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:
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:
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, the government announced that it plans to transfer benefits under various schemes directly into the bank accounts of individual beneficiaries. Benefits can be the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) wages, scholarships, pensions and health benefits. Beneficiaries shall be identified through the Aadhaar number (Aadhaar is an individual identification number linked to a person’s demographic and biometric information). The direct cash transfer (DCT) system is going to be rolled out in 51 districts, starting January 1, 2013. It will later be extended to 18 states by April 1, 2013 and the rest by April 1, 2014 (or earlier). Presently, 34 schemes have been identified in 43 districts to implement the DCT programme. Currently, the government subsidises certain products (food grains, fertilizers, water, electricity) and services (education, healthcare) by providing them at a lower than market price to the beneficiaries. This has led to problems such as high fiscal deficit, waste of scarce resources and operational inefficiencies. The government is considering replacing this with an Aadhaar enabled DCT system. It has claimed that the new system would ensure timely payment directly to intended beneficiaries, reduce transaction costs and leakages. However, many experts have criticised both the concept of cash transfer as well as Aadhaar (see here, here, here and here). In this blog, we provide some background information about cash transfer, explain the concept of Aadhaar and examine the pros and cons of an Aadhaar enabled direct cash transfer system. Background on cash transfer Under the direct cash transfer (DCT) scheme, government subsidies will be given directly to the beneficiaries in the form of cash rather than goods. DCTs can either be unconditional or conditional. Under unconditional schemes, cash is directly transferred to eligible households with no conditions. For example, pension schemes. Conditional cash transfers provide cash directly to poor households in response to the fulfillment of certain conditions such as minimum attendance of children in schools. DCTs provide poor families the choice of using the cash as they wish. Having access to cash also relieves some of their financial constraints. Also, DCTs are simpler in design than other subsidy schemes. Even though cash transfer schemes have a high fixed cost of administration when the programme is set up, running costs are far lower (see here, here and here). Presently, the government operates a number of DCT schemes. For example, Janani Suraksha Yojana, Indira Awas Yojana and Dhanalaksmi scheme. In his 2011-12 Budget speech, the then Finance Minister, Pranab Mukherjee, had stated that the government plans to move towards direct transfer of cash subsidy for kerosene, Liquified Petroleum Gas (LPG), and fertilizers. A task force headed by Nandan Nilekani was set up to work out the modalities of operationalising DCT for these items. This task force submitted its report in February 2012. The National Food Security Bill, 2011, pending in Parliament, includes cash transfer and food coupons as possible alternative mechanisms to the Public Distribution System. Key features of Aadhaar The office of Unique Identification Authority of India (UIDAI) was set up in 2009 within the Planning Commission. In 2010, the government later introduced the National Identification Authority of India Bill in Parliament to give statutory status to this office.
For a PRS analysis of the Bill, see here. Aadhaar enabled direct cash transfers Advantages Identification through Aadhaar number: Currently, the recipient has to establish his identity and eligibility many times by producing multiple documents for verification. The verification of such documents is done by multiple authorities. An Aadhaar enabled bank account can be used by the beneficiary to receive multiple welfare payments as opposed to the one scheme, one bank approach, followed by a number of state governments. Elimination of middlemen: The scheme reduces chances of rent-seeking by middlemen who siphon off part of the subsidy. In the new system, the cash shall be transferred directly to individual bank accounts and the beneficiaries shall be identified through Aadhaar. Reduction in duplicate and ghost beneficiaries: The Aadhaar number is likely to help eliminate duplicate cards and cards for non-existent persons or ghost beneficiaries in schemes such as the PDS and MNREGS. Disadvantages Lack of clarity on whether Aadhaar is mandatory: According to UIDAI, it is not mandatory for individuals to get an Aadhaar number. However, it does not prevent any service provider from prescribing Aadhaar as a mandatory requirement for availing services. Therefore, beneficiaries may be denied a service if he does not have the Aadhaar number. It is noteworthy that the new direct cash transfer policy requires beneficiaries to have an Aadhaar number and a bank account. However, many beneficiaries do not yet have either. (Presently, there are 229 million Aadhaar number holders and 147 million bank accounts). Targeting and identification of beneficiaries: According to the government, one of the key reasons for changing to DCT system is to ensure better targeting of subsidies. However, the success of Aadhaar in weeding out ‘ghost’ beneficiaries depends on mandatory enrollment. If enrollment is not mandatory, both authentication systems (identity card based and Aadhaar based) must coexist. In such a scenario, ‘ghost’ beneficiaries and people with multiple cards will choose to opt out of the Aadhaar system. Furthermore, key schemes such as PDS suffer from large inclusion and exclusion errors. However, Aadhaar cannot address errors in targeting of BPL families. Also, it cannot address problems of MNREGS such as incorrect measurement of work and payment delays. Safeguard for maintaining privacy: Information collected when issuing Aadhaar may be misused if safeguards to maintain privacy are inadequate. Though the Supreme Court has included privacy as part of the Right to Life, India does not have a specific law governing issues related to privacy. Also, the authority is required to maintain details of every request for authentication and the response provided. However, maximum duration for which such data has to be stored is not specified. Authentication data provides insights into usage patterns of an Aadhaar number holder. Data that has been recorded over a long duration of time may be misused for activities such as profiling an individual’s behaviour.
