Food Security Bill

Even though it has already been passed, just the mention of the name “Food Security Bill” creates a heated discussion in any room. So here’s an attempt to provide a data-rich view of the main arguments against the bill, which I looked up for my own understanding.

1. It is too expensive, especially during a time of fiscal deficit

Critics claim that the cost of Rs. 95,000 crores (this is the official estimate) is too much at a time of fiscal deficit. The cost of the current PDS program is Rs. 72,000 crores, so the bill increases PDS cost by 32%.

The incremental amount of Rs. 23,000 crores represents a fraction of 1% of GDP and 3-4% of annual union budget.

Even if we include the implementation cost, the total (not just the incremental) estimated cost becomes Rs. 1,25,000 crores.  Others are claiming that the real cost will be double this number, but those are all “back of the envelope” type of rough calculations and also do not calculate the new incremental costs over and above the current PDS + ICDS costs.

Secondly, to these numbers in perspective, let us compare the cost of FSB to other subsidies.

The diesel subsidy costs us Rs. 1.6 lakh crores, of which 16% is used by passenger vehicles owned by middle class and elite, 4.6% by gensets and 2% by mobile towers.  Removing only the 22% of the subsidy that benefits the middle class would free up Rs. 40,000 lakh crores.  Yet no one is advocating that solution for ameliorating the fiscal deficit.

Tax breaks given to the gold and diamond industry was Rs. 60,000 crores last year.  Eliminating just these two subsidies would be more than enough to cover the incremental costs of the FSB over the current PDS costs.

2. Corruption and leakage

The PDS system has huge leakage: 40-60% by various estimates. So, if the overall costs increase, it is fair to assume that the leakage will increase in the same proportion.

But that does not negate the need for the Bill.  If zero- corruption was the bar we set for all government programs, we’d never spend a rupee on building roads.  Yet no one is advocating scrapping infrastructure spending.  Corrupt Indians have stashed $500billion or Rs. 25 lakh crores or roughly half India’s GDP in illegal foreign bank accounts. Coalgate scam itself diverted Rs. 2 lakh crores.

The real issue is designing greater transparency and governance into FSB and all government programs. 

3. Cash transfer is more effective than providing food

Proponents of cash payment say that it will save us the cost of handling food grains, but they don’t say how increase in income will result in either more expenditure on food or greater access to food or assure the availability of food on a regular basis.

They cite examples of Latin America where cash transfers have worked.  A comprehensive review by DFID of cash transfer schemes shows that cash transfers can a) reduce income inequality, b) increase ability to pay for health and education (assuming supply exists).  However, the report concludes that there isn’t sufficient evidence to show that cash transfers can improve “final outcomes in health or education” per se.  In all cases, such as the one in Nicaragua, the cash transfer was designed as a reward for attending nutrition workshops on breastfeeding and child nutrition, visits to health facilities and participation in preventive health programs.

Stand-alone cash transfers without the supply side interventions and complimentary program elements are known to be ineffective in creating nutrition outcomes.  Abhijit Banerjee’s book “Poor Economics” and other research shows that increased income does not necessarily result in increased expenditure on food, especially on nutritious food. 

Since the objective of FSB is “food security” it is important to provide more direct access to affordable food or to design an entirely new program along the lines of Latam programs. We’d need to figure out the cost of the comprehensive program and compare that to the FSB.

4. Nutrition versus Food

According to National Sample Survey Organization’s “Perceived Adequacy of Food Consumption in Indian Households” 2010, less than 2% of households in India go to bed hungry.  So why do we need this Bill?

Secondly, with 51% of children under 5yrs and 41% of women in rural India malnourished the real issue is malnutrition, not necessarily hunger.  Malnourishment affects physical health, making people prone to other forms of illness, missed days of work and even affects their mental capability.  According to latest research, effects of nutrition deprivation may last for at least two generations of children.

The current ‘food adequacy’ includes the impact of current PDS system.  By scrapping the FSB and maintaining status quo, we’d be removing only the changes in the PDS and some affiliated programs. 

So, do the changes in PDS take us any closer to better nutrition?

As far as I can tell, there is only one way in which the bill takes us closer to better nutrition: Inclusion of millets in PDS for the first time. 

The special entitlements for pregnant and lactating women, children under 6 which are being touted by many are the same as current ICDS standards already in place for food provided through aaganwadis and mid-day meals.  The main difference is that they have gotten rid of the “supplement” language which caused a great deal of confusion in implementation.

The Bill doesn’t go as far as the Tamil Nadu program which includes pulses and oilseeds or the Chhattisgarh program includes pulses, gram and iodized salt.  We can only hope that the state governments will add these elements to the central government.

Even though the Bill merely tinkers with the existing PDS and ICDS programs, it does bring some integration in thinking across these two programs, which is essential.

For those stating that we should do the FSB because it is not sufficient, it is like saying that let’s not bother starting treatment of a patient unless we can provide every treatment required. Clearly there is a need to start somewhere. And, millets are certainly a good starting point as they are cheaper and less perishable than vegetables and supplements.

In Summary

So it seems that the FSB takes us closer to better nutrition by including millets and integrating guidelines for PDS and ICDS.  And it adds provisions for improvements in implementation of PDS. 

Is the extra cost worth the incremental improvement?  Despite its flaws, I think it is worth it if it increases consumption of millets which are far more nutritious than wheat and rice. It might even lead to better market-oriented value chains for millets, which is something that we have lost due to the country’s focus on promoting wheat and rice cultivation.  And, as development economists repeated point out, India’s progress in terms of development indicators lags behind our neighbors and is not commensurate with economic progress.  Correcting this requires investment in nutrition security, education and health.

In the words of Jean Dreze, “The Bill is a form of investment in human capital. It will bring some security in people’s lives and make it easier for them to meet their basic needs, protect their health, educate their children, and take risks.”

This entry was posted in Agriculture and farming, Economics and public policy, Food and nutrition and tagged , , . Bookmark the permalink.

3 Responses to Food Security Bill

  1. Pingback: A different (and less heard) perspective on the Food Security Bill |

  2. Pingback: PDS impact on food security and poverty | Stirring the Pyramid

  3. Pingback: A different (and less heard) perspective on the Food Security Bill – Escape Velocity Consulting

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