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.

Recently, there have been instances of certain collective investment schemes (CISs) attempting to circumvent regulatory oversight.  In addition, some market participants have not complied with Securities and Exchange Board of India's (SEBI) orders of payment of penalty and refund to investors. In August, the Securities Laws (Amendment) Bill, 2013 was introduced in the Lok Sabha to amend the Securities and Exchange Board of India Act, 1992 (the SEBI Act, 1992), the Securities Contract (Regulation) Act, 1956 (SCRA, 1956) and the Depositories Act, 1996. The Bill replaced the Securities Laws (Amendments) Ordinance, 2013. The Bill makes the following key amendments: a) Definition of Collective Investment Schemes The SEBI Act, 1992 defines CISs as schemes in which the funds of investors are pooled, yield profits or income and are managed on behalf of investors.  It also exempts certain types of investments which are regulated by other authorities. The Bill introduces a proviso to the definition of CIS.  This proviso deems any scheme or arrangement to be a CIS if it meets all three of the following conditions: (a) funds are pooled, (b) it is not registered with SEBI, or it is not exempted by SEBI Act, 1992, and (c) it has a corpus of Rs 100 crore or more.  These provisions could potentially lead to some schemes not conventionally defined as CIS to fall under the definition. For instance, partnership firms operating in the investment business or real estate developers accepting customer advances could be termed as CISs. SEBI has been given the power to specify conditions under which any scheme or arrangement can be defined as a CIS. This raises the question of whether this is excessive delegation of legislative powers - usually the parent act defines the entities to be regulated and the details are entrusted to the regulator. b) Disgorgement (repayment) of unfair gains/ averted losses SEBI has in the past issued orders directing market participants to refund i) profits made or ii) losses averted, through unfair actions.  The Bill deems SEBI to have always had the power to direct a market participant to disgorge unfair gains made/losses averted, without approaching a court.  This power to order disgorgement without approaching a court is in contrast with the provisions of the recently passed Companies Bill, 2011 and the draft Indian Financial Code (IFC) which require an order from a court/tribunal for disgorgement of unfair gains. Further, the Bill specifies that the disgorged amount shall be credited to the Investor Education and Protection Fund (IEPF), and shall be used in accordance with SEBI regulations.  The Bill does not explicitly provide the first right on the disgorged funds to those who suffered wrongful losses due to the unfair actions, unlike the draft IFC. c) Investigation and prosecution The Bill empowers the SEBI chairman to authorise search and seizure operations on a suspect’s premises.  This does away with the current requirement of permission from a Judicial Magistrate.  This provision removes the usual safeguards regarding search and seizure as seen in the Code of Criminal Procedure, 1973, the recently passed Companies Bill, 2011 and the draft Indian Financial Code. The Bill also empowers an authorised SEBI officer to, without approaching a court, attach a person’s bank accounts and property and even arrest and detain the person in prison for non-compliance of a disgorgement order or penalty order.  Most regulators and authorities, with the exception of the Department of Income Tax, do not have powers to such an extent. d) Other Provisions of the Bill The Bill retrospectively validates consent guidelines issued by SEBI in 2007 under which SEBI can settle non-criminal cases through consent orders, i.e., parties can make out-of-court settlements through payment of fine/compensation.  The United States Securities and Exchange Commission settles over 90% of non-criminal cases by consent orders. The Bill retrospectively validates the exchange of information between SEBI and foreign securities regulators through MoUs. The Bill sets up special courts to try cases relating to offences under the SEBI Act, 1992. For a PRS summary of the Bill, here.