Panel moots smaller food security net, cash transfers

Panel moots smaller food security net, cash transfers

The identification of “eligible households” has been left to the state governments.

The National Food Security Act’s (NFSA) coverage will come down from roughly 67 per cent to 40 per cent of the country’s population, if the recommendations of a high-level committee for restructuring of the Food Corporation of India (FCI) are accepted by the Centre.

The panel headed by former union food and consumer affairs minister Shanta Kumar submitted its report to Prime Minister Narendra Modi on Wednesday. The reduction in coverage will require an amendment to the NFSA, which entitles all “eligible households”, constituting up to 75 per cent of India’s rural and 50 per cent of its urban population, to 5 kg of subsidised grain per person per month. The identification of “eligible households” has been left to the state governments.

While seeking reduced coverage, the committee has, however, sought restoration of the earlier 7-kg-per-person monthly quota of grain for below-poverty-line (BPL) families, as against the uniform 5-kg entitlement under the NFSA.

The other significant recommendation is to implement a system of cash transfers in place of physical grain delivery through the PDS over a 2-3 year period. This transition could first be attempted in cities with a population of more than 1 million. Food subsidy savings are expected to be Rs 30,000 crore annually.


The panel is understood to have also pitched for deferring implementation of the NFSA in states that haven’t put in place mechanisms to check leakages from the public distribution system (PDS). This includes end-to-end computerisation of the PDS network right up to fair price shops, putting the list of beneficiaries online for verification by others, and setting up vigilance committees to check grain pilferage. The committee has estimated leakages from the PDS at 40-50 per cent.

Another important recommendation of the panel is to curb imposition of statutory levies by states in the form of purchase tax, mandi fee, rural development cess, etc. Such levies now range from as low as 2 per cent of minimum support price (MSP) in Gujarat to as high as 14.5 per cent in Punjab.

The panel has apparently proposed that the statutory levies be capped at a maximum 3-4 per cent of MSP, and be included in the MSP itself. This recommendation is seen a logical extension of the Modi government’s cracking down on states that have been announcing bonuses over and above the Centre’s MSP.

States such as Madhya Pradesh and Chhattisgarh have been told that in the event of their paying such bonuses to farmers, procurement for the Central pool would be limited only to the extent of their grain requirement for their PDS and welfare schemes.

The committee is said to have recommended that FCI enter into an agreement with individual states before every procurement season to cap local levies and not declare bonuses.

“The Prime Minister has asked the Department of Food and Public Distribution to expeditiously give their comments on the report, so that it can be implemented in a time-bound manner,” an official release said.