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Food Security Bill-Hope for the Hungry or Just Hype-VRK100-05Jul2013

Food Security Bill-Hope for the Hungry or Just Hype-VRK100-05Jul2013

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RamaKrishna Vadlamudi, Hyderabad, analyzes the impact of Food Security Bill, promulgated by the President on 5Jul2013. This write-up analyzes the impact of this bill.
RamaKrishna Vadlamudi, Hyderabad, analyzes the impact of Food Security Bill, promulgated by the President on 5Jul2013. This write-up analyzes the impact of this bill.

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Published by: RamaKrishna Vadlamudi on Jul 05, 2013
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10/14/2013

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Rama Krishna Vadlamudi, HYDERABAD 05 July 2013 
www.ramakrishnavadlamudi.blogspot.com 
As the cliché goes, India is a kaleidoscope of contrasts. On the one hand you’ve plenty of food grains rotting in government warehouses and on the other millions of hungry andmalnourished mouths have been craving for two square meals a day.Amidst such chaos, the Union Cabinet on 3 July 2013 approved an ordinance on theNational Food Security Bill (NFSB) and the President has since given his assent for theordinance. This bill will have to be ratified by the Parliament. This write-up aims toanalyze the issues concerning the NFSB and its consequences.
The Government Version:
The Government of India enlists the objectives of the bill as:
 
Up to sixty-seven percent of the population would be provided a uniformentitlement of five kilograms per person per month at highly subsidized prices of Rs 3, Rs 2, Rs 1 per kg for rice, wheat, or coarse grains respectively
 
This is a legal right for each individual in the eligible families—covering 75% of the rural population and 50% of the urban population
 
An amount of 61.23 million tonnes of food grains is needed annually forimplementing this programme (as per current estimates)
 
The subsidy cost to the government is Rs 1,24,700 crore during 2013-14
 
This will be done thro the current Targeted Public Distribution System (PDS)
 
There will be a special focus on nutritional support to women and children
 
The eligible households will be identified by the respective state governments
The Other Version:
Before discussing the merits of the Food Security Bill, let us examine the track record of the PDS, through which the government is aiming to provide food security. Every Indianknows how effective the PDS is in distributing subsidized food to the needy. PDS is amiserable flop. This distribution system is highly corrupt and a substantial portion of thepublic money is swallowed by fair price shop traders, corrupt officials, etc. Only a smallpart of the benefits reaches the intended beneficiaries. The leakages from the PDS havebeen well documented by various auditors and other government arms.
 
 
Rama Krishna Vadlamudi, Hyderabad 05 July 2013 www.ramakrishnavadlamudi.blogspot.com 
Page 2 of 3There is no doubt that unless the PDS is overhauled completely, all the loopholes areplugged and it is made more effective, providing food security to the millions of population will remain a mirage—despite the stated intentions of the government.However, some states seems to be more effective in providing food security through thePDS—notable examples being Chhatisgarh, Kerala and Tamil Nadu.
Problem of Buffer Stocks, Storage and Transportation:
To meet the annual requirement of food security bill, we need to keep 61.23 milliontonnes of food grains as operational stocks. In addition, we need to have strategicreserves for meeting any output shortfall—arising out of drought or floods or transportproblems. It may be recalled that in 2002-03, total output of rice and wheat dropped by28.5 mt (absolute change) due to drought. Such an output shortfall will lead to severeproblems in implementing food security.As per CACP, the strategic reserves have to be kept either in physical form or in the formof foreign exchange reserves. Foreign exchange reserves are necessary to import foodgrains during emergencies. So, we need to keep aside some portion of foreign exchangereserves exclusively to meet the import (if any) of food grains.The current buffer stock norm (for rice and wheat) is 31.9 mt as of 1
st
July each year. Ouractual stocks as on 1.7.12 were 80.2 mt. It is estimated that the actual stocks as on 1.7.13would be about 82.2 mt. This is against the available covered storage capacity with FCIand State agencies of 53.4 mt. This means that we have only 65 percent covered storagecapacity—53.4 mt storage capacity versus the required 82.2 mt. So the governments havecompletely failed in providing the required storage capacity.Indian Railways is unable to provide enough rakes to transport the food grains across thebreadth and length of the country. On this front also, the government’s failure is clear.
Distorting the Market Dynamics:
Large-scale public procurement will drive the private sector out of the market. The NFSBmay lead to some unintended consequences—such as higher support prices, rising foodprices, higher labour and input costs, etc. This means that the market prices of food grainswill be largely determined by the government procurement and PDS requirements.
Actual Cost of the Bill:
Moreover, the total subsidy cost for the NFSB will be Rs 2,00,000 crore per annum andnot Rs 1,25,000 crore as claimed by the government. This has been stated in a discussionpaper (No. 6 prepared by Ashok Gulati and Surbhi Jain) put out by the Commission forAgricultural Costs and Prices, or CACP, under the Ministry of Agriculture.

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