India passes $20 bln law to expand food welfare

An Indian tribal woman rests after working in a paddy field in Umwang, in the northeastern Indian state of Meghalaya, Wednesday, Sept. 4, 2013. India plans to subsidize wheat, rice and cereals for some 800 million people under a $20 billion scheme to cut malnutrition and ease poverty. The Food Security Bill, sent this week by India's parliament to the president for approval, guarantees citizens a legal right to food. (Photo : AP Photo/Anupam Nath)

India plans to subsidize wheat, rice and cereals for some 800 million people under a $20 billion scheme to cut malnutrition and ease poverty.

The Food Security Bill, sent this week by India’s parliament to the president for approval, guarantees citizens a legal right to food.

India has some of the world’s worst poverty and malnutrition with two-thirds of its 1.2 billion people poor and half of the country’s children malnourished. But the $20 billion annual cost of the bill, which consolidates and expands existing subsidies, has drawn renewed attention to strained government finances at a time when India is flirting with an economic crisis as its currency falls and debt mounts.

Food Minister K.V. Thomas called the bill a first step toward improving food distribution in a country where poor transportation and lack of refrigeration mean up to 40 percent of all grains and produce rot before they reach the market.

The legislation, long promised by the governing Congress Party, was passed by India’s upper house of parliament on Monday after being passed last week in the lower house.

It allows those who qualify to buy 5 kilograms of rice a month for 3 rupees (4.5 cents) a kilogram. Wheat will cost 2 rupees a kilogram, and for cereals the cost is 1 rupee.

Pregnant women and new mothers will also receive at least 6,000 rupees ($90) in aid. In a deviation from India’s patriarchal traditions, the scheme designates the eldest woman in each home as the head of the household, hoping to prevent rations from ending up on the black market.

This would also help keep subsidy costs from escalating, the government said.

The very poorest families, already receiving subsidized rates for up to 35 kilograms of grains a month, will continue to receive those benefits, the government said.

The expanded spending will increase food subsidies from 0.8 percent of gross domestic product to 1.2 percent.

Moody’s credit ratings agency said last week that the food bill would hinder the government’s ability to consolidate its finances. The Reserve Bank of India also warned in its annual report that the bill could exacerbate strains on the government budget and limit its room for maneuver in the future.

“Given the macroeconomic situation … the timing is not right,” Bimal Jalan, a former RBI governor, told Press Trust of India, though he acknowledged that the food program is otherwise a “desirable thing to happen.”

The government has said it can afford to pay for the 61.2 million tons of grain required, and that recent measures such as a cut to diesel subsidies would help. It said it would cover most of the program’s annual $20 billion cost, which includes existing subsidies, but it will be up to India’s states to decide who will qualify.

With elections looming next year, the opposition has criticized the bill as a gimmick for winning votes while also saying the plan itself was not ambitious enough to improve nutrition.

India has offered free midday school meals since the 1960s in an effort to persuade poor parents to send their kids to school. That program now reaches some 120 million children. The country gives a similar promise of a hot, cooked meal to pregnant women and new mothers – a promise the new bill extends to children between 6 and 14 years old. <AP/NEWSis>