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Indian Merchants’ Chamber Managing Committee Meeting October 1, 2013

Indian Merchants’ Chamber Managing Committee Meeting October 1, 2013. National Food Security Act 2013 G.Chandrashekhar, Chairman IMC Agribusiness and Food Processing Committee. NFSA – Salient features. One of world’s most ambitious welfare programs;

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Indian Merchants’ Chamber Managing Committee Meeting October 1, 2013

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  1. Indian Merchants’ Chamber Managing Committee MeetingOctober 1, 2013 National Food Security Act 2013 G.Chandrashekhar, Chairman IMC Agribusiness and Food Processing Committee

  2. NFSA – Salient features • One of world’s most ambitious welfare programs; • Seeks to deliver foodgrains at highly subsidized rates to over 800 million (~ 12% of world population) covering 70% of country’s rural and 50% of urban population.

  3. NFSA – Salient features • Guarantees minimum 5 kgs of rice (Rs 3/kg), wheat (Rs 2/kg) and coarse cereals (Re 1/kg) respectively per person per month at rates that are about 10% of cost or 90% subsidised. • 5 kg covers half of average monthly use per person; so, another 5 kg will have to be sourced from open market.

  4. Four dimensions of NFSA • Foodgrain production • Foodgrain procurement • Distribution logistics • Fiscal burden • Ethical dimension??

  5. Production • India world’s second largest rice and wheat producer; not food insecure today; but faces real risks in sustaining output levels & growth; will output growth equal demand growth? • What if India faced drought? Adverse consequences of having to import

  6. Procurement • Systemic inefficiencies galore; Track-record of procuring / handling 50 ml.t • Inadequate warehousing, unscientific storage, humungous carrying costs • Purchase of 62-65 ml.t will reduce grain available for open market.

  7. Distribution logistics • Weakest link in supply chain; Grains will be supplied through 450,000 FPS; leakages are well known; how will they be plugged? Can official machinery and PDS shopkeepers have capacity & interest to serve > 800 million people? Doubts persist

  8. Fiscal • NFSA cost estimated at $ 20 Billion (Rs 120,000 crores); an incremental cost of $ 6-7 Billion (~ Rs 40,000 crores) • Already at an alarming level, fiscal deficit risks worsening • At 90% subsidy on 5 kgs, people will save some cash which will hopefully be used to buy more food in open market; but persistent high food inflation can negate benefits

  9. NFSA and nutrition security • Legal right to food is welcome; but pervasive malnutrition and under-nutrition is a threat; In its present form, NFSA will not meet protein and calorie needs of target population; include pulses and edible oil; • NFSA may be reviewed after three years • Cash transfer?

  10. Thank You.Floor open for discussion • G. Chandrashekhar The Hindu Business LineKasturi Building, J. Tata Road, Churchgate, Mumbai 400020 Phone:91-22-22885593 – 22021099email:chandrashekhar.g@thehindu.co.in

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