3 min read.Updated: 25 Mar 2021, 09:31 PM ISTHimanshu
We must widen its coverage to feed the needy instead of letting subsidy reductions get the better of it
Subsidy reduction is a key aim of Niti Aayog’s proposal to reduce food-security coverage, but our subsidy level is not as high as it looks and the move could thwart efforts to achieve nutrition goals
A recent discussion paper by the Niti Aayog has suggested a reduction in the coverage of beneficiaries under the National Food Security Act (NFSA) from 75% of the population in rural areas to 60%, and from 50% to 40% in urban areas. The rationale: this will lower India’s food subsidy by ₹47,229 crore. This is not the only proposal to reform the NFSA. Earlier this year, the Economic Survey suggested hiking the issue price of foodgrains from the existing ₹3 per kg for rice, ₹2 per kg for wheat and ₹1 per kg for coarse cereals through the public distribution system (PDS).
The NFSA was passed in 2013 and implemented fully in 2015. While its reform is welcome after six years of implementation, such a process should have been based on an independent evaluation of its functioning in the context of the Act’s stated objectives. Unfortunately, there has been no such evaluation. Even the consumption expenditure surveys, which were used to evaluate the PDS, are last available only for 2011-12. There was one survey conducted in 2017-18, but it was junked by the government. Nevertheless, small surveys by private researchers and organizations have highlighted the reach and efficiency of the NFSA in improving nutrition and ensuring food security for India’s most vulnerable.
However, the current discussion on reform is based not on any objective evaluation of its functioning and efficacy, but on the necessity of reducing our food subsidy. Even that is a misplaced pursuit. The food subsidy for this year, at ₹4.22 trillion, is partly explained by payments of past dues to the Food Corporation of India (FCI). So is the case with next year’s food subsidy budget of ₹2.4 trillion. But the practice of using off-budget measures, such as loans extended to FCI by the National Small Saving Fund, was introduced by this government. Excluding loan payments for next year, the food subsidy bill stands at around 1% of gross domestic product, which is almost the same as it was before the NFSA was implemented, and in spite of the fact that the Act has expanded the number of beneficiaries substantially. But it is not just off-budget accounting practices that blurred the actual level of food subsidy, but also the practice of much higher procurement and piling up of excess stock. As on 1 March, FCI had 80.5 million tonnes of rice and wheat, which is almost four times the buffer requirement.
The bogey of the NFSA being a drain on the public exchequer is not borne out by facts. The high food subsidy is actually a result of the mismanagement of food procurement and storage by the government. Today’s reform proposals are regressive because they would negate the goal of expanding coverage under the NFSA by making it quasi- universal. Reducing the number of PDS beneficiaries will be a throwback to the era of targeted distribution, which was not just inefficient and leakage-prone, but also excluded a large majority of the poor who actually needed government support. Also, there is absolutely no mechanism or instrument to reduce the number of beneficiaries. The Socio-Economic Caste Survey is almost a decade old and there is no way one can identify the required number of beneficiaries. But such a step at this juncture will also be detrimental to the stated purpose of the NFSA, which is to provide nutritional security. The latest data from the National Family Health Survey (NFHS-5) has clearly shown stagnation and in many cases reversal of the gains made on the nutritional front. With the covid pandemic exacerbating the food security and livelihood situation, any attempt to dilute the NFSA in the name of reforms will further weaken food and nutrition security. In fact, given the mounting stocks of foodgrain with FCI, the need of the hour is to expand the NFSA and make it universal, at least until stocks are exhausted or our economic situation returns to normal.
Any short-sighted attempt at diluting the NFSA will not only reverse the gains made on nutrition and food security over the past two decades, but will also contribute to inefficiency. An obsession with our food subsidy has meant that important reforms needed of the NFSA have hardly found any takers. A better way to make the NFSA more relevant is to include essential nutrients, such as pulses and edible oils. Since India is a net importer of both, bringing them under the NFSA will increase productivity through better incentives and also help ensure nutritional security. The reforms should focus on strengthening the NFSA and its links with the agricultural sector, and not on diluting the hard-won right to food in the country.
Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi