National Food Security Act Analysis

NATIONAL FOOD SECURITY ACT

Shaina Patel, TYBA

Definition:

The National Food Security Act (NFSA, 2013) has been introduced to meet the challenges posed by fast population growth, deprivation, deteriorating ecosystems, increasing price of food and unsustainable agricultural practices. It aims to provide for food and nutritional security in human life cycle approach, by ensuring access to adequate quantity of quality food at affordable prices for people to live a life with dignity and for matters connected therewith or incidental thereto’.

Main aspects of NFSA:

The people who will benefit from this Bill can legally claim specified quantities of food grains at highly subsidised prices. The Targeted Public Distribution System (TDPS) will provide food grains (5 kilograms per person, per month) in priority households[AT1], and 35 kilograms per month to households under the Antyodaya Anna Yojana (AAY) – a scheme targeting the poorest people. This government sponsored scheme was introduced in December 2000 by the NDA government. The subsidized prices of food grains are Rs. 3 per kg of rice, Rs. 2 per kg of wheat and Rs. 1 per kilogram of coarse grains.

The Bill also gives “legal rights to women and children and other special groups such as destitute, homeless, disaster and emergency affected persons and persons living in starvation, to receive meals free of charge or at an affordable price, as the case may be.”

Reason for NFSA:

The Sampoorna Grameen Rozgar Yojana was created by merging two existing programs i.e. Employment Assurance Scheme (EAS) and Jawahar Samridhi Yojana (JGSY). (National Rural Employment Programme (NREP) and Rural Landless Employment Guarantee Programme (RLEGP) were merged to create the JGSY). These programs were targeted at the rural poor and were ineffective. These wage employment programs were created with the intention of creating employment opportunities for the poor during the lean season. The Central government also provided food grains free of cost to distribute to the rural poor through panchayats. The creation of physical and intrinsic assets for the people whose incomes lie below the officially defined poverty line [AT2]was intended to give them a stable flow of returns leading to their economic stability (i.e. giving them the ability to provide sustenance for their families and themselves). These efforts, however, did not achieve their aim.

Furthermore, India’s increasing poverty rates and its encounter with crises (financial crisis[AT3], rupee depreciation, etc.) has had a detrimental effect on the state of its national food security. The impoverished household’s capacity to survive has been affected by these shocks.  Though the National Sample Survey (NSS, 64th round) shows a decline in the proportion of people not receiving a minimum of two square meals a day, in 1993-94 and 2009-10, starvation still persists. The number of people being pushed into food insecurity is increasing greatly. Thus, the PDS may serve as a reasonable solution to tackling the problem of food insecurity. Providing access to affordable food will be effective in curing mass hunger.

Hypothesis:

1. Reducing food losses on the supply side and preventing food wastage on the demand side is more effective than providing subsidized grain through PDS.
2. Subsidising food grains is not effective due to exponential population growth

Null Hypothesis:

1. Providing subsidized grain through the PDS is more effective than reducing food grain losses and wastage on the supply side and demand side of the market respectively.
2. Subsidising grains is more effective than controlling population growth and reducing losses in the decreasing resource base (food grain production).

Literature Survey:

The ^h Ninth Five Year Plan (Vol 2), 1998-2002, Agriculture, Irrigation, Food Security and Nutrition, Planning Commission of India

The aim of this plan was to rectify inequalities and boost economic growth in India. A few of the central features this plan were population control, prioritizing agriculture and rural development to create employment, reduction in poverty and attaining self-sufficiency in terms of agricultural production. The TPDS was created in June 1997 by the Government of India. Distribution of food grains is in accordance with poverty estimates of the Planning Commission. Additionally, Section 4.3 of the 9^th Five Year Plan, examines ‘Food and Nutrition security’, ‘Linking Production and Distribution Systems with Employment and Poverty Alleviation Programmes’ and most importantly ‘Restructuring Public Distribution System’.

The National Food Security Act, No. 20 of 2013, Ministry of Law and Justice

according to the Twenty Seventh Lok Sabha Committee report, “Food security means availability of sufficient food grains to meet the domestic demand as well as access, at the individual level, to adequate quantities of food at affordable prices.” The   people who will benefit from this Bill can legally claim specified quantities of food grains at highly subsidised prices through the TPDS.

What economic theory tells us about the impacts of reducing food losses and/or waste: implications for research, policy and practice, 2013, Martine M Rutten, International Policy Department, LEI Wageningen UR, Alexanderveld 5, 2502, The Hague, LS, Netherlands

Martine Rutten (2013) examined the effects and the factors of influence of reduction in losses and waste in agriculture and food systems on hunger and food insecurity. Martine Rutten posited two economic theories to analyse the impacts of food loss reductions on the supply side and food waste reductions on the demand side. (The research, when applied to policy and the Indian food security system, reveals startling results in this research paper).

Methodology:

This paper will analyse the effect of decreasing food losses and food waste by applying economic theories, namely the Malthusian Theory of Population and the general Demand and Supply theory. This paper will use lucid diagrams to explain and examine the economic theories along with their application to the problem of food security.

B

Testing hypothesis 1:

The Food Corporation of India (FCI) is the apex agency for the procurement and distribution of grains across the country, and is instrumental in implementing the welfare scheme. According to the FCI, rice and wheat worth Rs. 2,050 crore has been lost in transit and storage since 2010 i.e. 11,07,638.8 metric tonnes (MT) of food grains are irrecoverable due to wastage or pilferage. It has been stated that the PDS witness’s losses that add up to 30% of the total output of food grains through its supply chain. [1]

The diagrammatic analysis below will display the effect of these losses.

Reducing losses in supply of food grain:

Using partial equilibrium analysis, the food grain market is examined in Diagram A. The demand curve for food grains given by the downward sloping demand curve intersects with the supply curve of food grains at equilibrium point A (where price is P_o and quantity is Q_o). (Price is determined at the point where quantity of food grains demanded equals quantity of food grains supplied). After losses have been incurred in the food grain market, the supply curve of food grains that have incurred losses (Supply’) lies above the supply curve of the food grains that have incurred losses (Supply). At original price Po, a greater quantity of food grain can be supplied to the market i.e. Q2 at point B. Additionally, if there were no losses then the original quantity Qo can be produced at a much lower cost i.e. P3 at point C.

The supply curves do not have to be parallel and will depend on the extent of losses incurred in the food grain market.

Diagram A

Assuming that measures are taken to attack the problem of food losses in supply (regulatory bodies are created, effective policy implementation through taxes and subsidisation, suppliers implement advanced technology to curb losses), a new equilibrium will be achieved in the food grains market at point D. The concerted effort to prevent losses would culminate in a larger equilibrium quantity at Q₁ and a lower price at P₁. Consumers can consume more food at a decreased price, the ensuing welfare gain can be gauged through the consumer’s surplus i.e. P_oADP_1. Correspondingly, there is a positive change in producer’s surplus since they can sell greater quantities at lesser prices i.e. P1DO-PoAP3. Thus, the overall welfare benefit is the aggregation of producer’s and consumer’s surplus i.e. P₃DO, the shaded area between the Supply curve and the Demand curve.

The effects as seen in the diagrammatic analysis are in consonance with the literature on effects of food losses. It is encouraging to developing countries, like India, who experience excessive losses in the supply chain.

Reducing wastage in demand for food grain:

The following diagrammatic analysis examines the effect of reduction in wastage of food grain demand. The market for food grains in India is displayed with the normal downward sloping demand curve, the upward sloping supply curve (wherein the entire supply chain is taken into consideration) and the equilibrium point A (where the price is P_o and the quantity is Q_o). After losses due to wastage on behalf of the consumers occur in the market, the demand curve that incurs these losses i.e. Demand’, lies to the right of the original demand curve. We know that consumption needs to decrease to Q₂ (at point B) at the original price P_o to achieve a stage of utility maximization, if there is no wastage. Alternatively, P₃ (at point C) displays a much lower value to the consumer at original quantity Q_o.

If the problem of wastage in demand for food grains is tackled via awareness campaigns, effective policy implementation through taxation, subsidization, regulation and punitive measures, a new equilibrium would arise in the food grain market at point D. The effort to avoid wastage in food grains would result in a decreased price P1 and a lower equilibrium quantity Q1 in the food grain market. The welfare of the producer is negatively affected as seen by change in producer surplus, P1DE-PoAE = DAPo, due to their ability to sell lower quantities at a lower price. The negative change in consumer surplus is P1DBPo – BAGF. These changes in surplus do not account for the fact that original curves of demand and supply include wastage. In this case the consumers lose BAGF to wastage at price Po and quantity Qo i.e. value gained is only PoBF. If wastage is avoided, there is a positive change in consumer surplus, P1DBPo and a negative overall change in welfare –BDA, given by the red shaded region. It should be noted that the perceived decrease in equilibrium quantity from Q0 to Q1 displays the wastage of food grain that was not ingested by the consumer. Thus, the true food consumption increases to Q1 from Q2. Additionally, the decreased equilibrium price for food grains shows that food security of the consumers in the country is increasing. This result is in accordance with the analysis in the literature of effects of food losses. This problem is usually seen developed countries, however urban pockets of India experience this problem too.

Testing Hypothesis 2:

It is evident that the burgeoning population of India will soon surpass the country’s food grain production capacity (as seen by inability of present food production levels to meet necessary food demand). Starvation and food deprivation is partially a result of inefficient food allocation. Reverend Thomas Malthus, in his Essay on the Principle of Population, suggested that human population has an exponential rate of growth while food production has an arithmetic growth rate. The ensuing situation would be that of a depleted resource base and humans having no resources for survival. To circumvent this tragedy, Malthus recommended controlling population growth rate. This paper also recommends eliminating losses that are prevalent in the current system of food distribution. Curbing losses and wastages of food will increase the quantity of food available, which can be used to prevent starvation. According to this paper, Malthus’s statement of declining food production points to the need for advanced agricultural technology.

According to Malthus, in the long run food production capacity will not be able to meet the demands of the growing population. Thus, population growth if unchecked will exceed food production capacities. However, when population growth exceeds food production capacity it can be ‘positively checked’ by famine, war and epidemics. This would result in population exceeding food production, then reducing due to tragedies. After the occurrence of the tragedy and the recovery of the population, population exceeds food production again. This will result in a cyclical trend. An alternative result could be achieved by ‘negative checks’, wherein the government foresees food production lags and places controls on population growth (i.e. in accordance with food production capacity). The negative checks refer to birth control measures. However, this paper also suggests preventive measures for reduction in wastages and losses of food grains and application of advanced agricultural technology as additional negative checks.

[AT4]

Critique:

This paper understands that the path to reduction in food losses and wastage, food security and consumer and producer welfare involves numerous factors. The factors need to be enumerated, analysed and accounted for in the decision and policy formulation process. The first hypothesis focuses more on the quantity of losses and wastage of food grain, while the impact on the population on India at large must be analysed (even though the analysis is qualitative in nature).

Policy Recommendations:

This paper suggests the application of targeted policies that solve the underlying problem in an existent system (i.e. TPDS) instead of pumping more resources into a faulty machine.

Considering the size of this nation, the initial step in acquiring food security is self-sufficiency in food grains. According to the Ninth Five Year Plan (Vol 2), India’s domestic production and consumption of food grains in the world market is relatively large. India produces about 65 million tonnes of wheat and 80 million tonnes of rice. Thus, importing on a great scale to meet requirements could make the nation vulnerable to sharp rises in world prices of food grains. Also, accepting aid or importing grains may come at the cost of conceding to amendments in national security policies. The fact that food creation is the primary occupation of most agricultural labourers, peasants, cultivators who cannot switch to other professions has been accounted for. Since food production in small-sized land holdings benefits the agricultural economy by ensuring employment, income and food security simultaneously, self-sufficiency in food grains should be given more importance than providing food grains to the people of India. (It should also be noted that the cost of imports is more than the cost of producing cheaper food grains, thus imports are not a feasible option to supplement domestic supplies.)

Conclusion:

Everyone is worried about the cost of the implementation of the programme. The fact remains that there are already programmes in place that are trying to solve the problem of food security. Some of these programmes include the National Rural Employment Guarantee Act, Mid-Day meal Schemes, the Right To Education, and the proposed food security bill to bring distressed, low-income families above the poverty line. As a result, the cost of government welfare programs for poverty elimination remains high at 2 per cent of GDP and is still increasing exponentially. [6] The problem is not the cost of introducing more policies and bills to overcome these adversities. The main problem is ensuring that the beneficiaries of these bills and programmes receive what is promised to them despite hindrances like corruption and losses in food grain supply.

Additionally, food subsidies, without development of the agriculture sector and the existing PDS, is not a sustainable solution to the problem of food security. Efforts need to be taken so as to enhance agricultural productivity through innovations (like sustainable technologies), solving problems like adversity during drought, soil management techniques. Developing and enhancing rural infrastructure could augment agricultural productivity. The problem of population growth must be integrated into development plans to solve the problem of food security. [7]

Appendix:

1. [3][AT5]

Food grains Area and Production

Year Area Production

(Million Hectares) (Million tonnes)

1950-51 97.32 50.82

1960-61 115.58 82.02

1970-71 124.32 108.42

1980-81 126.67 129.59

1990-91 127.84 176.39

1997-98 124.00 192.43

1998-99 NA 195.25

BIBLIOGRAPHY:

[1] http://www.hindustantimes.com/india-news/newdelhi/rice-wheat-worth-rs-2-050-crore-wasted-in-3-yrs-in-govt-godowns/article1-1092190.aspx

[2] http://www.agricultureandfoodsecurity.com/content/2/1/13

[3] UNDP, http://indiabudget.nic.in/es98-99/chap85.pdf

[4] demand v/s supply of food grains, http://www.ncap.res.in/upload_files/policy_brief/pb28.pdf

[5] agricultural prod stats, http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/017T_BST130913.pdf

[6] Sahoo, P, 2013, ‘Direct cash transfers: a panacea for poverty and inequality in India?’, East Asia Forum http://www.eastasiaforum.org/2013/02/21/direct-cash-transfers-a-panacea-for-poverty-and-inequality-in-india/

[7] http://populationaction.org/wp-content/uploads/2012/02/PAI-1293-FOOD_compressed.pdf

[8] http://www.fee.org/the_freeman/detail/chinas-one-child-disaster#axzz2rxriSrsV

[9]http://www.bbc.co.uk/schools/gcsebitesize/geography/population/managing_population_rev3.shtml

[AT1]Define priority households?

[AT2]What is the ‘officially defined’ poverty line?

[AT3]Be more specific. Are you referring to the brown shoots emerging post the 2008 global meltdown debacle?

[AT4]ATTENTION, NIMIT: This graph needs to be replaced with the ones that must be superimposed. This is temporary.

[AT5]This will be replaced by another table. Not final yet.

v