A recipe for chaos & corruption

In a stunning admission of party hypocrisy, former Food Minister Shanta Kumar recently stated that the BJP’s support for the National Food Security Act last year was just a pretence. Remember, when the act was being discussed in Parliament, BJP leaders (from Narendra Modi to Sushma Swaraj and Arun Jaitley to Murli Manohar Joshi) were falling over each other to demand an even stronger act. Going beyond words, the party moved an amendment aimed at ensuring universal coverage for the public distribution system, with enhanced entitlements. Now we are being told, without irony, that all this was just pre-election posturing and that the BJP actually opposes the act.

The context of Shanta Kumar’s statement was the release of the report of a High Level Committee on Reorienting the Role and Restructuring of the Food Corporation of India, of which he was the chairperson. The report includes a series of recommendations to curtail the National Food Security Act. These recommendations, incidentally, lie outside the committee’s terms of the reference. The long list of stakeholders consulted by the committee does not include anyone who might speak on behalf of those for whom the act represents a faint hope of greater economic security.

Recipe for chaos
Turning to the substance, it may be recalled that the National Food Security Act guarantees three sets of entitlements: nutritious food for children, maternity benefits, and subsidised foodgrains under the public distribution system. The committee’s recommendations pertain to the PDS. They include: (1) restricting the coverage to 40% of the population instead of 67%; (2) providing eligible households with 7 kg of foodgrains per person per month instead of 5 kg; (3) raising the issue price from Rs 3 per kg for rice, Rs 2 per kg for wheat and Re 1 for millet to half of the relevant minimum support price; (4) delaying the implementation of the act in states that have not achieved end-to-end computerisation of the PDS and related norms; and (5) making a gradual transition to cash transfers.

These recommendations are a recipe for chaos and corruption. The strongest safeguard against corruption is not end-to-end computerisation (helpful as it may be) but clarity of entitlements: if people know what is due to them, they will fight for it. Broad coverage, low issue prices, clear entitlements – these are core principles of PDS reform that have been used with good effect from Tamil Nadu to Himachal Pradesh and Chhattisgarh to Andhra Pradesh. Even Bihar, the stronghold of corruption in India, is now using this approach to bring about radical change in the PDS. Aside from helping to improve the PDS, wide coverage serves another useful goal – avoiding exclusion errors. The problems associated with targeting households “below the poverty line” are well-known, and more or less intractable. Further, the official poverty line is abysmally low. Food subsidies for households above the line are not a “waste”, as implied in some cost-benefit analyses of the PDS. There is nothing unreasonable in asserting that two-thirds of the Indian population live in conditions of acute insecurity and are in dire need of social support.

Bihar on the move
To illustrate the counter-productive nature of the High Level Committee recommendations, consider Bihar. Spurred by the approaching elections, the Government of Bihar has made strenuous efforts to implement the National Food Security Act in the last few months. About 75% of rural households in Bihar today have a new ration card, or an Antyodaya card. For the first time, most people know that they are entitled to 5 kg of foodgrains per person per month from the PDS. Opposition parties (including the BJP) are helping them to know their rights and demand their due. All this has put the entire system under tremendous pressure to perform, in sharp contrast with the situation that prevailed until just a few years ago.

If the High Level Committee has its way, all this is to be undone and Bihar is to return – somehow – to the old system based on BPL targeting, narrow coverage and higher issue prices. What purpose would that serve? It would certainly not help to improve the system. It would not significantly reduce the foodgrain requirements of the PDS in Bihar, if entitlements are raised from 5 kg per person to 7 kg per person. It would not give poor households a better deal (even if they escape “exclusion errors”), since they would lose more from higher issue prices than they would gain from higher quantities. The only purpose it would achieve is to save money for the government – and that is indeed the main justification provided by the High Level Committee for the proposed reforms.

Way forward
The High Level Committee report shows little understanding of these issues, and relies almost exclusively on tentative estimates of PDS “leakages” (including its own exaggerated estimate of 47% for 2011-’12) from the National Sample Survey to argue for a downsizing of the PDS. The fact that PDS leakages have been unacceptably high for too long is undeniable. But a fuller reading of recent evidence brings out some critical facts absent from the High Level Committee report.

First, some credible sources, notably the India Human Development Surveys, do point to a significant decline in PDS leakages in recent years. Second, the decline has been particularly clear in states that have initiated serious PDS reforms – Bihar is the latest example. Third, the bulk of the remaining leakages lies in the “APL” (above poverty line) quota, and possibly other ad hoc quotas. In 2011-’12, these leaky quotas accounted for about half of total PDS allocation. Under the National Food Security Act, they are due to be phased out in favour of the more transparent “5 kg per person” for all eligible households. This is, in all likelihood, a better way of slashing the leakages than to tinker with the entire framework right in the middle of the implementation process.

None of this detracts from the value of some of the recommendations made by the High Level Committee on issues that were within its terms of reference and domain of competence. Nor does it mean that the National Food Security Act is fine as it is. The point, rather, is that it would be wiser to go forward than backward. Despite its numerous flaws, the act is an opportunity to fix the PDS and make it work for the people. The central government would do well to clarify its stand on the National Food Security Act. If it opposes the act, let it say so openly. If not, it should facilitate the implementation of the act by speeding up the release of Socio-Economic and Caste Census data, which is holding things up in many states. The central government should also make a provision, in the next budget, for maternity benefits – a legal entitlement under the act. Or perhaps this is also something that the BJP just pretended to support?

By: Jean Drèze