What is the issue?
- The implementation shortfalls in National Food Security Act are leading to high food subsidy budget for the Centre.
- It needs drastic measures to check the spike in food subsidy budget and address fiscal burden.
What is the NFSA?
- The NFSA (National Food Security Act) replaced the Targeted Public Distribution System (TPDS).
- It significantly expanded the coverage of beneficiaries than before.
- The beneficiaries are entitled to subsidised foodgrains (5 kg per head per month).
- Post the NFSA period, the above poverty line (APL) and below poverty line (BPL) categories under the TPDS have been done away with.
- The objective is food and nutritional security by ensuring access to adequate quantity of quality food at affordable prices.
What is the concern now?
- It is more than 5 years since the passage of the National Food Security Act (NFSA), 2013.
- But the task of supplying highly subsidised foodgrains to the 81 crore people under the PDS is still challenging for the government.
- NFSA has gradually turned out to be a huge financial burden with mounting burden of food subsidy budget.
- This is compounded by the huge surplus grain (rice and wheat) stocks currently held by the Food Corporation of India (FCI).
What are the policy shortfalls?
- Procurement - Open-ended procurement operations is carried out by the FCI and state government agencies.
- This is for purchasing paddy and wheat from farmers by paying minimum support prices (MSP).
- The broad objective is to ensure MSP to farmers and availability of foodgrains to weaker sections at subsidised prices.
- This results in excess procurement of foodgrains against the requirement for the implementation of the NFSA.
- E.g. the FCI and state agencies procured 69 million tonnes (MT) of foodgrains in both rabi and kharif seasons (2017-18)
- However, the off-take of foodgrains by states (for the NFSA) during 2017-18 was around 54 MT.
- The grain off-take for other welfare schemes had been around 3.6 MT during 2017-18.
- In addition, to carry-forward stock from the previous year, it has led to ‘surplus’ grains held with the FCI, much more than required buffer norms.
- Ultimately, surplus pushes up the cost of storing foodgrains.
- Over the years, the economic cost (procurement, distribution and storage) of holding foodgrains has been rising sharply.
- This, in turn, is contributing to the rising food subsidy budget.
- Price - The Centre is reluctant to increase the price of highly subsidised foodgrains supplied under the NFSA, 2013.
- Under the Act, the price of Rs 3/2/1 for rice, wheat and coarse grains, respectively, was capped for 3 years, which ended in 2016.
- Each rupee (per kg) increase in issue price of grains could result in savings of food subsidy of more than Rs 5,000 crore annually.
- FCI - Along with the rising food subsidy budget, FCI’s financial condition is another concern.
- There is rising outstanding food subsidy dues to the FCI because of the mismatch between the budget allocated to it and the actual expenses incurred.
- So the finance ministry would soon arrange a loan of Rs 27,000 crore from the National Small Savings Fund (NSSF).
- In 2016-17, the finance ministry had arranged a five-year loan from the NSSF of Rs 70,000 crore for the FCI.
- All these measures are likely to push up the food subsidy budget further.
How could it be addressed?
- For better management of foodgrains, the NDA government set up a high-level committee (HLC) chaired by Shanta Kumar.
- The HLC recommended the government to have a relook at the current NFSA coverage of 67% of the population.
- It should be brought down to around 40% of the population, which would comfortably cover BPL families and some even above that.
- The HLC also recommended gradual introduction of cash transfers (DBT) in PDS, which is estimated to save Rs 30,000 crore annually.
- With a huge spike in food subsidy budget, the Centre has to take some key measures such as
- capping procurement for maintaining optimum foodgrain stocks
- increasing issue price of foodgrains
- rolling out DBT in cities
- curbing grain pilferage through digitisation of the entire foodgrain management
Source: Financial Express
