AS THE National Food Security Bill inches its way back to Parliament, financial analysts are raising predictable concerns about its affordability. These concerns, however, are misplaced.
The revised version of the food Bill is actually little more than a “Public Distribution System (PDS) Restructuring Bill”. The foodgrain requirements of the Bill are no more than existing allocations. Other entitlements (such as midday meals) do not go beyond the rights that people already have under Supreme Court orders, with the main exception of maternity entitlements.
Modest as it is, this PDS restructuring is very important. At the cost of a small increase in the food subsidy (due to lower issue prices), it can achieve a massive improvement in the effectiveness of the subsidy. Today, a large part of the food subsidy is wasted on the non-transparent and leaky APL (above poverty line) quota. Under the food security act, the APL quota will go, the PDS will have a broader base, and people will have clear entitlements — all likely to lead to a major improvement in the PDS. The effectiveness of this move towards a more inclusive PDS (especially if it is combined with other PDS reforms) is confirmed by the recent experiences of many states — Tamil Nadu, Chhattisgarh, Rajasthan, Odisha, Andhra Pradesh, Himachal Pradesh, among others.
A large part of the food subsidy today is also wasted on the transport and storage of monumental food stocks. With a well-functioning PDS, it will be much easier to coordinate procurement and distribution, so that excess stocks don’t accumulate. The availability of excess stocks also means that the short-run economic cost (as opposed to the financial cost) of the Bill is virtually nil.
Last but not least, the Bill is a form of investment in human capital. It will bring some security in people’s lives and make it easier for them to meet their basic needs, protect their health, educate their children, and take risks.
In short, the food Bill is sound economics. It will put the entire PDS on a new footing and ensure much better use of the food subsidy.