'Food Security Bill is a good opportunity to fix PDS'

Critics of the National Food Security Bill (NFSB), which was passed by the Lok Sabha after a nine-hour debate on 26 August, argue that one of its biggest flaws is that it depends on the extremely ’leaky’ public distribution system (PDS).

However, Reetika Khera, an economist and assistant professor at the Department of Humanities and Social Sciences at the Indian Institute of Technology, Delhi, who has studied the PDS and its implementation, says the notion that PDS is ’leaky’ is an outdated one.

Khera, who in 2011 along with economist Jean Dreze conducted a survey on the state of the PDS in nine states, argues that contrary to public perception, many Indian states have made considerable progress since 2004 in plugging leakages in the PDS.

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While naysayers remain highly sceptical of the National Food Security Bill having any positive impact on the PDS, Khera is among those who believe that the Bill has the potential to reform the PDS.

Firstpost asked Khera why and how the National Food Security Bill will fix the PDS and what she made of the slide in the equity markets after the legislation getting the Lok Sabha nod.

Excerpts from the interview:

What is your assessment of the public distribution system in India today? The perception is that the PDS is beset with corruption, is inefficient and leaky.

The PDS earned itself a deservedly bad reputation through the 2000s as a ’leaky’ system. However, between 2004-5 and 2009-10, overall leakages declined by 15 percentage points to 40 per cent at the all India level, and in some states the improvement was rather impressive - 50 to 10 per cent in Chhattisgarh and 75 to 30 per cent in Odisha.

The reforms that these states undertook will become compulsory under the food security bill in other states, so it can be expected that leakages in the bad states (Uttar Pradesh, Bihar, West Bengal) will also come down. These reforms include expansion of coverage, reduction in price, computerization of systems, de-privatization of shops (from private dealers to co-ops, Gram Panchayats and Self Help Groups). The Bill is a good opportunity to fix the PDS in those states where it needs fixing.

What specific provisions in the Bill will make the PDS less prone to leaks and to corruption?

When the PDS price is approximately Rs 6 per kg (as it is today for BPL wheat) and the market price was approximately Rs. 6-8 per kg, when I was cheated, I lost a maximum of Rs 2 per kg. But if the PDS price is Rs 2 per kg (as it will be under the Act), I stand to lose Rs 6 per kg.

In the latter situation, I am more likely to create a fuss, argue with the dealer etc. In fact, the difference between market price and PDS price today is between 15-20 rupees, and that creates a pressure from below in the system.

[caption id=“attachment_1068533” align=“alignleft” width=“380”]  Will ration shops operate better thanks to the Food Security Bill? Reuters[/caption]

Is procurement of grains a cause for concern? Will our current grain production be able to meet the demand that will arise from the food security scheme?

The grain commitment under the National Food Security Bill is going to increase from approximately 58 million tonnes to 63 million tonnes, an increase of about five million tonnes. Increased requirement is very small. Procurement today is only 30 per cent of total production. I think the Bill will help the government draw down its ballooning stocks, which it has been finding difficult to store, and which has been adding to the economic costs of the government.

Some political parties, the Samajwadi Party, for instance, have expressed concern over the impact of the scheme on farmers. The Party warned that the scheme could exacerbate farmer distress leading to more farmer suicides. Is the Bill anti-farmer? Does the scheme fall short with respect to safeguarding interests of farmers?

No. Procurement operations are a form of support to farmers, and the bill is ensuring government presence in the procurement market, which gives more options to farmers.

The government procures about 30 per cent of total production and only needs to continue doing so. The remaining 70 per cent of grain trade in wheat and paddy in the private market will remain unaffected even after the bill is implemented. The overall requirement of grain and the share of public procurement in total production will change only marginally as a consequence of the bill. Consequently, the claim that India will become dependent on imports and that the bill will lead to higher prices for non-beneficiary households is baseless.

Farmers have welcomed government procurement through the Food Corporation of India (FCI) as it enhances their choices-to sell in the private market or to FCI. Without FCI, farmers would have no option but to sell to private traders. Some argue that the bill will further strain Punjab and Haryana’s agricultural sector.

Again, the facts tell a different story: procurement has become more decentralised since 2004-2005 and the combined share of non-traditional states (Andhra Pradesh, Chhattisgarh and Odisha) in paddy procurement has risen to 33-45 per cent. Others feel that if grain is provided at Rs 1-3 per kg, those farmers who produce for self-consumption will stop doing so. Chhattisgarh’s experience with decentralised procurement and an expanded PDS does not corroborate this.

Finally, the bill contains a provision for including millets and maize, so that there is scope for diversification of cropping patterns. That the agricultural sector needs urgent attention and reform is not in dispute, but National Food Security Bill the does not hinder that process.

What would you say are some of the glaring flaws in the Bill?

One big gap is the removal of all provisions for destitute (e.g. community kitchens) and also that the provisions for children are quite weak. Besides that, there is fear of over-centralization (e.g. forcing states that have a good PDS working on a ‘per household’ basis to move to a per capita approach). States should be allowed to decide within broad parameters whether they want per capita or per household.

Do you agree with the analysts who blame the subsidy burden of food security scheme for the slide in the equity markets?

It is hard to see the causal link between those two - the only probable reason is that the markets are not aware of the insubstantial increase in expenditure due to the food bill, and that because they have an inaccurate exaggerated cost in mind that they have created panic. I would look elsewhere for the causes behind the slide in the market (e.g., gold imports and current account deficit).