MACRO ECONOMICS

AND
BUSINESS ENVIRONMNET
PROJECT REPORT
ON

FOOD SECURITY BILL

Submitted to
Dr. Ritika Gugnani

Submitted by
(GROUP 5)
Khushboo vishnani
Pavan kr. Gautam
Kunal Madan
Komal Bakshi
Ravi Balyan
Rohit Mohan

INDEX
CONTENTS
Food Security Introduction
Government Acts
Evolution of Food security bill
Scope of Bill
Features of Bill
Role of PDS
Investments and Expenditure Required
Challenges
International Concerns
Limitations
Solutions
Analysis and Findings
Conclusion
Bibliography

PAGE NO.
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16-17
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19

FOOD SECURITY
Food security is one of the most fundamental needs of security. Food security focuses on the
availability of the food and its adequate use to access the nutritious & balanced diet.
The other side of coin is food insecurity which is something broader in scope. Food insecurity
includes hunger, malnutrition. Poverty and health are also inter-related with food security.
People with poor health are not productive and unemployed people are not able to purchase
food. Therefore food, poverty, health are tied with single thread and forms nexus of foodnutrition-livelihood.
With the passage of time measuring food security is becoming quite challenging, because of
continuous growth in population. A study shows that global population has doubled to 7.2
billion since 1950, but the number of hungry people are same, which means there is decline
in percentage terms to a number of hunger people. At present 1/8 percentage of people are
hungry as when compared to 1/3 in 1950. This is because latest updated technology being
used in production, increase in foreign trade among countries.
Our country calculates undernourishment on the basis of minimum daily intake of total
calories by men, women, children. Majority of hungry people resides in labour intensive food
production. They need additional calorie for proper growth and development therefore,
continuous efforts are made by experts to calculate more reliable and effective data by
exploring new information and latest technology. Country like India have majority population
which resides in rural areas and they are peasants, poor class, or labour workforce. These
people might not have food because of low productivity ,low income ,which restricts them
from purchasing food, sometimes the food produced, harvested are spoiled by pest or by
change in climate. Change in climate includes flood, draught rise in temperature. Climate
change is worst in sub-saharan, Africa, South Asian countries and therefore there is insecurity
of food. According to, world bank report there will be decrease of 15 to 18% in crop yield in
coming years in these regions.
WHO defines three crucial facets of Food Security :

Availability of food
Access to food
Consumption of food.

Food availability is having availability of sufficient quantities of food on a consistent basis.

Food access is having sufficient resources both economic and physical to obtain appropriate
food for a nutritious diet. Food use is the appropriate use based on knowledge of basis
nutrition & care as well as adequate water and sanitation. By, this we can say poverty ,poor
health, hunger, are the result of low income ,poor productivity, climate change and therefore
in order to overcome these challenges we need food security bill.

IMPORTANT GOVERNMENT ACTs

NFSA(National Food Security Act) is fifth in a series of what might be said as a right-based
approach. The Right to information act, has introduced transparency in governance. The
Right to work through the rural employment guarantee law (MGNREGA), The forest rights
Act giving tribals the right to forest produce, and The Right to education Act that has sharply
increased student enrolment in schools are the other entitlements put in place by the
government.

FOOD SECURITY BILL IN INDIA

Food security has been entitled as right which widens its scope by becoming specific and far
reaching. The moment access to grain becomes legally enforceable right and mere favour
from state the game changes completely. It includes the level of administrative preparedness
to meet the resulting PDS grain demand. It opens the gateway for NGO to identify any
district or block where no PDS exists. They can file petitions in courts about people who are
denied from their rights. The poor people are not having resources to claim what is rightfully
resources due to them by taking their complaints against the local administration through the
local administration through the grievances redressal mechanism. This is an area where
responsible NGOs can step in and fight battles on behalf of the deprived people. OLIVER DE
SCHUTTTER, United Nations Special Reporter on the Right to Food, said the food law had
global significance : It is an important movement for the right to food in India. India is the
most populated country of the world, containing 17.2% of world population. But according to
the report of Global Hunger Index Indias condition is extremely pathetic. 25% (30 crore)
people of India do not take complete meal two times. In this scenario food security is must in
India

EVOLUTION OF FOOD SECURITY BILL

President Mrs. Pratibha Patils declaration for the first time in parliament on June 4, 2009 that
a national Food Security Act would be formulated, took more than four years to bring in
ordinance. It was started through following process:1) The Sonia Gandhi-led National Advisory Council in 2010, drafted the bill originally
and proposed legal entitlement for 75% of Indias population.
2) A panel led by C Rangarajan recommended lowering entitlements and reforming
PDS.
3) In September.2011, the food ministry circulated a draft report for public comments.
4) In Dec.2011 , food security bill was first tabled in Parliament.
5) In 2012, bill goes to the Standing Committee of Parliament. Jean Drezz and some
economists push Plan-B, which removes distinction between priority groupsband nonpoor. Standing Committee was suggested to provide 5kg per person a month.
6) In Jan.2013, Standing Committee submits recommendations. Final version of bill
incorporates Plan-B & Standing Committees recommendations.
7) In May 2013, Bill was tabled in the Lok Sabh in Budget session but not taken up due
to chaos in Parliament.
8) In July 2013,Cabinet Committee on Economic Affairs passes ordinance on food
security covering 67% of the population and enacted into law on August 2013.
9) The National Food Security Act, 2013 was signed into law on September 12, 2013.

SCOPE OF FOOD SECURITY BILL

According to Commission on Agricultural costs and Prices (CACP) bill is the biggest ever
experiment in the world for distributing highly subsidized food by any government through a
right based approach. The Act further says that functioning of the bill will be by PDS , to
cover the two-third population i.e. about 820 million people. As per the Act Lok Sabha
Standing Committee on Food estimated that total requirement of foodgrain in order to
achieve the target will be approximately 61.55 million (metric) tonne in 2012-13. According
to, CACAP total requirement of food in May 2013 on an average through PDS is calculated
as 2.3 mt for wheat (27.6 metric tonne annually) and 2.8 metric tonne for rice (33.6 mt
anually). CACP estimated rice and wheat required is about 61.2 million metric tonne.
Standing Committee estimated value of additional food subsidies during 2012-13 works out
to be Rs. 2409 crore, or about $446 million at the current exchange rate for a total
expenditure of 1.22 trillion rupees. CACP reported current economic cost of FCI for
acquiring, storing, distributing foodgrains is about 40% more than the procurement price. The
expected expenditure of 1,20,000 crore for NFSB is merely a drop in an ocean.
There is a requirement of additional expenditure for scaling of operations, enhancement of
production, investments for storage, movements, processing and market infrastructure etc.
For implementation of bill there is requirement of expenditure of about 1,25,000 to 1,50,000
crore. Minister of Consumer Affairs, Food and Public Distribution K.V. Thomas in an
interview stated that it is not just the responsibility of Central government but State
government is also equally responsible. India will be known in the world for eradication of
hunger, malnutrition and poverty. Bill will focus on providing food security to 75% of rural
population fulfilling nutritional needs of children, pregnant and lactating women. The
government estimated cost on food security will come nearly 11.10% of total receipts.
CACPs estimated cost of food security comes at 21.5% of total receipt. Economists Bhalls
estimated cost of food security comes at around 28% of total receipt, once the cost of food
security is calculated as percentage of total receipt of government from current financial year
we can see how huge the cost of food security is actually.CACP warned that enactmented of
bill will create severe imbalance in production of oilseeds and pulses and will create demand
pressures which will inevitably spillover the market prices foodgrains. The higher food
subsidy will raise fiscal deficit of government. The commission further said that bill would
restrict private initiative in agriculture, reduce competition in market place due to government
domination of grain market, shift money from investments in agricultures to subsidies and
continue focus on cereals production when shifts in consumer demand patterns indicate a
need to focus more on protein, fruits & vegetables.

FEATURES OF FOOD SECURITY BILL

75% of rural and 50% of the urban population are entitled for three years from
enactment to 5kg foodgrains per month @ Rs.3, Rs.2 and Rs.1 per kg for rice , wheat
& , coarse grains. States are responsible for determining the eligibility criteria.
Pregnant women and lactating mothers are entitled for nutritious take home ration of
calories and a maternity benefit of at least Rs. 6,000 for 6 months. Children 6 months
to 14 years of age to receive free hot meals.
The central government will provide funds to states in case of short supplies of
foodgrains. The current allocation of foodgrains will be made by central government
for atleast 6 months.
The state government will provide a food security allowances to beneficiaries in case
of non-supply of foodgrains through Public Distribution System.
The eldest women in home, 18 years or above, will be the head for the issuance of
ration card.
There will be state and district redressal mechanisms and State Food Commissions
will be formed for implementations and monitoring of the provisions of the Act.
Three-tier independent grievance redressal system.
Antyodaya Anna yogana households are entitled to an additional 10kg of foodgrains per
household. An additional allocation of foodgrains of 6.5 million tonnes for Other Welfare
Schemes is also included in Act. This includes provision of an additional 5kg of grain per
month to pregnant women and new mothers, and free mid-day meals in schools in age
group of 2-16 years. The total foodgrains requirement is estimated as 61.2 million tonnes
& this includes an additional 2.9 million tonnes to protect the allocation to states under
Public Distribution System.
According to Department of Food and Public Distribution following food security
schemes are allocated to some states
STATES THAT HAVE FOOD SECURITY SCHEMES
Andhra Pradesh
35 kg rice at Rs.1 per kg
Chhattisgarh
35 kg rice at Rs.2 per kg.
Kerala
Rice at Rs.2 per kg for BPL, universal PDS
Karnataka
30 kg rice at Rs.1
Madhya Pradesh
30 kg wheat at Rs.1
Odisha
20 kg rice at Rs.1 a kg.
Tamil Nadu
20 kg free rice a month
West Bengal
Rice at Rs.2 per kg in selected area

ROLE OF PUBLIC DISTRIBUTION SYSTEM (PDS)

National Food Security Act has put the Public Distribution System at the core of the national
mission to feed the hungry. The value of PDS is demonstrated well in many states.
Chhatisgarh, and Tamil Nadu being leading examples have improved the functioning of the
PDS beyond all recognition. In Chhattisgarh the system has turned out to be very successful
affair because of the importance and attention paid by state government to it. GPS trackers
were installed in ration shop trucks to keep tabs on them and SMSs to individual ration shop
consumers on the grain being dispatched with details of when it will arrive at shops, & so on.
But functioning of PDS in many states are leaky. There are many adequacies of PDS they
are:1)
2)
3)
4)

Its uneven coverage in rural areas

Its inability to serve the deserving person
The huge leakages in form of diversion of subsidized grain to open market
Utilization of highly subsidised cereals by above poverty line people by using fake
identities

Thus PDS mechanism suffers from wastages, leakages, diversion, underutilisation, exclusion
errors. Steps are required to make it corruption free, efficient and accountable through
provision of better infrastructure, fixing accountability on key functionaries and introducing
systematic reforms to ensure financial and institutional issues with regard to effective
implementation of PDS.
PDS can be revamped and redesigned by:1) Opening new outlets with providing services in morning and evening hours so that
people can fetched grains.
2) Computerization of records
3) Stringent enforcement and establishment of grievances redressal mechanism
4) Decentralization procurement and distribution system
5) Making availability of locally demanded foodgrains
6) Inclusion of millets and other items under PDS
7) Allowances in lieu of loss of wage
A well-functioning PDS liberates people from constants fear that might be difficult to make
ends meet if crops fails, or someone falls ill, or if there is no work.

INVESTMENTS AND EXPENDITURE

FOOD SECURITY BILL

REQUIRED

FOR

The quantum of food subsidy in Indias GDP has been less than 1%, which clearly needs to
be scaled up if food security has to be expanded further. This share was 0.8% in 2004-05,
which declined marginally to 0.89% in 2009-10, and dropped to 0.74% in the current budget
(2012-13 BE). Similarly, the share of food subsidy in the total budget has been flyng
somewhere around 5% since 2004-05. The present provision of food subsidy in the union
budgets is based on allocation of foodgrains to different sections of the population, i e,
Antyodaya Anna Yojana (AAY), BPL and APL. CIP of per quintal of wheat for AAY, BPL
and APL is Rs 200, Rs 415 and Rs 610, respectively. Similarly, CIP of per quintal of rice for
AAY, BPL and APL is pegged at Rs 300, Rs 565 and Rs 830 (for Grade A), respectively.
Further, the present provision of food subsidy has been made on the basis of the economic
costs (EC) of per quintal of wheat and rice, i e, Rs 1,580.6 and Rs 2,068.9, respectively. To
put in place the universal PDS for the provisioning of rice and/or wheat and millets, certain
following assumptions are taken to arrive at an estimation of food subsidy in the union
budgets.
Total number of households at present is 24 crore (approximate)
Provision of distribution of rice or wheat under PDS to all households at 35 kg per month
per household;
Provision of distribution of millets under PDS to all households at 5 kg per month per
household economic cost of wheat and rice will not increase from their present levels of Rs
1,580.6
and Rs 2,068.9 per quintal of wheat and rice, respectively; further we assume price of millets
as Rs 1,500 per quintal;
Distribution of rice and wheat is in the ratio of 2:1.Based on these above assumptions, the
total amount of cereals needed for distribution through PDS would be around 115.2 million
tonnes (i e, 67.2, 33.6 and 14.4 million tonnes, respectively for rice, wheat and millets), and
the total amount of subsidy per annum would be Rs 1,85,418 crore (at current prices). The
food subsidy bill stood at Rs 75,000 crore as per 2012-13 BE and thus an additional outlay of
Rs 1,10,418 crore would be needed. The above estimate suggests that an additional amount of
Rs 1,10,418 crore is required over of the above the existing food subsidy bill of the union
government to universalise the distribution of rice, wheat and millets.
The government estimates suggest that food security will cost Rs 1,24,723 crore per year. But
that is just one estimate but, the cost at around $25 billion. Commission for Agricultural
Costs and Prices(CACP) of the Ministry of Agriculture in a research paper puts the cost of the
food security scheme over a three year period at Rs 6,82,163 crore. During the first year the
cost to the government has been estimated at Rs 2,41,263 crore . Economist Surjit Bhalla put
the cost of the bill at Rs 3,14,000 crore or around 3% of the gross domestic product (GDP).
The trouble here is that by calculating the cost of food security in terms of percentage of
GDP, we are unable to understand the seriousness of the situation that we are getting into. In
order to properly understand the situation we need to express the cost of food security as a
percentage of the total receipts(less borrowings) of the government.

The receipts of the government for the year 2013-2014 are projected at Rs 11,22,799 crore.
The government's estimated cost of food security comes at 11.10%(Rs 1,24,723 expressed as
a % of Rs 11,22,799 crore) of the total receipts. The CACP's estimated cost of food security
comes at 21.5%(Rs 2,41,623 crore expressed as a % of Rs 11,22,799 crore) of the total
receipts. Bhalla's cost of food security comes at around 28% of the total receipts (Rs 3,14,000
crore expressed as a % of Rs 11,22,799 crore).
Once we express the cost of food security as a percentage of the total estimated receipts of
the government, during the current financial year, we see how huge the cost of food security
really is. This is something that doesn't come out when the cost of food security is expressed
as a percentage of GDP. In this case the estimated cost is in the range of 1-3% of GDP. But
the government does not have the entire GDP to spend. It can only spend what it earns.
The cost of food security is expressed as a percentage of total receipts of the government is
likely to be even higher. This is primarily because the government's collection of taxes has
been slower than expected this year.For the first three months of the financial year (i.e. the
period between April 1, 2013 and June 30, 2013) only 11.1% of the total expected revenue
receipts (the total tax and non tax revenue) for the year have been collected. When it comes to
capital receipts(which does not include government borrowings) only 3.3% of the total
expected
amount
for
the
year
have
been
collected.
What this means is that the government during the first three months of the financial year has
not been able to collect as much money as it had expected to. This means that the cost of food
security will form a higher proportion of the total government receipts than the numbers
currently tell us. And that is just one problem.
It is also worth remembering that the government estimate of the cost of food security at Rs
1,24,723 crore is very optimistic. The CACP points out that this estimate does not take into
account "additional expenditure (that) is needed for the envisaged administrative set up,
scaling up of operations, enhancement of production, investments for storage, movement,
processing and market infrastructure etc.

CHALLENGES OF FOOD SECURITY BILL

1. INCREASING PRODUCTION AND NUTRITION

The FAO estimates that crop production will need to increase by 70% by 2050. If this is to be
achieved then coming 4 decade period will see more food production. The many groups of
expert in the field of agriculture, trade and rural development support a model called
sustainable development. This can be achieved in 3 ways, i.e. agro ecologically, genetically
and socio-economically. Improving the diversity and nutritional value of food farmers grow
their own subsistence is another way ensure adequate & stable nutrition. Biotechnology
research is helping to breed crops to better withstand heat, draught and floods and have key
micronutrients.

2. NEED FOR CHANGE IN CONSUMPTION PATTERN

Consumption pattern plays a important role in food insecurity because of their influence on
the types of foods which are produced and the resources required to grow them. For example
1kg of wheat requires 1,500 litre of water whereas same amount of beef requires ten times
that amount. Similarly a third of wheat production goes to feed animals rather than humans.

3. WASTE AND POST-HARVEST LOSSES

Around a third of all food produced ends up in waste. It occurs mostly when food crops spoil
after harvested. Such post-harvest losses are caused by inadequate storage, transportation, or
market access. Better understanding of storage systems and political commitment can help to
address this issue. But, science & technology are also stepping in.
4. GENDER GAP
Technology can make a difference but it is important to look at who is able to receive it.
Rural women are the most important groups for addressing food insecurity and malnutrition,
because these people are involved in food preparation at home. Individuals women farmers
yield are lower than men on average of about 20 to 30%. This happens because of differences

in their ability to access resources like high quality seeds & fertilizers. Reasons for this
differences includes cultural norms, unequal land rights and womens domestic labour.

5. SUSTAIN AVAILABILITY OF FOODGRAINS

Sustained availability of food grains with public authorities in wake of the legal right
guaranteed to entitled beneficiaries is the major challenge. Self sufficiency has been achieved
in food grain production at 257 million tonnes despite the growing pressure on land and water
as a result of climate change. There is overexploitation of ground water resources in the states
like Madhya Pradesh, Bihar , Uttar Pradesh, Orissa, West Bengal.
6. EFFICIENCY OF THE FOOD GRAIN PROCUREMENT, TRANSPORTATION
AND DISTRIBUTION CHAIN
FCI is applicable in entire country but it works in few surplus states such as Punjab,
Haryana, Western UP and Andhra Pradesh. CACP says that it would be cheaper to
procure food grains from states such as Madhya Pradesh, Bihar, Gujarat, etc. and deliver
to neighbouring deficit/remote states in Central, Eastern and Western India. This could
also possibly reduce the wastage of food grains. Additional procurement, storage and
distribution by the FCI under NFSA would require rail head connections for all FCI
storage points and increase in bulk wagon availability with Indian Railways. One key
aspect that needs immediate attention is reform of the FCI apparatus with allowance for
public private partnerships in physical movement and storage of grains.

7. ELIMINATE LEAKAGE AND CORRUPTION

Another challenge is to eliminate leakage and corruption and ensure stringent monitoring
under NFSA at the last mile distribution points in states. States such as Tamil Naidu and
Kerala by computerization of databases and using hologram. The states like Madhya Pradesh
has taken a significant step and used the private sector to computerize the PDS and register
beneficiaries with the biometric Aadhaar numbers as well as provide food coupons, led
technologies.
8. QUALITATIVE IMPROVEMENT IN FOOD ABSORPTION
Long term challenge is of qualitative improvement in food absorption, especially for women
and children, by creating synergies between public health, sanitation, education and
agricultural interventions. Creation of quality rural and urban infrastructure through
community participation, by converged programs, like Mid Day Meal , National Rural Health
Mission, Total Sanitation Campaign , Integrated Child Development Program has to be
achieved through effective public private partnerships in states. NGOs such as Akshaya Patra
that delivers freshly cooked, nutritious daily meals to 1.3 million children in government

schools through twenty locations across nine states in India need to be encouraged, scaled
and institutionalized.
9. DISPARITIES IN THE DISTRIBUTION OF PDS BENEFITS
Offtake per BPL cardholder is high in WB, Kerala, Himachal Pradesh, and Tamil Nadu as
compared to that in Bihar, Madhya Pradesh, Uttar Pradesh and Rajasthan which account for
largest amount of poverty in India.
10. FINANCIAL BURDEN
The immense financial burden of the NFSA will translate to mean rising food subsidy. From
Rs 17,494 crores in 2001-02 the food subsidy has shot up to Rs 72,823 crores in 2011-12.The
projected subsidy bill of Rs1,25,000 crores may be underestimated as it fails to account for
the large procurement, storage and distribution costs, rising minimum support price which
State has to offer to farmers as an incentive to increase production and to cover rising cost.
11. FORCE GOVERNMENT TO IMPORT
A poor harvest may force Government to import. When India enters the world market with
such huge demand the world prices will rise. This would increase our import bill and
Minimum Support Price will have to be increased to compensate for rising world prices.
This will lead to raise in the ballooning subsidy bill and inflation pressures.

INTERNATIONAL CONCERNS ABOUT FOOD SECURITY

BILL
After the implementation of Housing and Food Security Act in 2013 the birth anniversary of
late Rajeev Gandhi in Delhi, Haryana, & Uttarakhand some leading food producing member
countries of the world like US, Canada, Pakistan raised the issue of subsidy because it was
increasing the threshold limit. India was asked to explain the effect the legislation will have
on global stocks and commodity prices. As, Agreement on Agriculture allows market
distorting subsidies only upto a limit of 10% of total production. Concerns about was raised
in WTO meeting at Indonesia in Bali, where several agricultural producing-exporting
countries talked about stockholding of food by countries such as India & Thailand
depressing global prices and affecting their export.
The issue of NFS Act, 2012 was on prime agenda of WTOs Bali ministerial conference in
December 2013. But, India did not succumbed by the pressure of developed countries.India

argued providing Food Security was the Sovereign Right of the country and it can not be
comprised. India was supported by the G-33 countries including China. As a result a
consensus emerged on this issue in the form of Peace Clause was signed which means no
dispute can be raised or complaint can be filled before WTO for four years against any
countries for adopting trade distorting measures on account of food security of WTO limits of
10%.

LIMITATIONS OF THE ACT

Corporate lawyer have listed over crucial shortcomings of the Act which requires careful
handlings.

Corporate governance
Restrictions on lawyers of subsidiaries
A sea change in auditing profession : appointment of auditors including mandatory
firm rotation.
Eligibility , qualification and disqualification of auditors, limits on the number of
audits.
Clauses on independent directors and the manner of their selection
Power to comprise or make arrangements with creditors and members
Merger and amalgamation of companies
Valuation of register valuers

SOLUTIONS ROR SUCCESSFUL IMPLEMENTATIONS OF

NFSA
The government has to create robust process and provide specific guidelines for
identification of priority families. Biometric based Aadhaar will provide the benefit of
de-duplication and ghost card identification as well as that of enabling ration cards to
their rightful owners.
Since the entitlements under the Act are dependent on the numbers of members in
each family, a responsive for updating family members details like death , birth,
marriage, divorce and resulting changes in foodgrain entitlements will ve required.

 A mechanism to eliminate Fair Price Shop is required to prevent large-scale diversion

of foodgrain from TPDS. This is essential not only to establish that each beneficiary
is being provided the right to food.
States will need to establish highly detailed set of directives to the district and block
level authorities responsible for on-the-ground implementation. These directives must
provide a pragmatic set of procedures, target timelines and milestones. Continuous
monitoring and evaluation of process and outcomes will be required to ensure that the
provisions of the envisaged system are not diluted during implementations.
Government will need to invest sufficient resources and build adequate organisational
capacity at the centre and at state level to successfully execute this mammoth program
within a reasonable time and cost.
The focus would shift from yield per hectare to per litre of water. With 45 % of
cultivable land under irrigation relies heavily on monsoon for agricultural output. It is
therefore necessary that the country invest heavily on creating requisite infrastructure
and government should take measures for to prevent misuse of water.
Imbalanced application of nutrients & excessive mining of micronutrients, leads to
deficiency of macro and micronutrients in the soil. The research &development
challenge would be to stop further degradation and go in for rehabilitation of
degraded lands and water resources in cost effective manner.
A balance between higher production of food grain and change in consumption
pattern is to be made. Effort should be made by government to ensure that farmers
uses resources judiciously and invests in land & right crops. Nearly 80% of
agricultural investments comes from private sector and mostly from small farmers.
Issues such as exports controls, levies & restriction on stock holdings & inter-related
movements of food would come into focus. The research should focus on to evolve
technologies and management options to suit the needs of smallholders agriculture
and involve them in agriculture supply chain through institutional innovations.
The consumption basket of an average Indian has been diversifying away from cereals
and moving towards more vitamins ,and protein foods. All these foods are bought fro
open market. If cereal inflation in market is hovering at 18%, vegetables prices
soaring at 46% and protein goods at 11% in July 2013 over last July 2012 then right to
poor will be in trouble. Therefore priority should be to bring down food inflation from
current level of 12% to less than 4%.

ANALYSIS
Poverty Ratio and Poverty Line
The root cause for providing food subsidy through NFSA is poverty prevailing in country. In
order to identify the poor class living in the society, poverty line is the benchmark. According
to the report of Tendulkar committee the national poverty line for rural areas for the year
2011-12 is estimated to be Rs.816 per capita per month and Rs.1,000/- per capita per month
in urban areas. Therfore, for a family of five, all India Poverty Line in terms of consumption
expenditure would amount to about Rs.4,080/- per month in rural areas and Rs.5,000/- per
month in urban areas.
Per Capita Poverty Line (Rs)
Per Capita Poverty Line
Per Month

Individual
Family of 5 person

Rural
816
4080

Urban
1,000
5,000

Per Capita Poverty Line Per

Day

Rural
27.20
136

Urban
33.33
166.67

Based on the poverty line, Government of India declares the poverty ratio.
Poverty Ratio & Number of People
Year

1993-94

Poverty Ratio %
Rural Urban Total
50.10 31.80

45.30

No. of poor (million)

Rural
Urba
Total
n
328.6 74.50
403.70

2004-05
2011-12

41.80 25.70
25.70 13.70

37.20
21.90

0
326.30 80.80
216.50 52.80

407.10
269.30

Poverty ratio in the year 2011-12 was 21.9 percentages and number of poor according to this
ratio comes to 269.3 million. Here, we can see that the numbers of poor in the year 1993-94
were 403.70 million which were reduced to 269.30 million by the year 2011-12, & this the
reduction of more than 33%. And as a result the poverty ratio was also reduced by more than
50% during 1993-94 to 2011-12.
Poverty and Ration Card
As per the latest available data of Ration cards, 45.89% who are either poor or poorest of
poor and 54.11% are from Above Poverty Line category.

Ration cards and fair price shop

Ration Cards in Lacks as on (31-12-2013)
No. of fair price shop
515108

BPL
870.85

AAY
247.633

BPL = Below Poverty Line

AAY = Antyodaya Anna Yojana (Poorest of the poor)
APL = Above Poverty Line

APL
1318.78

Total
2437.26

The current population of India as on 21 st February 2014 is 124.90 Crore. As

per the poverty estimates of 2011-12 the average household size of 5 (rounded off) was
considered while calculating poverty line.

Now as per the above table total numbers of ration cards issued by the year 2013 were
2437.26 Lacks. So, if number of ration cards are multiplied with average household size of 5,
then the number of people benefited from the government welfare schemes through ration
cards will be 121.86 Crore . This shows that still total number of people who are not having
the ration cards are around 3 Crore.
As per planning commission 22% Indian population is poor, whereas ration card data states
that there are almost 46% who are coming either in BPL category or in AAY category. This
clearly indicates that either the poverty line is not properly defined or the ration card holders
are taking undue advantage of the scheme. This clearly reveals that around 24% (46%-22%)
of the beneficiaries are doubtful. This shows that amount of food subsidy is going in wrong
pockets which is the result of corruption or leakage in the public distribution system.

Public Distribution System and Leakage

The Government is going to implement this act through existing Public Distribution System.
The above analysis is based on the ration card data of December 2013 and poverty line
clearly reveals that, there is a leakage of 24% in the PDS while as per Gulati A. et. al. (2012)
there is a leakage of 40.4% in the PDS.
Subsidies (crore)

Fertilisers

2012-13

65974.1

Budget 13- Revised figure of

14
food subsidy with
NFSA
65971.5
65971.5

Food

85000

90000

124747

Petroleum

96879.87

65000

65000

Interest

7415.88

8061.34

8061.34

Others

2384.58

2050.68

2050.68

Total Subsidies

257654.43

231083.52

265830.52

Findings

Government will cover 67% of population under this act but the poverty ratio in India
is 26% as per international poverty line and 22% as per national poverty line,
therefore unnecessary coverage of 41% of the population will increase the cost of
subsidy.
.
The State Government will prepare guidelines and identify priority households. This
means that the Central Government does not have any exact data of actual
beneficiaries of NFSA, yet it claims to cover two third of the population.

Government has proposed to implement this act through PDS. As per the finding there
are 3crore people who do not have ration cards but Government has not mentioned
any clear guidelines for including these people under NFSA

If the government would have resolved the issue of leakage in PDS, then Rs. 30000
crore could have been saved .

One of the reforms suggested by government for improving PDS is to leverage

Aadhar cards for unique identification, but this step is not going to be helpful as the
Supreme Court of India has made Aadhar non-mandatory for getting any social
benefit.

The government has proposed to implement cash transfer facility in case of nonsupply of food grains but only 10% of the poor avail banking facility in India.
Providing banking facility to 90% of the poor is a big challenge for the government.

Computerization of fair price shops and door step delivery are also among the
proposed reforms by government. But looking to the current scenario it seems a
challenging task.

CONCLUSION
The success of Act depends on efficient grievance redressal, tackling corruption and
stakeholders active involvement. Subsidised food will reduce the food spending of the poor
and place some surplus money in their hands. This surplus money which would then be spent
in India will stimulate domestic consumer demand. Unless the Act is effectively
implemented, hunger and poverty will continue to affect our country.
The Act has potential to bring rich dividends especially in rural areas as it will increase their
productivity, labour efficiency, reduced expenditure on health and reduced migration to cities.
India with population of more than 1.2 billion if wants to become a global super power then
she has to eliminate hunger and malnutrition which is affecting more than one third of the
population.
An African quote is apt to mention in this context.
Anybodys
Hunger is Everybodys Shame.

BIBLIOGRAPHY
Books
1. Introduction to Economics S.K. Aggarwal
2. Indian Economy- Singh

Websites
1.
2.
3.
4.

www.wikipedia.com/foodsecurity
www.thehindu.com
www.forbes.com/indias-food-security-bill
indiacode.nic.in