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Are we ready?

posted Dec 20, 2011, 1:43 AM by Puneet Goyal
Dec 20, 2011, 12.00AM IST
The cabinet clearing the food security Bill takes India a step closer to introducing a major welfare scheme. Extending subsidised food to more than two-thirds of the country's population, the programme will benefit the poor across the social board. The question is whether we're ready for launch, since the food entitlement project will face substantial challenges under present conditions.

For starters, subsidy will be delivered via the creaking public distribution system (PDS). Whilethe National Sample Survey says the PDS network provides grain to less than a fifth of the urban population and around a third of the rural,the Bill lays out an ambitious target of covering 50% of the urban and 75% of rural population.

The PDS's existing shortcomings of being poorly targeted and subject to large leakages will be exacerbated with the activation of the food security plan. Surely the latter should be channelled through alternative mechanisms of subsidy delivery like food coupons or cash transfers. Plus, for better targeting, identification of beneficiaries ought to be linked to the Aadhaar project.

There's also the question of grain availability. While the government claims the scheme will need 61 million tonnes, which is slightly higher than the 56 million tonnes estimated by the National Advisory Council, it is lower than the estimate of the Prime Minister's Economic Advisory Council of around 64 million tonnes. But other food welfare schemes must be subsumed under the programme; else, the total annual grain requirement will go up substantially. While the maximum grain procured in a single year is 57 million tonnes, there's the risk of the share of government procurement going up to more than a third of national grain production.

The scheme can negatively impact the working of wholesale grain markets and grain flows besides forcing the government to depend on large-scale and costly imports when grain production falls.

Finally, the costs need to be considered at a time the government's fiscal situation is precarious. Since the Bill proposes to supply grain at much lower prices to the priority segment - Rs 3, Rs 2 and Rs 1 per kg of rice, wheat and coarse cereals respectively - and at not less than half the minimum support prices to the general category, the subsidy will amount to Rs 1.5 lakh crore annually.

This is apart from huge funds needed to increase agricultural production or build storage space. It makes little sense to increase spending on such a massive scale when BPL families are yet to be identified and the government desperately needs to curtail the fiscal deficit. To actually deliver food entitlement, let's first get our logistics and resources in shape.