Food security programme: Will the states really benefit?

Ahead of the Assembly elections in a number of states scheduled towards the end of the year, the UPA regime has cleared its ambitious Food Security Bill, and has opted to enact it by way of an Ordinance. The moot question is whether it will pay dividends for the UPA, as some states follow their own more ostentatious public distribution system (PDS) programme.

It is unlikely states such as Tamil Nadu and Karnataka which distribute rice free - or rice at Re 1 a kg - would increase the price. This is a factor that may limit the political dividend for the UPA, as it attempts to overlay a food subsidy package over what is run by states. In the case of many states, what is already being offered is more generous than what the UPA has tried to do with the Food Bill.

In one respect, the Food Bill is different from the farm loan waiver which the UPA announced in 2008 in the run-up to the last general elections. In the farm loan waiver, state-owned banks that were directly controlled by the union finance ministry and cooperative banks, were the implementing agencies. In the case of food subsidy to the citizen, states directly control the distribution point as well as the extent of subsidy. The central government only deals with states and not the citizen directly.

On the face of it, there is one big relief, in that the Centre recognises 69 per cent of households in India as 'below poverty line' (BPL) households worthy of support. As it prevails now, the Centre's estimates of BPL households in each state varies from that of the states' own estimates. To give one example, while Karnataka claims it has 8.7 million BPL families, the Centre recognises only 3.13 million of them as BPL, and allocates subsidised foodgrains accordingly. The catch is whether the Centre's upward revision in BPL numbers for the nation as a whole will benefit all states. There is every possibility that some states will get increased allocations, while many may not. The Centre could say their BPL numbers have not increased.

Another aspect of the food bill which is likely to make states anxious is that the proposed Ordinance uses a "unit" system as the yardstick for distribution of PDS grains, a departure from allocating a fixed quantity per family. Under the new unit system, how much foodgrains a family gets depends on the number of members it has.  Andhra Pradesh gives out 20 kg of rice a month at Re 1 per kg for a family. If the Food Bill allocation is per head instead of per family, the allocation will increase or decrease depending on family size. Under the earlier system, the Centre was giving at the rate of 35 kg per family. This will go down for most families once the unit system is introduced.

The Centre allocates foodgrain to states at subsidised rates of Rs 5.65 per kg of rice and Rs 4.15 per kg of wheat. The states are, however, supplying them to BPL families at prices still lower, or free of cost as in Tamil Nadu, and meeting this additional expenditure out of their own budgets. The states are hoping that they will get more foodgrain with the recognition of more households as BPL families, and this will mitigate their financial burden.
 
Finer details about the Ordinance are yet to emerge, and hence states have no clue to whether implementation of the proposed Ordinance will benefit them or not. It will benefit a state only if the Centre has increased the number of BPL families for that state and increased the foodgrain allocation. Otherwise it does not help.

Separately, it is unlikely that the Ordinance will secure or further food security of poor households in India. It does not seem to consider the change in the composition of the food basket of the average Indian household over time. The Ordinance seems to be targeting a food basket that existed two decades ago.

For instance, the National Sample Survey Organisation (NSSO) presented its latest survey findings on the household consumer expenditure pattern on June 20. The NSSO's findings show that in 2011/12, the average rural household spent Rs 12 out every Rs 100 expenditure on cereals, which is what the Food Bill targets.  Almost 20 years ago, in 1993/94, the average rural household spent Rs 24 of every Rs 100 on cereals. The share of cereals has been steadily falling, as has been the extent of spending on food. This trend fits with what has happened across the world as societies get richer.

It is not as if only rural households are spending less on cereals. The NSSO data for 2011/12 showed a similar pattern among urban households too, where the average spend on cereals is Rs 7.30 for every Rs 100 of household expenditure.

The Food Security ordinance seems to be fighting the last generation's problems.