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 per person per
month at rates that are about 10% of cost
or 90% subsidised.
• 5 kg covers half of average monthly use
per 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.g@thehindu.co.in