Why Companies Must Embrace Food Security


By Shachindra Nath

Shachindra NathAny Defence of the food security law is found to raise eyebrows. Naysayers have already taken a tough stand against the law, given its fiscal implications. Many believe that a high-growth economy will itself tackle poverty and hunger.

I disagree. I grew up in a tier-II city and worked extensively in rural areas. Here, people work 18 hours a day but still can’t think about a second meal for their families. They live their life on a day to day basis, unsure of gainful employment the next day. I fret about the deficit, but cannot look aways from hunger and poverty. Many argue that growth is the right way to eliminate poverty and not charitable measures of giving food or employment. But has employment jumped over the last 10 years of exemplary economic growth? The answer is no.

I India, for GDP wroth to translate into real employment generation will take decades. It would need willpower, infrastructure development and a socially-responsible corporate mindset.  While the journey of GDP growth to employment generation and povertyelimination is an ongoing process, we should remember that a hungry man becomes rebellious not when he is hungry but when he sees himself hungry and a section of society getting more prosperous every day.

No food security or employment guarantee scheme can lay the foundation of a sustainable and prosperous nation but they can ensure that the basic needs of people are addressed. Given the near political consensus on the food security law, should India Inc. not align itself more with the people’s will,  asrepresented by Parliament?

The real debate has to be about how India can found the costs of these schemes and how long these schemes need to be run. Like any business, we need to discuss how to increase revenues for government. For a developing economy, where society is so economically diverse, the focus of the government can never be on reducing cost but on generating at least Rs.10 of new revenue for every rupee of expense on social schemes.

Based on government estimates, the incremental cost of meeting the increments of food security in 2013-14 is Rs.45, 000crore, of which Rs.10, 000crore has already been provided in the Budget. This leaves a gap of Rs.35, 000crore.
An environment where an individual can survive with dignity will enable greater social stability and economic development. The long-term objectives of corporate India should be aligned with effective implementation of the food security law.

The corporate sector should ensure that expenses on food security are funded. The new companies law says that all companies meeting certain financial parameters must contribute 2% of their profits to social causes this is estimated to translate into Rs,15,000-20,000 crore.

Companies already make some contribution to corporate social responsibility (CSR). Assuming the existing CSR spend is Rs.2, 000 – 3,000 crore, incremental funds of Rs.12, 000-15,000 crore would become available, and allocating even a part of this to food security would be a good starting point. We need rules that treat contribution towards food security as CSR.

We have a history of welfare schemes outliving their intended life. The law has fixed the prices of subsided food grain for the first three years after which the government can reset prices, but is not obligated to.  To pre-empt the government in power at the time of reset from succumbing to the temptation of not raising prices, the law should have provided an inviolable obligation to raise prices over time to at least cover inflation. The recent approach to hike diesel pricing by 50 paise each month has shown how certainty of future pricing leads to acceptance.

The other regret is that there is no provision to change the coverage. Ideally, the law would set a path to reducing coverage as income vulnerabilities reduce. The burden would, therefore, come down progressively and the law would have added millions of healthier workers to the system.

It is time the industry thinks through whether it should only negatively react to the food law or take a positive approach, to balance the needs of all.

(The Author is Group CEO, Religare Enterprises)

(Article first published in Economic Times, 25 October 2013)

Photo: Business Line

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