- The share of states in the net proceeds of the shareable Central taxes should be 32%.This is 1.5% higher than the recommendation of 12th Finance Commission.
- Revenue deficit to be progressively reduced and eliminated, followed by revenue surplus by 2013-14.
- Fiscal deficit to be reduced to 3% of the GDP by 2014-15.
- A target of 68% of GDP for the combined debt of centre and states.
- The Medium Term Fiscal Plan(MTFP)should be reformed and made the statement of commitment rather than a statement of intent.
- FRBM Act need to be amended to mention the nature of shocks which shall require targets relaxation.
- Both centre and states should conclude 'Grand Bargain' to implement the model Goods and Services Act(GST).To incentivise the states, the commission recommended a sanction of the grant of Rs 50000 crore.
- Initiatives to reduce the number of Central Sponsored Schemes(CSS)and to restore the predominance of formula based plan grants.
- States need to address the problem of losses in the power sector in time bound manner.
Thursday, November 15, 2012
Major Recommendations of 13th Finance Commission
Concept of SHG
Concept of SHG
Self Help Group (SHG) is a small Voluntary
association of poor people preferably from the same socio-economic background.
They came together for the purpose of solving their common problems through
self-help and mutual help. The SHG promotes small savings among its members.
The savings of the members is kept with a bank. This common fund is in the name
of SHG. Usually the number of members in one SHG does not exceed twenty. The
concept of SHG is based on the following principles:
·
Self-help supplemented with mutual help
can be a powerful vehicle for the poor in their socio economic development.
·
Participative financial services
Management is more responsive and efficient.
·
Poor need not only credit support, but
also savings and other services.
·
Poor can save and are bankable and SHG,
as clients result in wider out reach.
·
Creation of a common fund by
contributing small savings on regular basis.
·
Flexible democratic system of working.
·
Loaning is done mainly on trust with a
bare documentation and without any security.
·
Amounts loaned are small, frequent and
for short duration.
·
Defaults are rare mainly due to group
pressure.
·
Periodic meetings, non-traditional
savings.
Monday, November 5, 2012
National Food Security
Features and Issues : National Food Security Bill
The Sonia
Gandhi-led National Advisory Council (NAC) —which sets the social agenda for
the UPA—had prepared the initial draft of the Food Security Bill. The salient
features of the proposed Bill are:
·
The draft
Bill that was earlier made public by the food ministry sought to cover up to 90%
of the rural population and 50% of urban households with legal entitlement to
subsidised food grains to be extended to nearly 75% of the country’s
population.
·
The Priority
households (46% in rural areas and 28% in urban areas) to have a proposed
monthly entitlement of 35 kgs (equivalent to 7kg of food grains per person), at
Rs.3 per kg for Rice,
Rs. 2 per kg for Wheat
and Rs.
1 per kg for Coarse grains.
·
The general
households (39% in rural and 12% in urban in phase !and 44% rural and 22% urban
in final phase) to have a monthly entitlement of 20 Kgs (equivalent to 4 Kg per
person) at a price not exceeding the current minimum support price for millets,
wheat and rice.
·
The minimum
coverage and entitlement and price to remain unchanged until the end of the XII
five year plan.
·
The
Government of India to specify the criteria for categorization of population
into priority and general households.
·
Legal
entitlements for child and maternal nutrition, destitute and other vulnerable groups
·
Reform of
Public distribution System.
The
following issues need to be resolved to realize the goals of the proposed NFSB:
·
Given the
current trends in food grain production and government procurement and the
likely improvements in these over time, will there be adequate availability of
food grain with the public authorities to implement the full entitlements for
the priority and general category households?
·
What will be
the impact of such large procurement on the open market prices?
·
What are the
subsidy implications for both the phases and can these levels be sustained in
future
·
Arriving at
a clear definition of the priority households and general households
·
Given the inefficiencies
and leakages in the current distribution system, identify the principal areas
of reform of PDS and the alternative mechanisms of reaching the target
households.
The food grains requirement
would go up to 63.98 million tonnes (million tons) in the final phase. The NFSB
proposed by NAC is a revolutionary Bill with almost universal coverage. The
Bill will have huge impact on the economy. Indian agriculture is highly
dependent on Monsoon God. During drought years production falls significantly
in such eventualities the government will have to be dependent on the imports.
As a result of this bill there will be sharp increase in the procurement of
wheat and rice which may adversely affect the open market prices of food
grains. PDS
In addition
to the physical food grain requirement, the proposed bill has large subsidy
implications. The total subsidy out go is expected to be much higher than the
government projections. Again, the extra food grains required for the
distribution will have to be produced either through area expansion or through
productivity growth. The production cost to the government will have to be
added in the subsidy cost to know the total financial burden to the government.
According to an estimate, If Parliament passes the Bill, the food subsidy bill
is expected to rise by Rs.
27,663 crore at nearly Rs.
95,000 crore only in the first year of the implementation of the Bill. The
production cost of producing extra 20 to 25 million tons of food grains has
been estimated at Rs. 1,10,600 crore.
If the extra food grains required for is
produced through an area expansion the problem is that the arable land is
shrinking. ISRO mapping shows 81 million hectare has undergone desertification.
India has net sown area of 140 million hectare only and there is ever growing
pressure of urbanisation and land going to non-agricultural uses. The food
corporation of India has limited storage capacity and every year lakhs of tons
of food grains is destroyed due to open storage. The cost of inefficiencies of
FCI will further cause problems for the authorities.
Again if the
food grains required is produced through the gain in productivity the trend
witnessed do not favour the argument. Already the Per-capita availability of
food grains has started showing a
declining trend. In the year 2000 the per-capita availability of rice was 203.7
grams per day while that of wheat was 160 gms per day. The availability has
declined by 2009 to 188.4 gms and 154.7 gms respectively. A number of measures
will have to be taken to increase the food grains production.
The present
food security system in India is marked by strange paradoxes[1]. Under this
system the relatively affluent farmers in the better of irrigated areas are
given incentives in the form of a high and rising support price. The
Procurement and distribution of food grains involves a subsidy and it is believed
to go not to the consumers of PDS grains but to make good the losses incurred
by the FCI. PDS has remained untargeted for years and even today the benefits
do not reach the targeted population. It can also be easily seen that poor seem
to prefer to purchase food grains in the open market despite all government
efforts. The system originated as a response to a critical food crisis and it
works well in the situation of crisis. Rao further mentions if earnestly
implemented liberalization could enable the food security system to much more
effectively help the poor at much less cost. The food security system has to
aim at three objectives:
·
Keeping the
aggregate production at or above the level necessary for self sufficiency
·
Reducing the
instability in food grain markets
·
Making
dependable arrangements for helping the poor to get adequate access to food
Regarding
the first two objectives mentioned above, they may be better served by phasing
out the government interventions rather than by continuing the present price
support cum procurement operations. Given the recent strong and broad based
trend in production of food grains and its likely continuance it makes little
economic sense to continue with a highly centralised and subsidized
arrangements for procuring large quantities of food grains in one corner of the
country, to store them for long periods often in the open in the absence of
storage space and to move them over long distances for distribution to
consumers who appears to be increasingly turning to the market for meeting
their requirements.
Again this
system is confined to rice and wheat- has hardly much relevance in stabilising
the food grains markets which comprise besides rice and wheat coarse cereals
and pulses marked by considerable instability in prices. So long as the
production and supply situation continues to be comfortable, the best policy
would be to leave the markets free and gradually diminish the present large
scale procurement operations. FCI may be allowed to work as an autonomous
company on commercial principles but during the time of draught/crisis it
should take control of the entire system.
Regarding the third objective,
viz., making dependable arrangements to ensure adequate access to food for the
poor, it is necessary to keep the following points about the PDS in mind:
The families purchase p part of their requirements from the open
market. Sharma (1995) Indrakant (1995) Rao (1996) Radhakrishna (1996) find a
number of poor depends totally on market. It would be necessary to find out how
far the poor turn to the market because of absence of PDS or its poor quality
and how far due to positive preference?. It would also be important to know how
is the grain purchased by the poor from the market is utilised.
The NSS data on consumer expenditure indicates that over the
recent years the lowest three deciles of the population rural as well as urban
have increased the consumption of non-food grains food items like milk edible
oil sugar and Gur and other food while their consumption for cereals has
remained unchanged or even declined. There are reports that upper strata among
the poor tries to catch up the consumption pattern of the strata above them.
Such people may sale off the PDS grains in the open market to finance their
purchases on non-food grain items below the price of their purchase. Some members
of the family may sale the grain to finance their liquor consumption or the
consumption of tobacco products.
The PDS and
food security provisions therefore need to design in such a way to prevent such
types of misappropriations. The present thinking of issuing the Smart Card to the beneficiary of the
scheme of Cash Transfer may simply
assure that the food grains reaches in the hands of the targeted beneficiary.
The beneficiary in the target group should be classified on the basis of the
ownership of assets as (a)asset rich-income poor (b) asset poor-income poor (c)
asset less-income poor. The first target should be the third category of
beneficiaries. This group is most vulnerable and also most careless. They
simply does not care for themselves and also misuse the benefits by reckless
expenditure pattern. This is the only reason for their not having any
productive asset. If cash benefits are
transferred to them they may misuse use it for financing their bad habits. If the
beneficiary himself is misusing the benefits who is going to stop them and how?
One possible way is to give this responsibility to the Panchayati Raj
Institutions at local level. It is believed that the decentralisation will make
the system more transparent and the active participation of the needy poor will
definitely improve the food security system meant for them. Another suggestion
may be that such beneficiaries should be provided with the benefits in group through a scheme like
mid-day meal so that any one person may not spoil the scheme.
[1] V.M. Rao (1996), Policy
Research for Liberalized Agriculture: Some illustrative Research Areas, Indian
Journal of Agricultural economics, Vol.51 No.1&2, Jan-Jun. pp. 138
In addition
to the physical food grain requirement, the proposed bill has large subsidy
implications. The total subsidy out go is expected to be much higher than the
government projections. Again, the extra food grains required for the
distribution will have to be produced either through area expansion or through
productivity growth. The production cost to the government will have to be
added in the subsidy cost to know the total financial burden to the government.
According to an estimate, If Parliament passes the Bill, the food subsidy bill
is expected to rise by Rs.
27,663 crore at nearly Rs.
95,000 crore only in the first year of the implementation of the Bill. The
production cost of producing extra 20 to 25 million tons of food grains has
been estimated at Rs. 1,10,600 crore.
If the extra food grains required for is
produced through an area expansion the problem is that the arable land is
shrinking. ISRO mapping shows 81 million hectare has undergone desertification.
India has net sown area of 140 million hectare only and there is ever growing
pressure of urbanisation and land going to non-agricultural uses. The food
corporation of India has limited storage capacity and every year lakhs of tons
of food grains is destroyed due to open storage. The cost of inefficiencies of
FCI will further cause problems for the authorities.
Again if the
food grains required is produced through the gain in productivity the trend
witnessed do not favour the argument. Already the Per-capita availability of
food grains has started showing a
declining trend. In the year 2000 the per-capita availability of rice was 203.7
grams per day while that of wheat was 160 gms per day. The availability has
declined by 2009 to 188.4 gms and 154.7 gms respectively. A number of measures
will have to be taken to increase the food grains production.
The present
food security system in India is marked by strange paradoxes[1]. Under this
system the relatively affluent farmers in the better of irrigated areas are
given incentives in the form of a high and rising support price. The
Procurement and distribution of food grains involves a subsidy and it is believed
to go not to the consumers of PDS grains but to make good the losses incurred
by the FCI. PDS has remained untargeted for years and even today the benefits
do not reach the targeted population. It can also be easily seen that poor seem
to prefer to purchase food grains in the open market despite all government
efforts. The system originated as a response to a critical food crisis and it
works well in the situation of crisis. Rao further mentions if earnestly
implemented liberalization could enable the food security system to much more
effectively help the poor at much less cost. The food security system has to
aim at three objectives:
·
Keeping the
aggregate production at or above the level necessary for self sufficiency
·
Reducing the
instability in food grain markets
·
Making
dependable arrangements for helping the poor to get adequate access to food
Regarding
the first two objectives mentioned above, they may be better served by phasing
out the government interventions rather than by continuing the present price
support cum procurement operations. Given the recent strong and broad based
trend in production of food grains and its likely continuance it makes little
economic sense to continue with a highly centralised and subsidized
arrangements for procuring large quantities of food grains in one corner of the
country, to store them for long periods often in the open in the absence of
storage space and to move them over long distances for distribution to
consumers who appears to be increasingly turning to the market for meeting
their requirements.
Again this
system is confined to rice and wheat- has hardly much relevance in stabilising
the food grains markets which comprise besides rice and wheat coarse cereals
and pulses marked by considerable instability in prices. So long as the
production and supply situation continues to be comfortable, the best policy
would be to leave the markets free and gradually diminish the present large
scale procurement operations. FCI may be allowed to work as an autonomous
company on commercial principles but during the time of draught/crisis it
should take control of the entire system.
Regarding the third objective,
viz., making dependable arrangements to ensure adequate access to food for the
poor, it is necessary to keep the following points about the PDS in mind:
The families purchase p part of their requirements from the open
market. Sharma (1995) Indrakant (1995) Rao (1996) Radhakrishna (1996) find a
number of poor depends totally on market. It would be necessary to find out how
far the poor turn to the market because of absence of PDS or its poor quality
and how far due to positive preference?. It would also be important to know how
is the grain purchased by the poor from the market is utilised.
The NSS data on consumer expenditure indicates that over the
recent years the lowest three deciles of the population rural as well as urban
have increased the consumption of non-food grains food items like milk edible
oil sugar and Gur and other food while their consumption for cereals has
remained unchanged or even declined. There are reports that upper strata among
the poor tries to catch up the consumption pattern of the strata above them.
Such people may sale off the PDS grains in the open market to finance their
purchases on non-food grain items below the price of their purchase. Some members
of the family may sale the grain to finance their liquor consumption or the
consumption of tobacco products.
The PDS and
food security provisions therefore need to design in such a way to prevent such
types of misappropriations. The present thinking of issuing the Smart Card to the beneficiary of the
scheme of Cash Transfer may simply
assure that the food grains reaches in the hands of the targeted beneficiary.
The beneficiary in the target group should be classified on the basis of the
ownership of assets as (a)asset rich-income poor (b) asset poor-income poor (c)
asset less-income poor. The first target should be the third category of
beneficiaries. This group is most vulnerable and also most careless. They
simply does not care for themselves and also misuse the benefits by reckless
expenditure pattern. This is the only reason for their not having any
productive asset. If cash benefits are
transferred to them they may misuse use it for financing their bad habits. If the
beneficiary himself is misusing the benefits who is going to stop them and how?
One possible way is to give this responsibility to the Panchayati Raj
Institutions at local level. It is believed that the decentralisation will make
the system more transparent and the active participation of the needy poor will
definitely improve the food security system meant for them. Another suggestion
may be that such beneficiaries should be provided with the benefits in group through a scheme like
mid-day meal so that any one person may not spoil the scheme.
Public Distribution System – Procurement, Off-take and Stocks
(Million Tons)
Year
|
Procurement
|
Off-take
|
Stocks
| ||||||
Rice
|
Wheat
|
Total
|
Rice
|
Wheat
|
Total
|
Rice
|
Wheat
|
Total
| |
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
1980-81
|
5.34
|
5.86
|
11.20
|
5.88
|
7.51
|
13.39
|
6.69
|
3.07
|
9.87
|
1985-86
|
9.62
|
10.35
|
19.97
|
7.40
|
11.72
|
19.12
|
10.34
|
10.21
|
20.75
|
1990-91
|
12.92
|
11.07
|
23.99
|
7.91
|
8.58
|
16.49
|
10.21
|
5.60
|
15.81
|
1995-96
|
9.93
|
12.33
|
22.16
|
11.63
|
12.72
|
24.35
|
13.06
|
7076
|
20.82
|
2000-01
|
18.93
|
16.36
|
35.29
|
10.42
|
7.79
|
18.21
|
23.19
|
21.50
|
44.98
|
2005-06
|
26.69
|
14.79
|
41.48
|
25.08
|
17.17
|
42.25
|
13.68
|
2.01
|
16.62
|
2010-11
|
31.13
|
25.92
|
56.79
|
29.80
|
23.07
|
52.87
|
28.82
|
15.36
|
44.35
|
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