High inflation may moderate in 2013 prompting RBI to cut rates
Delhi realty: Winners and losers of 2012

Economy Dec 24, 2012

Food Bill will result in higher leakages, says Ashok Gulati

By Firstbiz Editors

The National Food Security Bill (NFSB), introduced in the Lok Sabha, will grossly interfere with the functioning of grain markets, resulting in higher leakages, chief of the Commission for Agricultural Costs and Prices (CACP) Ashok Gulati has told the Business Standard.

According to him, already the leakages from the public distribution system are about 40 percent. The will bill will also result in efficiency losses, and contradicts the very policy of encouraging diversification in the farm sector, he has said.

He said the plan to opt for cash distribution only if there is a shortage of grain supplies is foolhardy. Reuters

A PTI report had said that a discussion paper co-authored by Gulati exposed lacunae in the Food Bill and also suggested further debate on long-term feasibility of the government's big-ticket social welfare programme.

Gulati, instead, sees merit in conditional cash transfers (CCTs). According to him, globally CCTs are seen having higher efficiency than physical supply of subsidised food.

The food bill is likely to cost the government around Rs 1.2 lakh crore in the first year, which is likely to go up to Rs 1.5 lakh crore by the third year, he said.

He said the plan to opt for cash distribution only if there is a shortage of grain supplies is foolhardy.

Distribution of cash with out a developed financial infrastructure is almost impossible. "This is like running to dig the well when there is a severe drought. That will not work," he has been quoted as saying in the BS report.

The Food Bill aims to give legal right over subsidised foodgrains to 67 percent of the country's population.

The CACP is a statutory body under the agriculture ministry which advises the government on price policy for major farm commodities.

"The Bill, in its present form, throws up major operational and financial challenges and would have enormous ramifications on the cereal economy/markets and, therefore, Indian agriculture as a whole," Gulati, in his personal capacity, said in the discussion paper, according to the PTI report.

"The long-term feasibility of the envisaged strategy under National Food Security Bill needs to be carefully analysed and debated in the national interest," he said.

The authors said the discussion paper series by CACP was an attempt to encourage unbiased discussion on critical issues affecting farm sector and food security. However, they made it clear that the views belonged purely to the authors and did not reflect the views of the organisations they belonged to.

On CCT, the paper suggested having "enough flexibility" in the Bill to innovate and evolve into such a CCT scheme, using the globally acclaimed expertise of India in IT and Aadhaar, to connect to and pull those at the bottom of economic pyramid.

Under the CCT scheme implemented in most of countries, money is directly provided to the poor families after entering into a "social contract" with the beneficiaries. The cash is paid on the condition that the beneficiary should send the children to school regularly or bring them to health centres. The cash is generally paid to the female member of the family.

Emphasising that individual states should be left to devise their own systems of provision of food security, the paper suggested that states, which are surplus in terms of production of cereals, could move straightaway to cash transfers.

Cities with a population of 1 million or more which already have reasonable financial infrastructure and setting up of micro-ATMs, can also shift to cash transfers, it said, adding that states, which are grain deficit may continue with the physical handling of foodgrains.

With inputs from PTI

by Firstbiz Editors

Related Stories.