Monday, April 9, 2012

Food Bill should rely on universal PDS

No Budget ever goes by without the routine expression of outrage over “subsidies”. At times, the focus is on food subsidy; this year, it was on petroleum – despite the likelihood of the National Food Security Bill (NFSB) coming into effect in 2012-13.
Do the fiscal hawks believe that the NFSB may not roll out in a hurry? A sum of Rs 75,000 crore set aside for food subsidy in 2012-13, which is higher by Rs 15,000 crore over the Budget estimates for 2011-12, but just about Rs 3,000 crore more than the revised estimates for this year. The Finance Minister did say in his Budget speech that the hike was on account of NFSB, but the law may take time in coming.


Meanwhile, economists have suggested that the NFSB should not be passed in its present form. A delay is worth it, if it results in a food distribution system that reaches out to the needy. The current model fails to do that, with leakages amounting to an estimated 43 per cent of the food subsidy.
The NFSB does not come up with an alternative delivery mechanism. Its flaws have been spelt out in an open letter by 25 economists to the Prime Minister, released a few days before the Budget. The letter says that instead of splitting the population into ‘general', ‘priority' and ‘excluded' households, as stated in the NFSB, it makes sense to have just two types of households – ‘general', or those in the PDS, and those ‘excluded' from it.
It says that general households should get rice, wheat and coarse grain at Rs 3/kg, Rs 2/kg, and Re 1/kg, respectively. This is against the Bill laying down two sets of prices for general (50 per cent of minimum support price) and priority households (Rs 3, Rs 2 and Re 1), respectively.
Grain entitlement can be fixed at 25 kg for every PDS household, against 35 kg and 15 kg for the two types of households proposed in the Bill. The food subsidy would be just a bit higher than the NFSB estimate (roughly the same as the Budget outlay), despite providing for cheaper grain to a larger number. The letter sets out a viable alternative. In effect, it makes a case for scrapping the “targeted” PDS (TPDS) – a decade-old policy of restricting PDS to the poor by identifying them. This led to exclusion of the poor and diversion of grain.
The most important argument against TPDS is a moral one – it is worse to exclude the poor than to include the better-off. As a result of this, perhaps, half the population still remains malnourished.
We should set aside the TPDS in all its forms (APL, BPL, general and priority) for a more “universal” system. This would entail one set of prices for the majority of the population that will be under the PDS umbrella, and exclusion of the well-off.
How to implement this? It should be easier to keep out a minority with distinct markers of well-being, than to include a sea of diverse, deserving people. The latter has demonstrably failed. While aadhaar can help in exclusion, so can the Socio-Economic and Caste Census (SECC). SECC is, ironically, being conducted to identify households other than the conventional ‘poor' who need to be included.
But it is important not to lose sleep over how the exclusion criteria will work. If the better-off use the PDS, it might actually help the entire system to work better. All public services function best when a cross-section of society uses them. The PDS works better in States where the middle-class avails of it. Instead, there are more pressing issues at hand. One needs to explore other ways to address the severe nutritional deficit in the population. A revamped, decentralised PDS can at best address the need for calories, but what about protein and micro-nutrient deficiencies? It is here that food coupons can be tried out to supplement the PDS, with the SECC's broad inclusion norms being used to identify the needy. Biometrics like smart cards can be put to work. The National Institute of Nutrition can work out the per capita requirements of pulses, to begin with, taking diverse agro-climatic differences into account.
As for criticism over rising food subsidies on this score, it should be dismissed with the contempt it deserves. Food “subsidy” well spent is not a subsidy but an investment in human capital. Those who speak of “demographic dividend” should know better.

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