards, the whole issue of identification cannot remain immune to judicial activism. How can one plan a guarantee on food entitlements when the very basis of the delivery mechanism is flawed? Given widespread gaps in BPL identification, this could easily turn into another nightmare for the government.
Himanshu is assistant professor at Jawaharlal Nehru University and visiting fellow at Centre de Sciences Humaines, New Delhi.
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