Food Security Bill: Who will plug the loopholes in PDS?

India’s main problem is proper management of demand and supply. So unless the government plugs loopholes in the PDS system, the Bill, brainchild of Sonia Gandhi, will only increase prices of foodgrain

The United Progressive Alliance (UPA) government finally took the ordinance route to implement its ambitious Food Security Bill-FSB , after efforts to have a debate in Parliament failed. The Food Security Bill, the brainchild of UPA chairperson Sonia Gandhi, aims to give legal rights to 67% of the population (those below the poverty line-BPL) over a uniform quantity of 5 kg foodgrain a month at Rs1 to Rs3 per kg. However, analysts feel that the country cannot afford such 'subsidy' luxury, which also have potential to increase foodgrain prices substantially.


According to Nomura Financial Advisory and Securities (India) Pvt Ltd, India’s current macro-economic position does not provide the space to implement this policy.”The government has budgeted its food subsidy at 0.8% of GDP (Rs900 billion) for the year ending March 2014, which will not be enough if the Food Security Bill is implemented in entirety. We do not expect a substantial fiscal impact of the bill in FY14 as it is likely to be implemented only in phases initially and since three months of the fiscal year have already passed. However, the medium-term consequences of the bill could be far reaching and will be clear from FY15 onwards,” Nomura said in a research note.


To implement the Bill in full, the government would need to procure more than 65 million tonnes of grains every year. The food security bill entitles 75% of the rural and 50% of the urban population to subsidised foodgrain. However, all the eligible households are unlikely to shift to public distribution system (PDS) under the new Food Security Bill, feels CRISIL.


“We believe that due to the preference for better quality and greater variety of foodgrain available in the open market, households above the poverty line that are currently not purchasing foodgrain under the PDS are unlikely to shift to PDS. BPL households, in contrast, will be less sensitive to quality as the resultant savings forms a significant proportion of their annual expenditure. Therefore BPL households are likely to shift to PDS once the FSB is implemented,” the ratings agency said in a report.


The bill aims to provide subsidized rice, wheat and coarse cereals to 67% of the population. However, the consumption pattern across the country is different. In fact, some states like Rajasthan do not sell wheat in its PDS shops. In Jharkhand, the quantity of rice consumed by a rural BPL household is 3.6 times its consumption of wheat. By contrast, in Rajasthan the foodgrain consumption under PDS almost entirely comprises of rice.


As per the Tendulkar Committee estimates, around 41% of rural and 25% of urban population fall under the below poverty line or BPL category. Nomura feels that while this bill is justifiable on welfare grounds, the macro-economic implications of the bill are quite significant.


“First, it will raise the government’s food subsidy burden to an estimated 1%-1.2% of GDP per annum from 0.8% of GDP currently. There would be additional expenses on creating the infrastructure related to implementing the Food Security Bill. Second, the government would need to have adequate food stocks every year for this purpose. In case of a deficient monsoon, the country may need to import grains, which could send global foodgrain prices higher. Third, with the government likely to procure a substantial part of the domestic foodgrain production, this could create scarcity for the private sector, pushing prices higher. Fourth, this bill could push up consumption demand for other items, as a lesser portion of current disposable income would need to be spent on grains. Therefore, the overall fiscal and inflationary consequences of the Food Security Bill are large,” the brokerage, said.


CRISIL however feels that the Bill will provide households with additional disposable income, which in effect would move up the income bracket. CRISIL estimates that the FSB could generate additional savings of around Rs4,400 this year for each BPL household which begins to purchase subsidised food. “For rural households the savings amount exceeds their current annual medical and educational spends. Higher disposable income would also allow BPL households to spend more on protein rich food, thereby improving their nutritional intake,” the ratings agency said.



ashwin bahl

3 years ago

Perhaps we should change the header to read

Moneylife ยป Food Security Bill: Who will FOOT the COSTS in PDS?



ashwin bahl

In Reply to ashwin bahl 3 years ago

...and the Food Security Bill.....


3 years ago

Who indeed? The PDS like all other Indian Government schemes have evoleved ver 65 years to be a process of creating scarcity to distribute entitlements and buil vote fodder while aplying the resources of the State to the primary benefit of the ruling elites. Nothing but violent revolution can change the Neta-Babu Quota-Corruption Raj

ashwin bahl

3 years ago

We wanna create more loopholes and scams and the loot will go on, do we really expect the ground reality to change in India with this Bill or any other Bill ? We can not make enough warehouses FOR grain storing for example, so what are we talking about ?

Vinay Joshi

3 years ago

A worldwide survey was conducted by the UN. The only question asked was:

"Would you please give your honest opinion about solutions to the food shortage in the rest of the world?"

The survey was a huge failure.

In Africa they didn't know what 'food' meant.

In India they didn't know what 'honest' meant.

In Europe they didn't know what 'shortage' meant.

In China they didn't know what 'opinion' meant.

In the Middle East they didn't know what 'solution' meant.

In South America they didn't know what 'please' meant.

And in the USA they didn't know what 'the rest of the world' meant!



N Kanitkar

In Reply to Vinay Joshi 3 years ago



3 years ago

As already all the state govt had come out with various welfare measure which have been successfully implemented and running without any hitch the last trial of present UPA govt is because next year 2014 is election year inorder to save their face for corrutpion and price rise they have mopped up this bill its and utter waste


Ashok Kumar Rastogi

3 years ago

FSB= fund sourcing bill. The Govt. wants to implement FSB without caring for delivery system leakages. Rajiv Gandhi said 85% of fund leaked without reaching to target people. One can see who would get benefited with this scheme with votes & monetarily.

Sensex, Nifty in no man’s land: Thursday Closing Report

A close above 5,865 on the Nifty would see the upmove continuing. However, if the benchmark closes below 5,760 we may see it heading towards 5,565

The market snapped its two-day decline as buying in index stocks in the late session lifted the benchmarks higher. A close above 5,865 on the Nifty would see the upmove continuing. However, if the benchmark closes below 5,760 we may see it heading towards 5,565. The National Stock Exchange (NSE) witnessed a turnover of 65.83 crore shares and advance-decline ratio of 754:621.
The market opened in the positive as two successive days of losses made stocks cheaper and on supportive global cues. The US markets closed higher in a short trading session on Wednesday, ahead of Thursday’s Independence Day holiday, on reports of a fall in weekly jobless claims and a rise in private sector employment. The better-than-expected US job report boosted the Asian markets in morning trade.
The Nifty gained 24 points over its previous close to resume trade at 5,795 and the Sensex started the day at 19,256, up 78 points. Support from healthcare, power, capital goods and IT stocks kept the momentum firm in early trade. 
The indices pared a small part of their gains on profit booking and touched their intraday lows at around 10.00am. The Nifty slipped to 5,786 and the Sensex went back to 19,245, at their respective lows.
Buying in IT, FMCG and oil & gas counters pushed the benchmarks higher in late morning trade. A higher opening of the key European markets also supported the sentiment in the second half of the trading session. 
The volatile market once again edged lower in post-noon trade, after the RBI governor asked banks to lower lending rates to attract investments. However, buying in index stocks in the late session saw the market hitting its high with the Nifty touching 5,848 and the Sensex climbing to 19,445. The market settled near the highs of the day, snapping its two-day decline.
The Nifty closed 66 points (1.14%) up at 5,837 and the Sensex finished the day at 19,411, a gain of 233 points (1.22%).
Among the broader indices, the BSE Mid-cap index gained 0.52% and the BSE Small-cap index rose 0.21%.
The top sectoral gainers were BSE IT (up 2.73%); BSE Fast Moving Consumer Goods (up 2.69%); BSE TECk (up 2.35%); BSE Realty (up 1.56%) and BSE Consumer Durables (up 1.23%). BSE Metal (down 0.29%) was the lone loser while BSE Capital Goods ended flat.
Out of the 30 stocks on the Sensex, 20 stocks settled higher. The gainers were ITC (up 3.74%); Tata Power (up 3.58%); TCS (up 3.26%); Tata Motors (up 2.80%) and Bharti Airtel (up 2.38%). The main losers were Tata Steel (down 1.73%); BHEL (down 1.63%); Sterlite Industries (down 1.13%); Bajaj Auto (down 1.02%) and ONGC (down 0.84%).
The top two A Group gainers on the BSE were—UCO Bank (up 9.23%) and TTK Prestige (up 7%).
The top two A Group losers on the BSE were—Ashok Leyland (down 7.69%) and MMTC (down 4.98%).
The top two B Group gainers on the BSE were—Control Print (up 20%) and Firstsource Solutions (up 19.92%).
The top two B Group losers on the BSE were—Gennex Laboratories (down 19.59%) and Empee Distilleries (down 18.45%).
Of the 50 stocks on the Nifty, 35 ended in the in the green. The major gainers were Reliance Infrastructure (up 4.09%); HCL Technologies (up 3.95%); ITC (up 3.88%); Tata Power (up 3.63%) and BPCL (up 3.54%). The key losers were BHEL (down 2.40%); Tata Steel (down 1.71%); Sesa Goa (down 1.53%); Cipla (down 0.79%) and Axis Bank (down 0.78%).
Markets across Asia, with the exception of the Nikkei and the Taiwan Weighted, closed higher on positive growth signals from the US. Besides, assurance by the Chinese premier Li Keqiang to support infrastructure growth also boosted investor confidence.
The Shanghai Composite gained 0.59%; the Hang Seng surged 1.60%; the Jakarta Composite added 0.10%; the KLSE Composite rose 0.12%; the Straits Times advanced 0.56% and the Seoul Composite climbed 0.79%.
At the time of writing, the key European indices were in the green and the US stock futures were trading with gains. However, the US markets will remain closed for trade today for the Independence Day holiday.
Back home, foreign institutional investors were net sellers of equities totalling Rs705.06 crore on Wednesday while domestic institutional investors were net buyers of shares amounting to Rs252.88 crore.
Pune-based Deepak Fertilisers and Petrochemicals Corporation (DFPCL) has acquired 2,89,91,150 equity shares of face value Rs 10 each, representing 24.46% of share capital of Mangalore Chemicals and Fertilisers. The stock rose 0.43% to close at Rs94.40 on the NSE. 
The largest Direct-to-Home (DTH) service provider Dish TV India has decided to increase prices of its set-top box by Rs250. The hike will be effective from today. While its standard definition set-top box will now be priced Rs2,249, its Dish plus recorder will cost Rs2,349. The company said there was no price rise on high-definition set-top boxes. The stock fell 0.24% to close at Rs61.80 on the NSE.


Govt considering ban on sale of TB drugs in open market
The health ministry is proposing changes in view of irregularity in administration of these drugs to patients and lack of proper monitoring which is hindering efforts to check the disease

Sale of tuberculosis (TB) drugs could be prohibited in the open market as part of efforts to ensure calibrated and monitored administration of these medicines which would then only be given on a daily basis free of cost by government-registered outlets to patients.  
The health ministry is proposing changes in view of irregularity in administration of these drugs to patients and lack of proper monitoring which is hindering efforts to check the disease. 
According to a WHO estimate, India is home to the largest number of TB patients—2.2 million of the world's 8.7 million. 
Patients are administered TB medicines either through government-run hospitals and clinics free of cost or by private practitioners. 
According to the health ministry, about 65% of the TB patients avail these drugs under the government’s DOT (Daily Observed Therapy) System while the rest opt for treatment by private practitioners and buy drugs from the chemists based on their prescription. 
The latter results in irregularity of treatment which leads to relapse of the ailment as there is lack of proper monitoring, the sources said citing experts. 
To address this, the government is planning to prohibit sale of drugs in open market. 
Under the new initiative, patients going to private practitioners for treatment will get medicines free of cost from chemists but only after the doctor informs them through a dedicated call centre to be set up by the government. 
The changes are being brought to ensure that all TB patients are administered the drugs on daily basis instead of intermittently as at present. 
Recently, health minister Ghulam Nabi Azad had expressed concern on the issue saying that the irregular regime is leading to growing resistance to anti-TB drugs. 
The health ministry officials recently had held a meeting with WHO and other experts who had emphasised on changing intermittent dosage system to daily regime. 
During the meeting, it was informed that many other countries including Brazil, China, which were following the intermittent dosage system, have now turned to the daily regime.


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