The massive food entitlement scheme, without a proper delivery mechanism, will only drain public finances. The UPA Government's market has failed the poor and dragged the middle-class to the edge of the poverty line
The food security Bill is a classic case of putting the cart before the horse. It increases subsidy on food grain by over Rs 33,000 crore immediately and progressively in the next five years to about Rs 1,79,000 crore while almost eliminating subsidy on agriculture. But there are positives to the Bill. For the first time since independence, the Government has officially accepted that there is hunger in the country and people die of it. Officials have always attributed such deaths to ‘malnutrition’ and not starvation. It is also an admission that inflation has spiralled and the Government has failed to keep food prices under check.
The Bill also admits that the poor comprise 67 per cent of the population — 81 crore —and not the various figures shelled out by the Planning Commission that ranged from 26 per cent to 36 per cent or the liberal ones at 40 and 50 per cent. The Arjun Sengupta committee puts the figure at 77 per cent! However, the Bill spells disaster for the public exchequer. The Government has taken upon itself to be held legally obligated to provide food grains at the fixed rates of three, two and one rupees, without ensuring that it would be available to it at affordable rates.
We should not be surprised if the Government is forced to buy food grains at high prices and sell at the lowest it has fixed. (Would that open up new routes for scamsIJ) True, the poor need to be fed; they also constitute the largest vote chunk. So the idea of feeding and garnering votes is natural. Surprisingly, even the Opposition did not object to it. Risking votes on a sensitive issue is not wise.
Ironically, nobody wants to learn from history. The best model of a welfare state was the Soviet Union. It collapsed not because of a failed ideology but because it couldn’t bear the weight of unaffordable expenses on its commitment to provide food, commodities and shelter to everyone. Entitle-ments kept the citizens happy but eroded the nation’s financial base.
India seems to be putting the clock back to 1971 and Indira Gandhi’s ‘garibi hatao’ days. But Indira Gandhi did not raise entitlements. She initiated a green revolution to ensure food availability; stopped imports of rotten wheat and rice from the US, and made people less dependent on the public distribution system. In her initial days, she was able to check spiralling prices. Her so-called ‘successors’ should have learnt from her that the country’s path to progress was through investment and research in agriculture.
Since 1991, public investment in agriculture has fallen drastically. Private corporate investment has increased in a selective manner and the corporates have emerged as the biggest zamindars. Their profits are soaring and so are the prices of food items. The recent National Spot Exchange scam has exposed betting in food items, something the UN agencies had warned of years back.
Yes, the UPA Government’s market has failed the poor and dragged the middle-class to the edge of poverty line. The massive food entitlement, without a proper mechanism to deliver, would only be draining public finances. Also, the Government even now has little control on prices. With the compulsion of buying food at a high price and supplying it at the lowest price, it is burdening all future Governments with enormous unwanted expenditure. It will be difficult for any future regime to withdraw it as the political fall-out would be too intimidating.
With the new land acquisition law, there would be further strain on farm land. Over the last two decades over 27 lakh hectare arable land has gone for other uses. The new Bill may facilitate further diversion. How will food production, even at the current rate, be ensuredIJ This would play havoc not just with public finances but with the economy as a whole.
As the Government would become the largest procurer, the farmers may have to contend with a freeze on minimum support price, another disincentive in inflation-hit times. This might create shortage of food for the 33 per cent who have been left out of the scheme resulting in further food price hike.
Since this chunk of the market is being controlled by the corporates, it is likely that they would offer better prices to farmers and choke the Government supply line. Would the Government in that case buy food from the corporate houses at extreme high prices to meet its commitmentIJ In extreme situation, India may even have to approach the international grain market. No sooner this happens international prices would rise. With forex crunch what would be its implication on the rupee, nobody has tried to foresee that.
Ultimately, the food may not just elude the poor but may also open flood gates of corruption in the purchase of food grains.