Epicurean philosophy associates the word food with indulgent delights while religious philosophy takes it a little further, syncing the stomach to religion. As written, beautifully in Devdutt Patnaik’s recent book, Sita – “The kitchen is the first yagnashala. For the kitchen fire turns raw food into edible cooked food, that nourishes the body and prepares it for intellectual enquiry…Thus Indian thought, while valuing thought, also values food. Food is nourisher, healer as well as happiness provider. Thought may be God, but Food is the Goddess. One cannot exist without the other.”

Economics and politics presuppose the high morals of religious philosophy, albeit in a veiled manner, while focussing determinedly on dry figures of cost outlays, cost benefits, government policies and agendas as well as growth and development. The much speculated and debated Food Security Act, 2013, has made the task of feeding the poorest of the poor, dining table discussions. The professional middle class lament the setback to the economy, while the Congress rejoices having something to boast of in the upcoming elections. What really is the impact of the Food Security Act?

Having read scores of articles and editorials, I do agree that people of a nation can’t go hungry. For a country that values liberal socialistic ideals, right to food is a basic human right and it is the duty of every government to ensure the provision of the same. But to what cost outlay? Different economists have estimated the cost of the Food Security Act at mind bogglingly different figures.  To the layman, these competing claims seem highly confusing.

To answer the second question, one needs to understand a few basic concepts.

What is Food Subsidy?

Simply put, it is the difference between the economic cost and the issue price.

What is the economic cost?

The total cost of choosing one action over the other. In this case, the economic cost would comprise procurement incidentals (cost of actually buying the foodgrain from farmers) and distribution costs (the cost of making it available at the fair price shops) of food grains.

What is issue price?

The minimum support price is the price which the government of India sets by recommending the Commission for Agriculture Costs and Prices (CACP).

What are the government’s estimates?

The Indian government, at present, incurs a food subsidy bill of approximately Rs 90,000 crore under the Targeted Public Distribution System (TPDS). The NFSA now aims at providing Priority households with 5 kgs of food grains per person per month, and Antyodaya households with 35 kgs per household per month. The combined coverage of Priority and Antyodaya households shall extend up to 75% of the rural population and up to 50% of the urban population. This comes to 67% of the total population of India. The PDS issue prices are to be Rs 3 per kg for rice, Rs 2 per kg for wheat and Rs 1 per kg for millets. These may be revised after three years.

The Union Minister of Food, KV Thomas says the annual food subsidy will go up by Rs 1.3 lakh crore. At the proposed coverage and entitlement, total estimated annual foodgrains requirement is 612.3 lakh tons and the corresponding estimated food subsidy for its implementation is approximately  Rs 1,24,747 crore. When compared to the estimated food subsidy requirement under existing TPDS and Other Welfare Schemes, the additional food subsidy implication is about Rs 23,800 crore per annum. Thus, the total subsidy implication comes to a little over 1.3% of the GDP. This additionality is to be borne completely by the Central Government.

And what does Surjit Bhalla say? 

He arrives at a figure of Rs 3 lakh crore. According to the NSS data, only 45% of the population was accessing the PDS in 2011-12, with an average consumption of 2.1kg per head. Under the bill, the coverage is to expand to 67% of the population (hence increase in number of mouths to feed) with 5 kgs per head at lower issue prices. Also Surjit Bhalla has factored in leakages that will have to be compensated for in order to feed all mouths covered under the act. Thus, according to his calculations the food subsidy would amount to 3% of the GDP.

What do Kotwal, Murugkar and Ramasami say?

Bhalla’s calculations are a gross over-estimation. He makes a few errors in his calculations. First, he doesn’t adjust his figures for the base population. Second, he compares per capita amount of food grains currently received by beneficiaries with the per capita amount of food grains the government promises to release under the National Food Security programme. According to them, the supply of grain per eligible person under the NFSO has actually gone down from 7.9 kg to 5 kg but the coverage has gone up from 44.5% to 67%.  Therefore, they have calculated the food subsidy to increase marginally by 18% and the total outlay to be within 1% of the GDP.

Before we throw our hands up in exasperation, we have to give each their due on the laborious calculations. For we can’t just throw out an estimate, as we don’t like the concept of an estimate. One definition, (that I personally seem to like best) –

“An approximation, prediction or projection of a quantity based on experience and/or information available at the time, with the recognition that other pertinent facts are unclear or unknown. An estimate is almost the same as an educated guess, and the cheapest (and least accurate) type of modelling.”

One, while being involved in the process of policy development, would like to take the most holistic approach possible. The points put forth by different economists are not wrong, they simply represent different perspectives on the issue of Food Subsidy.

Ideally the legislative planning process for food security should take into account not just incremental costs over and above the PDS, but also costs associated with agricultural production enhancement (Ashok Gulati), institutional creation and maintenance of grievance redressal mechanisms in states, costs involved in plugging leakages, end-to-end implementation costs incurred by the state governments, infrastructural costs as well as cost of implementing the legislation itself and beyond.

However, the question that seems to be pertinent here, is not the extent of the cost outlays, but as to how the government plans on financing it. The financial memorandum doesn’t state the same with much clarity. Would there be plain simple budgetary allocations or fiscal measures or a combination of both? If so, then to what extent and how? Had that been done, the debate would have been not as much as quantum of outlays but on the best possible way to finance it.

Currently, one must satisfy their appetites with the fact that budgets and government policies work most often on incremental basis. Estimates being estimates don’t represent the entire picture and the NFSA speaks of food security more in terms of a food subsidy, and the Government of India it seems has only taken into consideration the immediate costs of procurement at MSP and distribution and sale at subsidised rates, quite in line with the definition of food subsidy.  The government therefore projects the outlays in these narrow terms only, and pegs it at Rs 1.3 lakh crore.

To those, who would still disagree, I’d suggest we take it with a pinch of salt.