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Food Security Report
Food Security Report
Food Security Report
The paper identifies problems of poor offtake and leakages in the PDS as major cause of Food Insecurity
in India and analyses the Food Security Bill. The Paper concludes that expenditure on food for the poor
will increase with the passage of the aforementioned bill.
Introduction
The paper identifies the job of the government as the provider of food security. With this premise it
analyses the PDS system and brings out two main reasons for failure of the PDS namely low offtake and
leakage. The paper then goes on to analyze the Food Security Bill which for the first time makes the
government guarantee Food Security. The paper after going through the draft bill, the NAC
recommendations and the C. Rangarajan committee report raises questions whether the Bills intentions
to provide Food Security. The paper then goes on to analyze the effect of passage of the Bill on the
expenditure of households to show that the passage of the Bill would actually raise the expenditure on
food. Finally the paper suggests a way to Finance the extra expenditure the Government will incur due
the passage of the bill noting that the passage of the Bill in its current form as fate accompli.
Contents
Abdullah’s Part............................................................................................................................................4
Leakage in PDS.............................................................................................................................................5
Food Security Bill.......................................................................................................................................11
Effect of the passage of the Food Security Bill on Individual Households..................................................14
Conclusion.................................................................................................................................................21
Recommendations.....................................................................................................................................22
Abdullah’s Part
Leakage in PDS
The Public Distribution System which is supposed to provide food security to vulnerable sections of the
society has failed to carry out its mandate. This has been due to predominantly due to reasons
1. Targeting Errors
These errors are due to errors in targeting i.e. proper identification of the beneficiaries
2. Malpractices
These are essentially malpractices like corruption or diversion of the food that is meant to reach the
poor
The Planning Commission report on the implementation of PDS explains the targeting errors in detail.
These errors can be classified as
1. Exclusion Error
2. Inclusion Error
The proportion of ration cards held in the name of real beneficiaries by non beneficiaries
Estimates of Errors
2. Distortion of incentives
The table below shows the total leakage and leakage due to ghost cards in various states.
Leakage and Diversion of Food Grains in PDS
State APL Total food Food grains Food grains Share of the poor
Households’ grains Leakage leakage at households in
share in leakage through FPS Distribution
subsidized (Col. 4 + Ghost
food grains Col.5) Cards
from TPDS
1 2 3 4 5 6
Along with the leakage due ghost cards, leakage due to diversion to unintended Beneficiaries is another
major reason of leakage. This happens due to APL cardholders getting the subsidized food grains
earmarked for BPL households. This can be seen from the next table.
State Allocatio Off- Off-take by Leakage of Off-take Earmarked
n from take by APL BPL by Food grains
Central States households genuine not reaching
Pool Govt. Holding BPL poor the poor
2003-04 2003- Cards (IE) households
04
1 2 3 4 5 6 7
1 2 3 4
From these we see that there is substantial leakage in the PDS. The reasons for these leakages are both
due to both human malpractices and deficiencies in the system. The leakages not only have an adverse
effect on food security but also cause excess government expenditure.
Thus we conclude for effective functioning of PDS these faults must be addressed. One of the options
that can be considered is the Universal PDS which can resolve targeting errors.
Refrences
NAC recommendations do not specify the eligibility criteria of priority and general households
mentioned by it. It leaves it to central government to decide criteria for it.
The targeting errors will still remain in the PDS reducing the effectiveness of food security Bill.
An expert committee constituted by the government under the head of Mr.Rangarajan has
recommended sharply diluted implementation of the food security bill proposed by the National
Advisory Council (NAC).
The Rangarajan committee found many flaws in NAC estimation. The NAC had estimated its
proposal would require 55.59 million tonne which the committee found to be an underestimation and
found it actually to be 73.98 million tonne.
As per current production and procurement trends, the committee said the government will be
able to procure only 56.35 million tones only so its actually not possible for government to procure
required amount of food grains. Also report says that Such an procurement will have a detrimental
impact on food prices by lowering availability in the open market which is opposed by Mr.Jean Dreze in
his article of The Hindu as he says that it won’t have an much adverse impact on prices.
It also suggested that APL allotment should be done once BPL allotment is done but this
suggestion by Rangarajan report is actually reducing the reach of PDS.
The effective implementation Food security act depends on whether the government merely
seeks to gain “political capital” from it, or whether it is truly guided by its responsibility to the people of
India & The government’s commitment to the “aam aadmi” goes beyond electoral rhetoric.
References
1. Draft of the Food Security Bill circulated by the empowered group of Ministers
2. Concept note on the Food Security Bill circulated by the Department of Food, GOI
3. Recommendations of the National Advisory Council
4. Various Newspapers , for the report by C. Rangarajan Panel
Effect of the passage of the Food Security
Bill on Individual Households
Having considered the considered the Food Security Bill and its broad implications including the
expenditure incurred by the government let us now try and understand its economic impact on
individual households.
Rural Urban
Sector Sector
% of % of consumption from % of A/ % of consumption from
MPCE MPCE
A/BPL PDS by A/ BPL hhs BPL hhs PDS by A/ BPL hhs
class class
hhs
Wheat Rice Wheat Rice
0-235 48.8 30.27 35.84 0 – 335 33.4 41.94 31.25
335 –
235-270 44.3 27.90 28.43 395 28.3 38.79 30.61
395 –
270-320 40.8 27.97 29.51 485 26.4 33.34 32.18
485 –
320-365 38.3 26.95 26.44 580 19.9 37.04 33.34
580 –
365-410 33.9 26.40 30.39 675 17.8 35.25 28.67
675 –
410-455 33.1 25.51 28.01 790 11.6 32.56 22.98
790 –
455-510 31.0 27.91 27.99 930 10.1 34.28 20.84
930 –
510-580 25.7 27.28 27.65 1100 6.9 32.35 14.57
1100 –
580-690 23.8 28.54 29.27 1380 4.1 23.20 22.89
1380 –
690-890 19.8 28.13 23.90 1880 2.2 26.79 5.22
890- 1880 –
1155 15.2 27.43 18.07 2540 1.5 17.36 8.91
1155 & 2540 &
more 12.0 21.85 24.03 more 0.9 25.35 30.27
All All
classes 29.4 27.40 28.16 classes 11.3 34.95 28.08
As can be clearly seen from the above table the percentage of AAY and BPL families covered
currently is less than 50% across all the classes (all classes except the bottommost classes fall under BPL
criteria). The reasons for this have already been discussed. The households who have been left out of
the food security apparatus have no recourse but to buy food from the open market, which eats away
most of their income.
Here we must note that we believe that prices in the open market will rise due to decreased
supply in open market from increased procurement by the government as noted by the C. Rangarajan
Committee report [8]. This will be further amplified by the government’s readiness to procure at prices
greater than MSP if it cannot procure its entire requirement at MSP as noted in the concept note of the
Food Security Bill circulated by the Department of Food and Public Distribution [9].
So, the passage of the Food Security Bill will raise the expenditure on food of the households
that are currently covered by the PDS (as explained above) and households that are not covered by the
PDS due to increased food prices.
However it can reduce the expenditure of the deserving households not covered by the PDS, if
they are brought under the food security net, though we are skeptical about this happening as the GOI
sees the total households under BPL decreasing with the passage of the Food Security Bill [10].
So we conclude that the expenditure of people on Food will increase with the passage of the
Food Security Bill and the prices of food in open market will increase strongly affecting those not
covered by the food security net.
References
1. Table 4.4 – Nutritional Norms for Poverty : Issues and Implications – M.H. Suryanarayan
2. Annexure 1 - Concept note of the National Food Security Bill – Department of Food and Public
Distribution GOI
3. Chapter 2 of the draft Food Security Bill formulated by the Empowered Group of Ministers GOI
4. Sections 8 & 10.1- Concept note of the National Food Security Bill – Department of Food and
Public Distribution GOI
5. Section 8 - Concept note of the National Food Security Bill – Department of Food and Public
Distribution GOI
6. Annexure 3 - Concept note of the National Food Security Bill – Department of Food and Public
Distribution GOI
7. Table 3.2 - Nutritional Norms for Poverty : Issues and Implications – M.H. Suryanarayan
8. Rangarajan panel wants APL out of Food Security Bill - Business Standard – Jan 18,2011
9. Section 12.2 - Concept note of the National Food Security Bill – Department of Food and Public
Distribution GOI
10. Section 6.5 - Concept note of the National Food Security Bill – Department of Food and Public
Distribution GOI
Conclusion
Recommendations
The Rangarajan Committee’s dilution of the NAC ‘s recommendations stem mainly from the rise
in the food subsidy that would be required to implement the recommendations, as noted earlier.
The food Subsidy in the financial year 2009-10 stood at Rs. 58,204.75 Crore. The Ranjarajan
report estimates that the total food subsidy required to implement the NAC proposal would be Rs.
92,000 croe which it believes is excessive. The quantum increase in the food subsidy if the Food Security
Bill were to be passed with NAC proposals would be about Rs 34,000 crore. The Rangarajan report finds
this a too big an amount.
in Rs.
Type Crore
3780853.0
Total 9
The above table shows the total FII inflows. If a tax at a nominal rate of 1% is levied on the FII
inflows it would generate revenue well above Rs 37,000 crore which would be more than enough to
fund the increased food subsidy.
The government should also try to tackle the root cause of food insecurity which is poverty. As
already seen that the government has to spend about Rs. 12 to ensure a benefit of Rs 5 to poor .The
government, hence, should also try and figure out ways to prevent the leakages in the system which
would do a lot of good towards ensuring that people get what they deserve. Use of modern
technologies like Information and Communication Technologies to combat leakage, as enshrined in the
Food Security Bill seems a good step forward in this direction.