FOOD SECURITY BILL

The National food Security ACT (also Right to Food Act) is an act of parliament of INDIA which aims to

provide subsidized food grains to approximately two thirds of India’s 1.2 billion people .

Aug 27, 2013 - The Lok sabha on Monday night passed the ambitious National Food Security Bill

Sep 3, 2013 - National Food Security Bill 2013 The Upper House of the Parliament, Rajya Sabha on 2 September 2013 passed the National Food Security bill

The National Food Security Act, 2013 (NFSA 2013) converts into legal entitlements for existing food security programmes of the Government of India. It includes the Midday Meal , Integrated

Child Development Services scheme and the Public Distribution System . Further, the NFSA 2013 recognizes maternity

entitlements. The Midday Meal Scheme and the Integrated Child Development Services Scheme are universal in nature

whereas the PDS will reach about two-thirds of the population (75% in rural areas and 50% in urban areas).

Under the provisions of the bill, beneficiaries of the Public Distribution System

: Rice at 3 (4.7¢ US) per kg: Wheat at 2 (3.1¢ US) per kg: Coarse grains (millet) at 1 (1.6¢ US) per kg.

FACTSThe Indian Ministry of Agriculture's Commission on Agricultural

Costs and Prices has referred to the Bill as the "biggest ever experiment in the world for distributing highly subsidized food by

any government through a ‘rights based’ approach .

: The Bill extends coverage of the Targeted Public Distribution System, India's principal domestic food aid program, to two thirds of the population, or approximately 820 million people.

: Public Distribution estimated a "total requirement of foodgrains, as per the Bill would be 61.55 million [metric] tons in 2012-13

:The CACP calculated in May 2013, "...the requirement for average monthly PDS off take is calculated as 2.3 mt for wheat (27.6 mt annually) and 2.8 mt for rice (33.6 mt annually)

: When volumes needed for the Public Distribution System and "Other Welfare Schemes" were aggregated, the CACP estimated rice and wheat requirements to total an "annual requirement of 61.2" million metric tons

The Standing Committee estimated that the value of additional food subsidies PDS“ during 2012-13 works out to be...Rs.2409crores," that is, 24.09 billion rupees, or about $446 million at the then-current exchange rate, for a total

expenditure of 1.122 trillion rupees (or between $20 and $21 billion

This estimate is just for the subsidy the government will be offering. The additional expenditure that is required to set up

system through which this scheme will be brought to the common man , setting up operations, movement of the food

grains, storage of the grains and so on is not part of this estimate. If we include all those factors the actual bill the

government will foot will be much higher than this estimate.

Food security scheme is an open ended scheme. This means that, there is no end date or expiry date for this

scheme. It will be a never ending phenomenon that covers 67% of our population irrespective of whether

they need that subsidy or not.

On November 28, 2014, the Indian government announced, "Allocation of food grains to 11 States/Union Territories (UTs) namely, Bihar,

Chandigarh, Chhattisgarh, Delhi, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Punjab and Rajasthan has started under the Act..."

and that the "remaining 25 States/UTs have not completed the preparatory measures required for

implementation of the Act." The Indian government extended the deadline for implementation of the Act

"by another six months, i.e. till 04.04.2015

The food security bill will treble India’s annual food security

Food Security Bill cost our Government ? An estimate by the Government suggests that the overall impact this

Food Security Bill will have on its tax payers will be around 1.2 lakh crores. Economists and industry experts feel that this estimate is highly optimistic and may go up to 2.4 lakh crores.

67% population means around 85 crore individuals (Assuming our population

as 130 crores)

The government using GDP for comparison purposes

Expenditure for this Food Security Bill will be between 2-3% of the nation’s GDP. 2 to 3% .

Is this a fair % comparison?

GDP the total value of all goods and services that are produced within our country. It does not refer to the total amount of money the Indian Government earns through

taxes and other revenue channels.

The projected Income for our country in the financial year 2013-2014 is around 11.2 lakh crores.

The government is proposing to spend between 10-20% of its gross income to meet the cash needs of this Food Security Bill. This

scheme will put immense pressure on the nation’s fiscal deficit.

Fiscal deficit is defined as the difference between what a government earns and what it spends.

Impact of the Food Security Bill on the Indian Economy

: Impact on Economic Growth The government would resort to borrowing to fund the Food Security Bill.

When the government enters the borrowing market, in order to entice investors, it would have to offer good interest rates. The private sector too would have to hike their interest rates in order to stay competitive. This means, the Interest Rates will continue to remain high. High Interest rates is never good for economic growth.

: Impact on Food Inflation Minimum Guaranteed prices means, farmers will have more

incentive to grow rice/wheat and other grains covered under this scheme. This might result in Vegetable production getting affected which will further affect the nation’s Food Inflation.

: Impact on Overall Inflation Funding this scheme is for the government is to "Print Money". World History is

full of classic examples where governments resorted to printing more currency to fund its cash requirements. This is never a good idea and will result in the country's overall Inflation going higher

: Impact on Savings Higher food prices mean higher inflation. Higher inflation means people will end

up spending a higher % of their income to meet their day to day needs. This will result in much lower savings.

: Impact on Economic Growth Lower Savings and lower surplus income means - people will spend a lower amount of money on consuming good and services and therefore the economic growth will slow down .

: Impact on the Rupee If India does not save enough money, we have to borrow capital from foreign countries/investors. When these foreign borrowings need to be repaid, it will almost always be using dollars. This will put pressure on the rupee and lead to further depreciation against the dollar.

: Impact on Fertilizer and Power Subsidy In order to grow food grains, farmers use fertilizers and electricity. Both of these items are already heavily subsidized for farmers. The procurement needs of the Food Security Bill will result in intensive cultivation using more fertilizer and power, which will push up central subsidies on fertilizer and state subsidies on power.

: Impact on the Current Account DeficitThe Food Security Bill guarantees food for the people covered under the scheme. So, if in a particular year, the in-country production of either rice or wheat is not sufficient we would be forced to import it. So, if we start importing rice, wheat or any other food grains, it will further widen the Current Account Deficit.