National Food Security Act 2013

The NITI Aayog recently circulated a discussion paper on a proposed revision in the NFSA, 2013.

Need for revisiting NFSA, 2013

• Validity of Central Issue Price (CIP): subsidised prices were fixed for “a period of three years from the date of commencement of the Act (i.e. till July, 2016). However, the CIP has remained unchanged since 2013.
• Rising food subsidy bill: MSP at which Food Corporation of India (FCI) procures rice and wheat (plus cost of storage, etc.) is much higher than CIP i.e., the price at which foodgrains are provided through the Public Distribution System (PDS) resulting in high food subsidy bill.
• Burden of maintenance of surplus stocks: High production and hikes in MSP with no changes in the CIP has led to accumulation of stocks with FCI. These surplus stocks beyond the operational and strategic reserve requirement have also risen. Maintenance of these surplus stocks has placed an additional burden on the food subsidy bill.
• Market distortion: If CIP is not revised, absolute number of beneficiaries (67% of the total population) would increase due to increase in population.
• Higher quota and higher supply at highly subsidised prices will further depress market prices for food grains
• Those farmers who are not able to sell grains to government agaencies will facea decline in income

     

Criticism of proposed revision in NFSA, 2013

• Lack of objective evaluation: of its functioning and efficacy but on the necessity of reducing our food subsidy.
• No proposal for enhancing efficiency: The high food subsidy is actually a result of the mismanagement of food procurement and storage by the government.
• Weakening of food and nutrition security: The reform proposals would negate the goal of expanding coverage under the NFSA by making it quasi- universal. Reducing the number of PDS beneficiaries will be a throwback to the era of targeted distribution, which was not just inefficient and leakage-prone, but also excluded a large majority of the poor who actually needed government support.
• NFHS-5 shown stagnation and in many cases reversal of the gains made on the nutritional front. The situation would be further exacerbated by the food security and livelihood situation.

Way ahead

• Reforms should be based on independent evaluation of the Act
• Better targeting of beneficiaries: to be restricted to the bottom 20% and the CIP for others could be linked to the procurement prices.
• Priorities one nation, one ration (ONOR) card: enable the beneficiaries (particularly migrant workers) of NFSA to claim either full or part of foodgrains entitlement from any fair price shops or ration shops in the country through existing ration cards in a seamless manner. Thus, this initiative would be helpful in effective targeting and reducing leakages.
• Direct Benefit Transfers (DBT): alternative to subsidized food would be giving income transfers
• Better management of surplus stock: with the FCI without creating any market distortion.
• “Price deficiency” payment scheme: Farmers could be compensated for the difference between the government-announced MSPs for select crops and their actual market prices.
• FCI should actively participate in the commodity exchange as a seller for wheat and rice. This will increase the liquidity in the market and reduce market distortions.

Conclusion

The government and Parliament both should take a call for any revision in its provisions. Moreover, the number of beneficiaries, which was fixed in 2011, was based on some criteria. Hence, any revision in coverage of people should succeed an exercise of data analysis.