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Indian Merchants’ Chamber Managing Committee Meeting October 1, 2013 National Food Security Act 2013 G. Chandrashekhar, Chairman IMC Agribusiness and Food Processing Committee
NFSA – Salient features • One of world’s most ambitious welfare programs; • Seeks to deliver foodgrains at highly subsidized rates to over 800 million (~ 12% of world population) covering 70% of country’s rural and 50% of urban population.
NFSA – Salient features • Guarantees minimum 5 kgs of rice (Rs 3/kg), wheat (Rs 2/kg) and coarse cereals (Re 1/kg) respectively person per month at rates that are about 10% of cost or 90% subsidised. • 5 kg covers half of average monthly use person; so, another 5 kg will have to be sourced from open market.
Four dimensions of NFSA • Foodgrain production • Foodgrain procurement • Distribution logistics • Fiscal burden • Ethical dimension? ?
Production • India world’s second largest rice and wheat producer; not food insecure today; but faces real risks in sustaining output levels & growth; will output growth equal demand growth? • What if India faced drought? Adverse consequences of having to import
Procurement • Systemic inefficiencies galore; Trackrecord of procuring / handling 50 ml. t • Inadequate warehousing, unscientific storage, humungous carrying costs • Purchase of 62 -65 ml. t will reduce grain available for open market.
Distribution logistics • Weakest link in supply chain; Grains will be supplied through 450, 000 FPS; leakages are well known; how will they be plugged? Can official machinery and PDS shopkeepers have capacity & interest to serve > 800 million people? Doubts persist
Fiscal • NFSA cost estimated at $ 20 Billion (Rs 120, 000 crores); an incremental cost of $ 6 -7 Billion (~ Rs 40, 000 crores) • Already at an alarming level, fiscal deficit risks worsening • At 90% subsidy on 5 kgs, people will save some cash which will hopefully be used to buy more food in open market; but persistent high food inflation can negate benefits
NFSA and nutrition security • Legal right to food is welcome; but pervasive malnutrition and under-nutrition is a threat; In its present form, NFSA will not meet protein and calorie needs of target population; include pulses and edible oil; • NFSA may be reviewed after three years • Cash transfer?
Thank You. Floor open for discussion • G. Chandrashekhar The Hindu Business Line Kasturi Building, J. Tata Road, Churchgate, Mumbai 400020 Phone: 91 -22 -22885593 – 22021099 email: chandrashekhar. [email protected] co. in