New Delhi: In the latest Union budget presented on February 2, there was a deep slash in foodgrain subsidy for the poor, with a massive 63% cut. To achieve this cost-saving measure, the government in December 2022 put an end to the free-food scheme that was rolled out during the COVID-19, rejigged other schemes under the National Food Security Act and rebranded them under the prime minister’s name.
Two months ago, the government opposed a Supreme Court direction to expand the beneficiaries under the food security law. Petitioners said that the number of people receiving the law’s benefits has been frozen at a little over 80 crore based on the now-outdated 2011 Census, but conservative estimates suggest at least 10 crore Indians are currently excluded from the programme due to population growth.
Now, a tranche of internal government documents accessed by The Reporters’ Collective sheds light on the role of apex policy think-tank NITI Aayog in reducing food subsidies. The documents reveal NITI Aayog has been the strongest opponent of expanding food security programmes. It has repeatedly sought to pare down and radically overhaul the public food distribution system, which gives subsidised rations.
The government’s arguments in the court against expanding the food security programme align with the recommendations of the NITI Aayog. It quoted some of the Aayog’s views in its affidavits submitted to the Supreme Court. Budget numbers show plans to reduce food subsidies by Rs 1,79,844 crore in the next fiscal despite the court’s directive to expand the number of beneficiaries.
The Aayog recommended that the government re-examine whether it is “feasible and desirable” to “continue providing cheaper food grains to nearly two-thirds of the population”, reveal documents.
For now, the National Food Security Act brought in by the previous UPA government in 2013 says that up to 75% of people living in rural and 50% of urban population can get subsidised food from the government, which roughly adds up to two-thirds of the total population.
The NITI Aayog also pushed to lower food security coverage in the middle of the COVID-19 pandemic. And it made these recommendations to draw down the food subsidy despite it being clear that the number of poor was surging and that when people have money problems, the first thing they stop buying is food.
Another tranche of documents show the Aayog also recommended bringing in the private and the corporate sector in the business of procuring grains and providing them to the poor under welfare schemes. At the moment, this is done entirely using state apparatus and agencies.
The Reporters’ Collective sent detailed queries to both the Department of Food and Public Distribution that implements the Food Security Act and NITI Aayog, which is looking to pare down the benefits. Despite reminders, neither responded.
In May 2020, while COVID-19 cases rose, an NGO went to court with the problems of migrant workers who lost jobs and were forced to return home broke. The apex court said the government should find out afresh, based on population growth, how many more people should get food at subsidised prices under the National Food Security Act.
This Act, which was passed in 2013, says that up to 75% of people who live in rural areas and 50% of people who live in urban areas can get subsidised food from the government. According to the law, the Union government uses population data from the Census to decide how many people can get help. Then each state decides the parameters to identify the eligible.
However, since 2013, the number of beneficiaries across all states has been frozen based on the 2011 Census data, which is now outdated. Advocate Prashant Bhushan, representing the petitioners, said that since 2013, the population has increased and the number of people who might need free food grains would also have increased – but since the coverage has been frozen, crores of poor people who need help are left out.
On June 29, 2021, the Supreme Court ruled that the Union government must take steps to re-determine the total number of people covered under the National Food Security Act in rural and urban areas of a state. “It shall be beneficial to a large number of people,” the court said.
The government did not move. In September 2021, Bhushan sent a legal notice to the minister for consumer affairs, food and public distribution, who oversees the distribution of subsidised grains to the poor, asking the ministry to comply with the court orders. He didn’t hear back.
In January 2022, he submitted another petition, seeking the government’s compliance with the court’s orders. Almost six months later, the government responded. In an affidavit, it told the Supreme Court that expanding the coverage under the National Food Security Act would be possible only after a new Census. And it submitted correspondence from the Registrar General and Census Commissioner that showed the Census had been indefinitely delayed. In effect, the government said it had no plans to widen the social security net anytime soon.
The court found a way around the government’s excuses. It directed the government to develop a formula or a policy to ensure that Act was not shackled by the Census of 2011 and that more needy citizens should be able to access the Act’s benefits.
Instead of waiting for the full Census, which by now has been postponed to after the Parliamentary elections in mid 2024, the court told the government to consider population projections for the period between 2011 and 2021 when devising this formula.
Documents show that the court’s directive prompted discussions within the government. The Registrar General, the NITI Aayog, the Ministry of Statistics, and the Department of Food got into parleys. It was in one such meeting on August 31, 2022, that the NITI Aayog first proffered a legal argument to not follow the court’s orders.
It observed, “the Hon’ble SC had not directed to amend the provisions of the Act for re-determination of coverage.” Then pointing out that the NFSA has no provision for using population projections to determine coverage, it said, “the direction of the Hon’ble Court is against the provisions contained in Section 9 of the Act.”
It was setting grounds to oppose the expansion of the food subsidy scheme. If the government did want to follow up on the court’s orders, and yet found it breached the law, it always had the option to amend the law. The NITI Aayog stopped at finding the problem in the Supreme Court order and not the solution.
The government didn’t tell the court about NITI Aayog’s concern. Instead, in September 2022, NITI Ayog wrote a completely different argument to prevent expansion of the scheme. This is the one the government took before the court.
This one argued that there aren’t as many poor people as there were a decade ago and coverage needn’t be increased.
“During the last eight years, since the enactment of NFSA, per capita income of the population in India has increased in real terms by 33.4%. The rise in per capita income of people is bound to have taken a large number of households to higher income class and they may not be as vulnerable as they were in 2013-14.”
This, the experts The Collective spoke to said, is a largely flawed argument.
Per capita income is the average money each person in a country earns each year. When the rich make more money, the per capita income goes up. But during the pandemic, millions lost their jobs and became poor. So, the per capita income number doesn’t show the socio-economic turmoil.
The growing divide between the rich and the poor is reflected in the significant increase in the number of ration card applications in the national capital alone. In 2022, the number of pending applications for ration cards stood at over 10 lakh, a 50% increase from May 2021. Several economic reports have pointed to increasing inequality during the pandemic and in the economic recovery after.
Yet, the Union government placed Aayog’s view, that beneficiary numbers would have gone down, before the apex court.
The government’s argument militates against what the Aayog has earlier acknowledged in early 2021 in a discussion paper that was, uncharacteristically, not put in public domain.
In this paper, the Aayog had estimated that the number of people to be covered under the Act would expand to 89.52 crore from the current 80 crore between 2011 and 2021. In other words, going by law and estimations, 9.52 crore additional beneficiaries rightfully deserved to be covered by the food security law and get subsidised rations.
The internal documents show a more audacious recommendation by the NITI Aayog. The Reporters’ Collective had filed RTI requests to get the correspondence within the government over the case in the Supreme Court. What it found was evidence that the NITI Aayog has been keen to not just pare down but completely alter the food scheme since as far back as 2019.
‘Radically overhaul PDS’
The government’s think tank had batted in 2019 for ‘radical overhaul’ of the PDS, show documents.
It demanded that private companies should be involved in the whole process of buying grains from farmers and giving it to poor people (called PDS), and that the price at which the food is given to the poor should be increased.
The Aayog’s Project Appraisal and Management Division in November 2019 wrote:
“In order to ensure efficient utilization as well as distribution of food grains it is imperative that the distribution of food grains under NFSA is undertaken under PPP (Public Private Partnership) mode.”
The comments were part of a note submitted to the consumer affairs, food and public distribution ministry on tackling malnutrition in the country.
“Private players should be engaged for procurement, transportation and storage of identified quantum of food grains for operational purposes as well as for maintenance of buffer stock in identified areas or at state/national level,” the division’s comment reads.
“This (PPP model) shall ensure cost-effective procurement without leakages, timely distribution as well as proper storage to avoid deterioration of food-grains. Existing systems adopted by FCI/ other state agencies suffer from various issues such as leakage, inclusion/exclusion errors and high cost of transportation/storage,” it added.
Dipa Sinha, assistant professor (economics) at Ambedkar University in Delhi, told The Collective that states with a good PDS such as Tamil Nadu, Himachal Pradesh, Chhattisgarh and others have community- or government-run PDS. “Having a corporate-run PDS would leave no way to hold the system accountable.”
“Privatising the PDS would open up the space for companies with other interests in the food market,” she added.
In the past, there have been instances of the private sector trying to enter the business of supplying subsidised food to children under some schemes, such as the mid-day meal. It led to uproar, forcing then governments to step back from the idea.
“The whole procurement and distribution system under the PDS is trying to correct market errors – by giving the right price to farmers even if the market price is lower and by selling it at a low cost to the consumer even if the market price is higher. Handing this over to traders with other commercial interests would be a conflict of interest,” Sinha explained.
In the recent budget, the Food Corporation of India (FCI), a key agency responsible for procuring grains from farmers, has been given short shrift. Instead of providing it the dues worth Rs 90,000 crore for the current year’s procurement, the government has asked the FCI to take a loan from the market to meet its requirements. This will further reduce the FCI’s efficiency and burden it with paying back the interest on the amount it should have got from the government.
Shreegireesh Jalihal is a member of The Reporters’ Collective, a journalism collaborative that publishes in multiple languages and media.