New Delhi: Differences between the National Advisory Council (NAC), headed by Congress party president Sonia Gandhi, and the government over the food security Bill have begun to narrow, but a suggestion by the agriculture ministry to offer cash to poor consumers in case sufficient foodgrain isn’t available remains a contentious issue.

“We do not have any serious objections to the recommendations of the NAC. But the ministry wants to have the provision for a cash component in case of a food shortage," said a top official in the agriculture ministry, who did not want to be identified.

Contentious issue: Traders at a wheat market. Ramesh Pathania/Mint

NAC, which sets the social agenda of the Congress-led United Progressive Alliance (UPA) government, has recommended that the government offer subsidized foodgrain to 75% of the country’s population—90% in rural areas and 50% in urban areas.

According to the NAC proposal, the priority households—46% in rural and 28% in urban areas—should have a monthly entitlement of 35kg of foodgrain at 1 per kg of millet, 2 per kg for wheat and 3 per kg for rice.

The agriculture ministry wants to include the provision to reimburse households with cash in case there is a shortage of foodgrain and the government is not able to provide the entire quantity through the public distribution system (PDS) for the entitled poor.

“If the storage is only enough to distribute 25kg each, cash could be provided in lieu of the remaining 10kg," the agriculture ministry official said.

N.C. Saxena, a former rural development secretary and a member of the NAC, said: “The government’s attempts for procurement for the PDS have so far been not honest. If the government ensures all measures, including a ban on exports to ensure better procurement, we can consider the suggestion as an exception. The procurement would have been better if the farmers had been paid minimum support price (MSP) properly, especially in the case of paddy."

But the activists who are working in the field of food security reject the idea.

“For a long time, the Central government and the Plan Panel have been pushing the idea of cash transfer. Its ulterior motive and ultimate aim is to withdraw from the food security scene and it will finish the PDS too. Once the PDS disappears, it will be the death knell for Indian agriculture," said Annie Raja, the general secretary of the National Federation of Indian Women, who has been actively campaigning for the food security legislation.

The agriculture ministry also has reservations about specifying the grains that will be distributed under the legislation. “Instead of mentioning millets, the legislation should refer to foodgrains only, because we are self-sufficient in the production of millets," the same ministry official quoted above said.

To the NAC’s suggestion that general households should have a monthly entitlement of 20kg at a price not exceeding 50% of the current minimum support price, the ministry in its draft note suggested that the foodgrain should be offered at less than 75% of the MSP in order to avoid pressure building in the open market.

The greater the difference between the price offered in the PDS and the open market, the greater are the chances of leakage of foodgrain from the PDS that would in effect lead to lower open market prices. That would be bad news for farmers.

A meeting convened by Prime Minister Manmohan Singh last week took note of the draft national food security Act and decided to wait for the suggestions by the Prime Minister’s economic advisory council, headed by C. Rangarajan, on the NAC’s plan.

According to the NAC proposal for the food security programme, expected to be a major flagship programme of the UPA government in its second term, offtake in the first phase of implementation would only be 85% of the foodgrain earrmarked for public distribution, and 90% in the second phase.

The NAC calculates that the requirement for providing subsidized foodgrain would be 49.36 million tonnes (mt) in the first phase and 55.59 mt in the second one, and the additional subsidy requirement would be 15,137 crore and 23,231 crore, respectively.

However, the agriculture ministry does not accept this argument. “We do believe that there would be 100% offtake for the programme once it is introduced," the official said.

Mint on 5 October reported that the department of food and public distribution had raised objections to NAC’s suggestions for the proposed law. It says the foodgrain required would be 63.54-76.94 mt and the subsidy cost would be between 86,643 crore and 1.14 trillion. Currently, the government spends 55,578 crore on food subsidies.