Apart from the many other ills of the proposed Food Security Bill—around 40-50% of PDS supplies don’t reach the poor today—the one that has been completely overlooked is that it gives the states an open invitation to raise more funds from the Centre. Today, states like Punjab and Haryana levy a 14.5% tax on all procurement by FCI in the state. Given what other states charge, of the R72,800 crore Food Subsidy Bill in FY12, as much as R10,000 crore was paid out to various state governments in the form of mandi and other related levies.
So, once the Food Security Bill gets going, all that a cash-strapped state needs to do is to hike charges on the procurement which, incidentally, needs to increase manifold under the new food law. Orissa, as FE has reported today, has already made a beginning by raising mandi and other taxes from 8.5% to 12% on paddy. While that will fetch the state only R120-150 crore, this is because the state has a very small share in the country’s paddy procurement. Once other states catch on, it is a safe bet the cost of the Food Security Bill will spiral even beyond the R6 lakh crore—over three years—that the CACP had estimated. That, and the huge leakages which will result from pushing so much grain through a pipe full of holes, are something the government needs to pay heed to now that the Parliament logjam has given it a chance to relook the Bill.