Lack of funds: Food Security Act may be put on hold

The proposed National Food Security Act (NFSA) may have to be put off to 2012 due to financial constraints, going by a recent Planning Commission document which points out that additional resources of Rs 77,000 crore (Rs 770 billion) will be required to implement the programme.

Drastic subsidy cuts and scaling down of other schemes will be necessary in order to mobilise adequate funds for the scheme.

The proposals put forward by the National Advisory Council (NAC) initially implied an outlay of Rs 103,000 crore (Rs 1.03 trillion), but this was scaled down to Rs 77,000 crore. Even this lower figure is likely to be about 13 per cent of the annual plan expenditure at the start of the 12th Plan.

"Fitting new commitments of the order proposed by the NAC will inevitably mean lower allocations for other important programmes," observes the position paper. Some of the key subsidies which may have to be cut are on kerosene, fertilizer and LPG.

Currently, they stand at Rs 100,000 crore (Rs 1 trillion) and may be pared to half by limiting coverage to BPL households and small farmers.

Among the new welfare schemes on which the NAC is insisting are community kitchens giving subsidised schemes to migrants and homeless urban workers (as in Chhattisgarh) and 10 kg of free foodgrains for HIV patients.

The ministry of food and consumer affairs has already rejected some of the NAC's proposals, as they would imply a commitment of 71 million tonnes of foodgrains annually.

Average procurement in the last five years is only 47 million tonnes. In 2008-09, it was 60 million tonnes, putting enormous pressure on storage facilities. But procurement cannot be sustained at this level indefinitely.

The ministry has suggested that 55 million tonnes is a more reasonable figure. At the same time, above poverty line (APL) consumers will have to pay higher prices for foodgrains.

The APL price will be linked to the minimum support price (MSP) of grain, in the hope that demand will shrink at a higher price in normal years.

But finance is not the only problem -- the main question being asked within the concerned ministries is whether the programme can be made sustainable.

Once it becomes a legal entitlement, the central government will have to keep funding the programme, although implementation will be in the hands of the state governments.

The paper points out that gross budgetary support for the Eleventh Plan in 2010-11 is Rs 370,000 crore (Rs 3.7 trillion). To achieve Plan targets, an additional Rs 200,000 crore (Rs 2 trillion) will be required in 2011-12.

But the increase is not likely to be more than Rs 75,000 crore (Rs 750 billion) put together for all schemes -- so the food security programme may well have to wait.