Tuesday, February 25, 2014


The much touted Food Security Act (FSA) has been rolled out by the "vote eager" government expecting rich dividends during the forth coming general elections in the country. Now that 67% of the population have a "right to food" (whatever that means!), the million dollar question is how to manage the delivery of food grains promised to the right beneficiaries? Going by the experience so far no one in the country is happy with the post-FSA experience and even the government has no clue as to how to achieve even a fraction of what is promised under the Act! Many helpless citizens wonder why the existing Public Distribution System has been side lined, though it has many defects and deficiencies. According to international experts the most efficient way of delivery is through a voucher system that can ensure not only grain security but also nutritional security. Comparison of different delivery systems makes interesting reading and the following extracts of a report by International Food Policy Research Institute provide compelling reasons as to why the voucher system is the most efficient one. 

"WHEN times are tough, how should governments in poor countries ensure their citizens remain fed? In the past most of them used subsidies to keep food prices low for all their citizens. But these policies have become unsustainable: the cost of maintaining Egypt's food subsidies, for instance, nearly doubled between 2009 and 2012. And much of the money goes to the wrong people. In Burkina Faso, Egypt and the Philippines less than 20% of spending on food subsidies goes to poor households. In the Middle East and North Africa only 35% of subsidies reach the poorest 40%, the IMF reckons.
Motivated, in part, by a desire to curb growing budget deficits, many countries are replacing broad subsidies with policies aimed more directly at the needy. But what form should the targeted aid take? Earlier this month Iran introduced free handouts of food to replace its subsidy schemes. Other countries, such as Indonesia and Malaysia, have chosen instead to provide extra cash benefits to the poor. So far, vouchers have been the least popular option. Proposals to introduce food-stamp schemes in such countries as Malaysia have been rejected on the basis they were too American and un-Asian.In this section
A new paper* by researchers at the International Food Policy Research Institute (IFPRI), a think-tank, suggests that might have been a mistake. The authors analysed the results of an experiment conducted by the World Food Programme in Ecuador in 2011, which compared handouts of food, cash and vouchers—all conditional on attending nutrition classes. The study found that direct handouts—Iran's new policy—were the least effective option. They cost three times as much as vouchers to boost calorie intake by 15%, and were four times as costly as a way of increasing dietary diversity and quality (see chart). Distribution costs were high, and wastage was also a problem. Only 63% of the food given away was actually eaten, whereas 83% of the cash was spent on food and 99% of the vouchers were exchanged as intended. Food transfers have also been the costliest option in similar projects in Yemen, Uganda and Niger, according to John Hoddinott at IFPRI.
In Ecuador there was little difference in cost between handing out cash and food vouchers, the other two options. But vouchers were better at encouraging people to buy healthier foods because of restrictions on what items could be exchanged for them. It was 25% cheaper to boost the quality of household nutrition using food vouchers than it was by handing out cash.A switch from universal subsidies to vouchers could be the most efficient way of boosting health as well as relieving poverty. This is overdue in many countries, according to Lynn Brown, a consultant for the World Bank. In Egypt subsidising starchy grains and bread has resulted in 70% of adults being overweight and 29% of under-fives being stunted. Either vouchers or cash handouts might reduce the bias against healthier foods (unsubsidised dairy products and vegetables) inherent in the system. But as Iran's populist giveaways show, the politics of cheap food can easily crowd out the economics."

One of the most disturbing features of the FSA is that it arbitrarily decides that 67% of the Indian population needs subsidized foods without any valid basis. It is also condemnable because of its over emphasis on cereals ignoring other protective foods like milk, egg and pulses. Its impact on agriculture could be disastrous with farmers taking up more and more cultivation of cereals like rice and wheat ignoring pulses and oil seeds. With the suspension of the Aadhar based delivery system where one gets the subsidy through the Banks, how the Scheme is going to be managed is any body's guess. It is most unfortunate that the modern India, even after 67 years of independence has not been able to evolve a documentation system to identify low income families who deserve government support for survival. In absence of reliable and dependable data, one suspects that most of the workers in the unorganized sector of the labor market are much above the poverty line requiring no prop from the State! In other words public money is squandered on them for the sake of considerations other than merit. How long this will go on, bleeding the Nation perpetually? The next government must take courage in its hand to drastically retool this project eliminating millions of undeserved beneficiaries from this doling bonanza!  

For further reading refer: http://www.economist.com/news/finance-and-economics/21596987-why-food-vouchers-are-policy-worth-considering-developing-countries-feeding


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