One of the more immediate motives for setting up the National Advisory Council was to give a new vigour to the long-pending food security legislation. Unsurprisingly, this is the single issue that has dominated the initial meetings of the NAC. But as reported in The Indian Express on Friday, the NAC was unable to reach a final consensus on the proposed law because of a potential conflict between extending food security as a ?universal entitlement?, like the NREG is, on the one hand, and the limited availability of foodgrains that constrain it, on the other. The principle of universal entitlement, of course, goes well beyond what the UPA had promised?subsidised food grains to below poverty line families. The NREG worked well as a universal entitlement because only those in real need of a minimum wage for 100 days a year identified themselves as poor and signed up the programme. Similarly, efficient self-selection may, however, elude a universal food security entitlement. The government can, of course, find ways to disincentivise above poverty line families from accessing subsidised foodgrains by, for example, distributing grain that is not of superior quality. So those who want the best quality, and can afford it, will buy from the market place. But the probability of leakages, hoarding and black marketing is high under a universal entitlement regime, given the weakness of institutions in India.
The NAC?s solution to the limited size of the government?s food stocks is to raise the buffer stock significantly. That will, however, divert more foodgrain away from the open market and create a spillover effect on food inflation, which is already a big headache for the government. The NAC would be better advised to opt for a more targeted food security scheme. There is the obvious problem of which estimate of poverty and hunger to choose among the many floating around. Depending on the estimate you believe, poverty ranges from 25% of the population to over 70%. We have consistently supported the lower end of the estimates range, which puts those below the poverty line at close to 25% of the population. This is the section that ought to be targeted by any food security legislation. The most efficient way to do so would be to provide direct cash transfers, perhaps to those already enrolled in NREG, which can then be used to buy foodgrains at market prices. That takes care of the needs of the poor while not distorting agricultural markets. But, for the moment, the NAC seems to be thinking in a different, less efficient direction.