Food Security Bill May Unwittingly Decelerate Foodgrain Production
The road to hell is paved with good intentions is a popular aphorism. Many a time, good intensions have wreaked havoc. For good intensions to fructify, it needs to be supplemented with good plans and adequate resources. Strangely, the policy wonks in India, where good intensions alone would suffice to convert a wish into a policy, are ever inclined to disregard this fact. The latest case in point is the food security Bill, which has just overcome its final obstacle in Rajya Sabha and awaits the President’s assent to become a legal right.
The National Food Security Bill is certainly founded on laudable intentions. However, the seemingly innocuous nature of many aspects of the Bill could derail the entire foodgrain production and supply mechanism. The Bill 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 to people to live a life with dignity.” The objectives of the Bill are noble and worth pursuing. However, does the agrarian economy have the resources to achieve the level of production of foodgrains required, given its existing constraints?
The Bill proposes to provide 7 kg of foodgrains per person per month at a highly subsidized price not exceeding Rs. 3 per kg for rice, Rs. 2 per kg for wheat and Re. 1 per kg for coarse grains. The coverage would be up to 75 percent of the rural population and up to 50 percent of the urban population.
As per the State of Indian Agriculture 2012-13, Department of Agriculture and Cooperation, the foodgrains production reached its peak of 259.32 million tonnes (MT) during 2011-12 (Final Estimates) and the production of rice, wheat and coarse cereals were 105.31, 94.88, and 42.04 MT respectively. For the year 2012-13 (2nd Advanced Estimates) the production of rice, wheat and coarse cereals are estimated to be marginally lower at 101.80, 92.30 and 38.47 MT respectively.
Foodgrains are procured by Food Corporation of India (FCI) and other government agencies for public distribution of foodgrains under various welfare schemes. The procurement-production ratio is around 35 percent for rice and wheat (Discussion Paper 2: National Food Security Bill – Challenges and Options, Commission for Agricultural Costs and Prices). Average production of foodgrains for the last six years is 239.6 MT, including 184 MT of rice and wheat. The procurement at the existing 35 percent of production would result in average stocking of 65 MT of rice and wheat. However, the requirement of foodgrains under the Bill would be around 75 MT.
Therefore, at the existing rate of production and procurement, the shortfall would be 10 million tonnes. In order to procure the deficit of 10 MT, the production needs to be raised by an additional 29 MT. Even if the rice and wheat production continue to stay around the peak level of 105.31, 94.88 MT respectively, there would still be a deficit of 5 MT of both the grains to meet the stipulation of the Bill.
As the total Central Pool stocks of rice and wheat were at 80.5 MT as on 1st July, 2012, the existing stock would satisfy the requirements for the next year or a couple of years. In case of additional requirements in near future, the procurement rate may be (theoretically, at least) enhanced to stock additional grains from private markets including exports (however, practically this would be difficult as the procurement in that case has to be from States other than Haryana, Punjab, Andhra Pradesh, Chhattisgarh, Madhya Pradesh and Uttar Pradesh, from whom already substantial procurement is currently being done, leaving less scope for additional procurement/ production).
In fact, India emerged as the world’s largest exporter of rice during 2011-12, indicating that, if necessary, exports could be curtailed to meet the procurement and stocking requirements under the Food Security Bill. However, this would come at an enormous cost to the consumers, as the private market would be crowded out by government purchases.
A drought or flood would certainly derail the system warranting heavy imports of rice and wheat. It is another issue that the right to food is not guaranteed during periods of natural disasters like floods, droughts etc. But the moot issue here would be the ability of rest of the world to supply the requirements of rice and wheat, if such a situation arises.
The real problem to foodgrains production would, however, start right after the implementation of the Bill. The irony would be that higher the success in implementing the Bill (or Act, after the President’s assent), higher would be the problems it would create. At the epicenter of the problem would be the concept of marketable surplus, the quantity of grains available for selling after accounting for home consumption, seed purpose, kind wages to labour and gifts to friends and relatives. The marketable or marketed surplus depend upon type of crop, incentives for growing a crop (like MSP), size of holding and other related factors.
The marketable surpluses are generally less for small and marginal farmers and the National Advisory Council in its ‘Recommendations on Enhancing Farm Income for Small Holders through Market Integration’ concurs that “small and marginal farmers (SMF) contribute to around 42% of marketable surplus…”
A Working Group document of the Eleventh Five Year Plan of Planning Commission reveals that “of the total production, about 60 percent is retained and stored by the farmers for consumption and use as seed, feed and payment of wages to labourers. Only 40 percent is marketable surplus which is handled by traders, cooperatives and government agencies.” Thus, all the domestic procurements and foreign trade happen only within this 40 percent offered by the farmers in the form of marketable surplus.
Out of 137.8 million holdings, small and marginal farmers (below 2 hectares) hold 117.1 holdings or 85 percent, but use only 44.32 percent of the total operated area. With a farm household size of 5-6 for up to 2 hectares of holdings, the approximate number of small and marginal farmers would be around 586 million. According to Census 2011, the urban population is 377 million and the rural is 833 million. The Food Security Bill proposes to cover up to 75 percent of the rural population i.e. 625 million.
As bulk of the small and marginal farmers are below poverty line, it means the proposed target rural population would easily include most of the 586 million small and marginal farmers, if poverty is the criteria for inclusion. However, the proposed coverage is not based on the recent poverty estimates, which says that only 25.7% of people in rural areas were below the poverty line and only 13.7% in urban areas in 2011-12. Therefore, the proposed coverage could exclude non-poor or rich from the universe population to identify the target population, in which case the possibility of including the whole of the small and marginal farmers is very high or almost certain.
Though the small and marginal farmers hold 44.32 percent of the total operated area, they contribute around 50 percent of the total farm output of the country as per 2002-03 level. The small and marginal farmers devote 70.5 percent of their area for paddy/rice, wheat and coarse cereals, in comparison to medium and large farmers, who earmark only 59.7 percent and 44.5 percent respectively. At present 70% of rice procurement for public distribution is done from Punjab, Andhra Pradesh, Chhattisgarh and Uttar Pradesh; while 80% of wheat procurement is done from Punjab, Haryana and Madhya Pradesh alone. Kirit S Parikh says, “Over 80% of rice is procured from only five states and over 90% of wheat from three to four states.”
Except Punjab where the share of small and marginal farmers in total crop output is 19.3 percent, the contribution of small and marginal farmers in other States are quite considerable– Madhya Pradesh (27.9), Haryana (29.9), Chhattisgarh (46.1), Andhra Pradesh (46.7) and Uttar Pradesh (65.1). Any disturbance in the cropping pattern of small and marginal farmers even in the Minimum Support Price (MSP) influenced States will change the national foodgrain production substantially. As per the Bill, these small and marginal farmers would only be receiving at heavily subsidised prices what they have to toil to produce, thereby disincentivising their future endeavours in producing foodgrains.
Birthal et al. found that “even though small farmers allocate a higher share of their areas to high-value crops, they also allocate a larger proportion of their area to rice and wheat than do medium and large farmers. This indicates that small farmers do not risk their household foodgrain security when they decide to reallocate land to high-value crops.” This explains the low proportion of 40 percent being offered as marketable surplus by small and marginal farmers and the balance 60 per cent being consumed within their family or locality.
The rationale behind the small and marginal farmers devoting a large proportion of their cultivable area to rice and wheat and also to retain about 60 percent of their produce (and offer only 40 percent as marketable surplus) is to secure their food requirements. With the introduction of Right to Food Security and offering foodgrain security to the small and marginal farmers, the incentives for small and marginal farmers to produce foodgrains would definitely wane and incentives for growing commercial crops certainly would go up. Why would a farmer exert himself or herself to produce what he/she would be getting at Rs. 2/3?
Further, unlike foodgrain crops, commercial or cash crops that offer additional income usually have a high proportion as marketable surplus. This would again incentivise farmers to change the cropping pattern against foodgrains (except for wheat in Punjab, which is a commercial crop there with a marketable surplus of around 85 percent) and massively in favour of cash crops.
As procurement of rice and wheat for public distribution is done from very few States, even a massive increase in MSP would not maintain the present cropping pattern in favour of rice and wheat (at the cost of other cereals and pulses, which is truly detrimental to nutritional security and therefore, deserves to be junked in any case). With a drop in domestic production of foodgrains, the country would be left with the only option of exporting foodgrains. For a population like ours, the world economy may not be able to produce adequate quantity of foodgrains and that too at affordable prices. This is a classic case of biting the hand that feeds.
The best way to provide food security would be to enable farmers to produce ample quantity of foodgrains and allow them to rightfully obtain the market-determined price for their produce. This would certainly ensure “access to adequate quantity of quality food at affordable prices to people to live a life with dignity,” which the proposed dole would miserably fail to achieve.
Till such a situation is created, direct cash transfers could be provided to the poor, including the most important small and marginal farmers to continue providing food security to the nation. Food Security Bill in its current form would unwittingly decelerate domestic foodgrain production and derail domestic food supply mechanism and, finally impoverish many.