On June 3, 2011, the National Advisory Council (NAC) posted the draft of the National Food Security Bill on its website and has asked for public feed back on the Bill by June 12, 2011. Key Features of the Draft National Food Security Bill, 2011 -          Every person shall have the right of access to sufficient and safe food either directly or by purchasing the food. -          The central and state government shall share the financial cost of procuring, storing and distributing food grains to the population entitled to it. -          There are special provisions for pregnant and lactating mothers, children in the 0-6 age group, destitute persons, homeless persons and disaster affected persons.  The appropriate government shall take immediate steps to provide relief to persons living in starvation. -          The state government shall provide all children upto class 8 freshly cooked meal in all schools run by local bodies and the government.  It shall also provide mid-day meals to children who are admitted under the 25% quota for children belonging to disadvantaged groups in unaided private schools -          Each household shall be categorised into priority and general in rural and urban areas. -          Each individual in the priority group households shall be entitled to at least 7kg of grain every month at a maximum price of Rs 3/kg for rice, Rs 2/kg for wheat and Rs 1/kg for millets. -          Each individual in the general group households shall be entitled to 4kg of grain per month at 50 per cent of the Minimum Support Price for paddy, wheat and millet. -          The state government can exclude certain persons who fulfil the exclusion criteria in rural and urban areas.  However, it has to cover at least 90% of the population in rural areas and 50% of the population in urban areas. -          The Bill lays down norms for procurement, storage and distribution of food grains under the Public Distribution System.  It also gives detailed norms for Fair Price Shops, ration cards, and monitoring the system. -          It seeks to set up a National Food Commission and State Food Commission in each state.  The Commission shall inquire into complaints on denial of entitlement, advise central and state governments and monitor the schemes.  Each district shall have a District Grievance Redressal Officer. -          The Bill includes penalties for dereliction of duty by public servants, which includes deduction of penalty from the salary of the public servant. -          Any person deprived of his entitlement to food shall be entitled to compensation from the appropriate government. -          The Gram Sabhas should conduct social audits of all schemes under this Act. The Back Story to the Bill The Right to Food Campaign In April 2001, the People’s Union for Civil Liberties (PUCL) Rajasthan had filed a writ petition in the Supreme Court against the Government of India, Food Corporation of India, and six state governments. The petition contended that the right to food was a fundamental right under “the right to life” provided by Article 21 of the Constitution of India. Although no final judgment has been given, the Supreme Court has issued several interim orders in the case.  Among the most significant of theses is the conversion of eight centrally sponsored schemes into legal entitlements, including the Public Distribution System (PDS), Antyodaya Anna Yojana (AAY), National Programme of Nutritional Support to Primary Education, also known as “Mid-Day Meals scheme”, and Integrated Child Development Services (ICDS), among others. Some orders by the Court in the area of food security include:

  • BPL families are entitled to 35kg of foodgrains at a subsidised price.
  • State governments are to implement the Mid-Day Meals scheme by providing every child in government schools and government assisted primary schools with a prepared mid-day-meal with a minimum content of 300 calories and 8-12 grams of protein each day of school for a minimum of 200 days.
  • Six priority groups have been identified who are entitled to the Antyodaya card.  The card entitles the people to 35 kg of grain per month, at Rs 2/kg for wheat and Rs 3/kg for rice.

On May 8, 2002, the Supreme Court appointed two Commissioners for the purpose of monitoring the implementation of the interim orders.  The Commissioners have submitted a number of reports highlighting the issues of concern on the implementation of the interim orders and making detailed recommendations. Government Initiatives One of the key commitments made by both UPA I and UPA II was on food security whereby it proposed to enact a legislation that would entitle every BPL family in both rural and urban areas to 25 kg of rice or wheat per month at Rs 3 per kg.  However, the Sonia Gandhi-led NAC has differences with the central government on the contours of the legislation.  The basic issues on which there are divergent views include (a) coverage under the Bill; (b) method to be adopted to ensure food security; (c) the amount of food grain required; and (d) the impact on the food subsidy burden. On October 23, 2010, the NAC made certain recommendations on the National Food Security Bill.  The Bill seeks to address nutritional deficiencies in the population. Some of its key recommendations are:

  • § Legal entitlements to subsidised food grains should be extended to at least 75% of the population – 90% in rural areas and 50% in urban areas.
  • § The priority households (46% in rural areas and 28% in urban areas) should have a monthly entitlement of 35kgs at Rs 1 per kg for millets, Rs 2 for wheat and Rs 3 for rice.  Rural coverage can be adjusted state-wise based on the Planning Commission’s 2004-05 poverty estimates.
  • § The general households (44% in rural areas and 22% in urban areas) should have a monthly entitlement of 20kgs at a price that does not exceed 50% of the current Minimum Support Price (the price at which the government buys food grains from the producer) for millets, wheat and rice.
  • § Government should specify criteria for categorisation of population into priority and general households.  Full coverage of food entitlements should be extended to all by March 31, 2014.
  • § Need for enabling provisions to revitalise agriculture, diversifying the commodities available under the Public Distribution System (PDS), ensuring universal access to safe water and proper sanitation, universalising primary health care, and extending nutritional and health support to adolescent girls.

In response, the Prime Minister set up an Expert Committee under Dr C. Rangarajan to examine the Bill and make recommendations.  The Rangarajan Committee submitted its report in January 2011.  It stated that it would not be possible to implement the NAC recommendations because of lack of availability of food grains and huge subsidy implications.  It was in favour of restricting entitlements of Rs 2/kg for wheat and Rs 3/kg for rice to households falling below the Tendulkar Committee poverty line plus 10 per cent of the BPL population.  This is equivalent to 48 per cent of the rural and 28 per cent of the urban population, which is about the same as the NAC categorisation for priority households. The NAC however criticised the Rangarajan Committee’s stand and proceeded with the task of drafting an appropriate legislation.  It finally posted the draft of the National Food Security Bill on its website and has asked for public feedback. Divergent Perspectives The draft has been critiqued by various experts.  A group of distinguished economists wrote an open letter to Mrs Sonia Gandhi opposing the NAC’s draft on the grounds that it legalises the PDS even though there is a large body of evidence of the inefficiency of the system (see Wadhwa Committee reports and Planning Commission report).  The economists contended that in addition to reforming the PDS, other alternate models of subsidy delivery should be examined such as direct cash transfers or food stamps.  The system of direct cash transfer through food coupons was also outlined in the Economic Survey of 2009-10.  It stated that the system would be less prone to corruption since it would cut down government’s involvement in procuring, storing and distributing food grains. However, there are divergent views on direct cash transfer too.  Some experts such as the economist and member of NAC, Prof Jean Dreze contend that food entitlement is better because it is inflation proof and it gets consumed more wisely than cash which can be easily misspent.  Others are of the view that cash transfer has the potential for providing economic and food security to the poor. The ball is now in the government’s court.  According to news reports, the government may finalise the Bill soon and introduce it in the forthcoming monsoon session of Parliament.

  The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016 is listed for discussion in Rajya Sabha today.[i]  The Bill aims to expeditiously resolve cases of debt recovery by making amendments to four laws, including the (i) Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and (ii) the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Recovery of Debts Due to Banks and Financial Institutions Act, 1993 The 1993 Act created Debt Recovery Tribunals (DRTS) to adjudicated debt recovery cases.  This was done to move cases out of civil courts, with the idea of reducing time taken for debt recovery, and for providing technical expertise.  This was aimed at assisting banks and financial institutions in recovering outstanding debt from defaulters. Over the years, it has been observed that the DRTs do not comply with the stipulated time frame of resolving disputes within six months. This has resulted in delays in disposal, and a high pendency of cases before the DRTs. Between March 2013 and December 2015, the number of pending cases before the DRTs increased from 43,000 to 70,000.  With an average disposal rate of 10,000 cases per year, it is estimated that these DRTs will take about six to seven years to clear the existing backlog of cases.[ii] Experts have also observed that the DRT officers, responsible for debt recovery, lack experience in dealing with such cases.  Further, these officers are not adequately trained to adjudicate debt-related matters.[iii] The 2016 Bill proposes to increase the retirement age of Presiding Officers of DRTs, and allows for their reappointment.  This will allow the existing DRT officers to serve for longer periods of time.  However, such a move may have limited impact in expanding the pool of officers in the DRTs. The 2016 Bill also has a provision which allows Presiding Officers of tribunals, established under other laws, to head DRTs.  Currently, there are various specialised tribunals functioning in the country, like the Securities Appellate Tribunal, the National Company Law Tribunal, and theNational Green Tribunal.  It remains to be seen if the skills brought in by officers of these tribunals will mirror the specialisation required for adjudicating debt-related matters. Further, the 1993 Act provides that banks and financial institutions must file cases in those DRTs that have jurisdiction over the defendant’s area of residence or business.  In addition, the Bill allows cases to be filed in DRTs having jurisdiction over the bank branch where the debt is due. The Bill also provides that certain procedures, such as presentation of claims by parties and issue of summons by DRTs, can now be undertaken in electronic form (such as filing them on the DRT website). Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 The 2002 Act allows secured creditors (lenders whose loans are backed by a security) to take possession over a collateral security if the debtor defaults in repayment.  This allows creditors to sell the collateral security and recover the outstanding debt without the intervention of a court or a tribunal. This takeover of collateral security is done with the assistance of the District Magistrate (DM), having jurisdiction over the security.  Experts have noted that the absence of a time-limit for the DM to dispose such applications has resulted in delays.[iv]  The 2016 Bill proposes to introduce a 30-day time limit within which the DM must pass an order for the takeover of a security.  Under certain circumstances, this time-limit may be extended to 60 days. The 2002 Act also regulates the establishment and functioning of Asset Reconstruction Companies (ARCs).  ARCs purchase Non-Performing Assets (NPAs) from banks at a discount.  This allows banks to recover partial payment for an outstanding loan account, thereby helping them maintain cash flow and liquidity.  The functioning of ARCs has been explained in Figure 1. Enforcement of security It has been observed that the setting up of ARCs, along with the use out-of-court systems to take possession of the collateral security, has created an environment conducive to lending.[iii]  However, a few concerns related to the functioning of ARCs have been expressed over the years.  These concerns include a limited number of buyers and capital entering the ARC business, and high transaction costs involved in the transfer of assets in favour of these companies due to the levy of stamp duty.[iii] In this regard, the Bill proposes to exempt the payment of stamp duty on transfer of financial assets in favour of ARCs.  This benefit will not be applicable if the asset has been transferred for purposes other than securitisation or reconstruction (such as for the ARCs own use or investment).  Consequently, the Bill amends the Indian Stamp Act, 1899. The Bill also provides greater powers to the Reserve Bank of India to regulate ARCs.  This includes the power to carry out audits and inspections either on its own, or through specialised agencies. With the passage of the Bankruptcy Code in May 2016, a complete overhaul of the debt recovery proceedings was envisaged.  The Code allows creditors to collectively take action against a defaulting debtor, and complete this process within a period of 180 days.  During the process, the creditors may choose to revive a company by changing the repayment schedule of outstanding loans, or decide to sell it off for recovering their dues. While the Bankruptcy Code provides for collective action of creditors, the proposed amendments to the SARFAESI and DRT Acts seek to streamline the processes of creditors individually taking action against the defaulting debtor.  The impact of these changes on debt recovery scenario in the country, and the issue of rising NPAs will only become clear in due course of time. [i] Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Bill, 2016, http://www.prsindia.org/administrator/uploads/media/Enforcement%20of%20Security/Enforcement%20of%20Security%20Bill,%202016.pdf. [ii] Unstarred Question No. 1570, Lok Sabha, Ministry of Finance, Answered on March 4, 2016. [iii] ‘A Hundred Small Steps’, Report of the Committee on Financial Sector Reforms, Planning Commission, September 2008, http://planningcommission.nic.in/reports/genrep/rep_fr/cfsr_all.pdf. [iv] Financial Sector Legislative Reforms Commission, March 2013, http://finmin.nic.in/fslrc/fslrc_report_vol1.pdf.