Full Transcript: What Will Free Rations Under NFSA Mean for the Poor, India's Food Stocks?

Indra Shekhar Singh hosts a discussion with economist Jean Dreze and former agriculture secretary Siraj Hussain to discuss the consequences of PMGKAY's discontinuation and providing free food under the National Food Security Act.

The Union cabinet recently announced the discontinuation of the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), under which free rations were provided to the poor as relief during the COVID-19 pandemic. Instead, it said that the foodgrains provided under the National Food Security Act (NFSA) at a subsidised rate to 75% of the rural population and 50% of urban population would be free for all of 2023. Apart from subsidised rations, the Act also provides for free-of-cost rations to pregnant women, growing children, and other such vulnerable groups. To discuss the consequences of this decision, Indra Shekhar Singh hosted a disucssion for The Wire with economist Jean Dreze and former agriculture secretary Siraj Hussain in a video interview that was published on December 30, 2022. They discuss the reduction in spending on social security, whether foodgrains should be provided for free under the NFSA and maintianing food security for citizens. The following is a transcript of the video, edited lightly for syntax, clarity and style.


Jean, could you please explain to us what is the NFSA and what was the real intention behind it?

Jean Dreze (JD): So I think that the basic idea was, first of all, to end hunger and to provide minimum economic security and food security to everyone. There are huge numbers of people In India, I would say a majority of the population, who lives in very precarious conditions. We are poor to start with and they are exposed to all kinds of contingencies – sometimes it is illness, crop failure, and unemployment. Now we have new contingencies like COVID-19, climate change, and so on. So they are very insecure and the idea is to bring a minimum of economic security to their lives with these food rations – which are not very much of course, five kilos per person per month. It’s not much at all but it does ensure that there is food in the house at all times, and I think that really is important for poor people.

We should remember, however, that the Food Security Act is not just about the Public Distribution System (PDS). There are also very important provisions related to child nutrition. The provision for school meals, and also mid-day meals, under the Integrated Child Development Services. And very importantly – I think this is the most important provision of the Act – universal maternity entitlements.

Unfortunately, the provisions for maternity entitlements has been sidelined. In fact, it’s been violated by the Central government for the last 10 years, but to my mind, it’s a very important provision. Very few countries – certainly in the developing world – have universal maternity entitlements. Again it’s not very much – Rs 6000 per child is really too little – but the principle is very important. And the entitlements can be and should be expanded over time. I think that was the basic idea of the Act.

I’d like to now move to Siraj Hussain. Sir, what do you think is the real shift here? Moving from PMGKAY, which provided free food grains, now we move to a point, and that too for one year only, where people can get highly subsidised rations. Do you think that the Indian administration system and the Indian food reserves can take care of this? Are we equipped enough, strong enough, to take this burden upon our economy and upon our farmers?

Siraj Hussain (SH): Actually Indra, there is no additional burden. In fact, as far as the government is concerned, it is reducing its commitment to provide food grains because before the PMGKAY was introduced, under the National Food Security Act, the beneficiaries were only getting 5 kilograms of food grains per person, per month. Then PMGKAY gave them five kilograms of additional food grains free of cost. So now that additional food grains have been withdrawn, which means that the government’s overall commitment to provide the quantum of food grains will now be lower.

But here, I think, this is a question to both of you..

JD: So, I think what Siraj has said is correct. So basically, there are two things happening at the same time, and it’s not an accident that they have been packaged together. One is the discontinuation of PMGKAY. So the discontinuation of additional food rations that have been provided over the last two years, and the other move is the reduction of issue prices under the NFSA, from Rs 3 per kilo for rice and Rs 2 per kilo for wheat to zero. Now the reduction of prices is neither here nor there. It’s not going to help people very much. I mean, think of the person who used to pay Rs 2 for five kilos a week per month. So they were paying Rs 10 a month. Now they are going to save Rs 10 because they’re going to get it for free. So, Rs 10 a month of subsidy is not going to make a difference to anybody, nor is this going to cost the Central government very much. But what it’s going to do is sweeten the pill of the other move, which is the really big move, and that is the discontinuation of the extra free rations. Now I don’t think that the PMGKAY was sustainable as it was, because we don’t have the food stocks required for that.

Let me clear this up, because it’s important to understand the artithmetic a little bit. The NFSA requires something like 60 million tons of food grain per year – that’s the procurement level around 2013, when the Act came into force. But the procurement levels have increased by leaps and bounds in the meantime, to 70 million tons per year, 80 million tons per and 90 million tons per year, and in the last two years (2020 and 2021), for the first time more than 100 million tons per year. And that’s why the food stocks have been ballooning, despite 60 million tons being offloaded every year under the NFSA.

Now the PMGKAY has solved that imbalance – or you can say it has temporarily resolved that imbalance – in the last two years by hugely increasing the distribution. The distribution was virtually double, more than 100 million tons, and therefore the stocks have been coming down. But now, PDS with PMGKAY is more than what we are procuring. So if you continue, the stocks are going to start melting much below the buffer stock norm. So in that sense, it was not sustainable. But if you discontinue it, I feel that what you are saving from discontinuing it, which is a lot of money – Rs 1.5 lakh crore per year roughly – that should be reinvested in social security measures like giving ration cards to people who don’t have them, investing in health, in school education and pensions and maternity entitlements, including very importantly, proper implementation of the NFSA, because the Modi government has been savagely cutting the budget for mid-day meals and ICDS in the last eight years and as I mentioned earlier, violating the provisions for maternity entitlements. So that money could have been very well used by being reinvested in social security and I’m afraid that may not happen. We will get to know in the next budget, but I fear that it will not happen. In which case, what is happening now is a great reduction of social support which is being sweetened by reducing the issue price to zero under the NFSA.

Hussain sahab, you’ve written articles against this move. Could you tell us what are some of your disagreements with this policy decision?

SH: Actually, what I have written is that the move to make it totally free is not desirable because the government has declared that these free food grains will be available until December 2023. It means that in the run-up to parliament elections, which are due in May 2024, it is very unlikely that the government will start charging anything for the central issue price, which means it is going to continue at least till May 2024 and even after that, it is very unlikely that it will continue.

In the process, the central government is taking an additional burden of about 15,000 crores. I agree with Mr Jean Dreze that there is a need to increase the budgetary allocation for several welfare schemes. I have myself written several articles with Mr Jugal Mahapatra, who was secretary, rural development, for increasing the old age pension, widow pension. You know there are additional amounts. Many state governments like Andhra Pradesh and Telangana have added to that out of their own budget, but the poor poorer states of India – northern India, eastern India – have not done that much.

In addition to that social welfare scheme, I would have recommended the government that there is a need to invest more in agricultural research, so that we can develop climate-resistant technologies. Mr. Dreze works in Jharkhand, he knows very well that from time to time, there are droughts. For example, this year itself there is a drought, then there are floods in Bihar. So there is a need to develop technologies for both paddy, wheat, and other crops so that we are able to produce enough to feed our large population.

This is a question to both you, whoever wants to answer. Now, the Act allows for 75% of the rural population to be covered under the scheme and 50% of urban residents. Now how many people do you think will actually be taking the benefit of this scheme? Can there be any guesses at all?

JD: Let me stress once again, that the reduction of issue price to zero from virtually zero – because you know two rupees per kg for wheat is virtually zero – that’s not of any consequence. The big move is not that. The big move is the discontinuation of PMGKAY and that’s where I think there’s objectionable going on. The reduction of price, as I said, it’s partly sweetening the pill and also very importantly, it’s a very clever political move to steal the show, and steal the credit of the NFSA, because what is going to happen now, is that people are going to get the impression – and the impression will be created – that they are getting free food from Modi or from the Modi government, when actually they are getting it from the NFSA and the Modi government is just adding a tiny extra subsidy. So, I think what we need to focus on is the reduction of food rations under the PMGKAY and how that money should be reinvested.

Now, you ask the question about coverage. The coverage is built into the Act. It’s 75% of the rural population, and 50% of the urban population. Personally, I feel this is quite reasonable. In fact, if anything, I would say it is on the low side. We must also remember that the actual coverage now is much lower, because the population has increased and the coverage has not been adjusted accordingly because the government didn’t conduct the 2021 census. So the actual coverage now is below 60% and that’s another way in which I feel that the present government is undermining the NFSA. So the money that’s being saved by discontinuing PMGKAY, I think should at least partly be used to provide ration cards to some people who don’t have them – we must remember that many poor people don’t have a ration card. For example in Jharkhand, where I live, as Siraj Hussain mentioned, there’s a big problem of young couples not having ration cards because they got married after 2011, when the Socio-Economic and Caste Census was conducted and that is the basis of the distribution of ration cards in Jharkhand. So those who married after that, for them it’s very hard to get a ration card. So why not give them a ration card, now that you’re saving all this money? I think that will be much better than, you know… agricultural research, I don’t dispute it’s important, of course, it’s important. But I think the budget for health, education and social security in India is far too low, and what you’re saving from it now, should be reinvested within that sector.

Mr Hussain, a question for you. It’s already been mentioned that the Indian stock food reserves are at their lowest and we did not have a good paddy harvest and neither wheat. Now, if again, we see a repeat of that in 2023, will this scheme burden the food economy further? Schemes like this, will they push India toward food inflation?

SH: If, God forbid, the wheat crop is again impacted by high temperatures in February and March – as it did last year, then it is quite possible that the procurement level will not be adequate to meet the requirement of NFSA. So I’m hoping that the winter will be good and the temperature will be low enough, about 15°C, so that the wheat crop matures well. As I said, if there is a shortfall, then it may be difficult for the government to procure.

So, what that will entail is very unpleasant. That will attract and persuade the government to bring measures which will force the farmers to sell to the government at MSP – which means that the government will do everything to bring down the market prices so that it is able to procure from the farmers at MSP. So that will harm the farmers’ interest. There are many number of other consequences, I am not going into the details, and therefore we are all hoping, praying, doing everything in our power to ensure that there is good rabi crop, and the rice procurement in the current season is also good.

You see the government has done its bit. Many people have not liked it but I supported the government’s move of banning the export of wheat and then restricting the export of rice by imposing 20% duty on non-basmati rice. These were all measures to ensure food security for Indian citizens, a move which would have harmed the farmers’ interest to some extent, but they were necessary to ensure food security for a large population of India.

Now, where I slightly differ from Mr Jean Dreze is the number of people who are covered. You know, many experts have argued in different reports – for example, the Shanta committee report – that the public should be reduced to 40%. But in the absence of a consumption expenditure survey, we do not know where the poverty are going. Even though Dr. Sujeet Bhalla and Ashok Virmani have said that poverty is down to 1%. The World Bank paper says that poverty is down to 10%. So there should be, from the government side, an informed view as to what is the level of poverty. So if it is possible to bring down the coverage, the government is able to do that.

JD: Can I differ on this?

Sure, please go ahead.

JD: You know, the NFSA is not just for people who are below the poverty line set by the Indian government’s abysmal criterion. That’s why I began by stressing that it’s about protecting people from insecurity. Because there are people above the poverty line who are nevertheless, at risk of poverty. And we need to protect those people as well. Let us not forget that when the Act began in 2013, now let us think of the 75% coverage in rural areas, what does it mean? It means, or it meant at that time – roughly – households that did not earn more than Rs 6000 a month. Now, are you saying that anyone who earns more than Rs 6000 a month – maybe today it would mean Rs 10,000 a month – doesn’t deserve any kind of social support? I cannot agree with that. I think that, you know, we have to cover a broad range of the population well above the poverty line, also bearing in mind that there are big exclusion errors, and we have to take those into account. I think taking all that into account, a coverage of 75% rural areas, frankly, I don’t think it’s unreasonable at all. The priority today should not be to reduce it but to implement it because as I said the actual coverage is at 60%.

An employee inspects a godown of Food Corporation of India (FCI) where rice bags are being stored in Srinagar, April 14, 2020. Photo: PTI /S. Irfan

Now, I’ll move to my last question and I’ll allow both of you to answer that. This one deals with economics. On one hand, India is telling the world that we want to be the world leaders, we will have a $5 trillion economy. And here we have, a necessity to feed 75% of our rural population – which is mainly producing the food – with subsidised rations. What does that say about our economy, our internal strengths, that people in our economy can’t even earn enough money to get themselves nutritious food, and the government has to provide for it?

JD: Well I don’t have a lot [unclear] that India is a world leader, it doesn’t correspond to anything and it’s just a delusion of the Indian elite. The facts are in front of us. India is still a very poor country in per capita terms. It may have a large GDP because the population is so large but in per capita terms, it’s still one of the poorest countries in the world. In terms of nutrition, it is among the very worst off countries in the world. So I don’t think there’s any doubt that India is a poor country where there’s a great need to provide some security to poor people and to help them in the terrible situation in which they are.

As an economist, and strictly, as an economist, if you’re thinking and reflecting on the stats – certain people in India, are going debt free, the GDP is booming, the stock market’s booming. And here, you have a vast majority of Indians who need rations from the government and subsidised rations from the government. There is an active need for that.

JD: It doesn’t tell me anything that I have not known for the last 40 years. I mean we have known the facts all this time. We know that there are huge numbers of poor people. We know that there’s huge insecurity. We know that under-nutrition levels are among the highest in the world in India and we also know that measures like the NFSA, mid-day meals, maternity entitlements, pensions, school education, and healthcare – all these things can do a great deal of good to help them. So I think that for me this is nothing new in the picture that you described.

SH: This GDP growth – of course, we are a very fast-growing economy compared to other countries, our inflation levels are lower. But you see, there is this question of inequality. GDP does not tell you anything about inequality and what is happening to the distribution of wealth. Now, India happens to be a very unequal country, and the poor people, the workers in the unorganised sector, agricultural labourers and women, are not benefiting from employment opportunities and income-generation activities which are primarily concentrated in the organised sector.

So, a lot of India continues to be very poor, as Mr Jean Dreze mentioned, despite the growth in GDP, and despite the promise of a $5 trillion economy. A large majority of India continues to be very poor. Now whether you know, 75% of rural India needs grains at Rs 2 or Rs 3 is a different point. But we must acknowledge that our growth is not equitous growth, and a lot more effort and policy changes are needed to address this question of inequality.

Thank you to both our panelists for being on the show, and I urge all the viewers to do your own research and understand this Act fully, because it does not only affect rural India and malnutrition but also affects the food economy and our thalis. So thank you for being with us and watching the show.