The United Progressive Alliance (UPA) government has resorted to an Ordinance route to launch the food security programme, promising cheap food to two-thirds of India’s 1.3 billion people. But why the hurry to bring in an Ordinance to implement the bill when Parliament’s monsoon session is round the corner?
And, whether the scheme with huge financial implications will provide food security to a large number of people, are some of the concerns that need to be addressed. But one thing is clear: opening the tap of excessive government expenditure is only aimed at obtaining electoral benefit for the UPA in the forthcoming general elections.
The scheme is supposed to cover up to 75 per cent of the rural and up to 50 per cent of the urban population to provide uniform entitlement of 5 kg of foodgrain per month at highly subsidised prices of Rs 3, Rs 2 and Rs 1 a kg for rice, wheat and coarse grains, respectively. It also promises to provide maternity benefit to identified beneficiaries at Rs 1,000 per month.
According to government’s own admission, for the proposed entitlement, the estimated food subsidy bill for the year ending March 2014 will be Rs 1,24,724 crore. The government has budgeted Rs 90,000 crore and the rest may be recovered from the reduction in subsidies in other areas such as petroleum and gas. Cutting subsidy on petroleum has already begun and the groundwork has been prepared for cutting gas subsidy from next year. But that may not be enough in the face of rising population and increasing cost of food in the coming years once the implementation takes off.
The Commission for Agricultural Costs and Prices that advises the government on price policy of major agricultural commodities has estimated the financial cost of the food security bill at Rs 6.82 lakh crore over the next three years. This is more than two times the provision in the budget. What the government may not have taken into account is the peripheral costs for implementation of the bill such as transportation and distribution costs, the cost of maintaining the buffer and the cost of foodgrain itself which is expected to go up every year. It is still not clear how future governments are going to raise such large revenues year after year.
It is true that no cost should be attached to eradication of poverty and hunger from a nation. But, in the wake of the recent World Bank report indicating massive food shortages in many parts of the globe as early as the 2030s due to climate change and other researches pointing to slower pace of farm productivity vis-à-vis rapidly growing population, the government also needs to ponder how it is going to carry on with the programme in the long run. In the Indian context, the problem of fluctuation in foodgrain production is more pronounced as a large part of agriculture in the country is solely dependant on monsoon rainfall.
To top it all, there is an acute shortage of infrastructure and consequent supply-side bottlenecks. Distribution of foodgrain and ensuring that it reaches to places where it is needed the most is a major challenge. For such a large scale programme, the government is only dependent on the existing creaky public distribution system (PDS), which has become a synonym for pilferage and rotting of grains rather than distribution among poor. The PDS is run through about 5 lakh fair price shops in the country in which leakages have been estimated of the order of 40 per cent, according to officials. This adds to an already humongous economic cost.
One might wonder what was the urgency to bring an Ordinance for a scheme which is going to affect the lives of millions of India’s destitutes and for which there is almost no preparation. Analysts say, there was a chance the bill would not get passed in Parliament as the Opposition had earlier also raised concerns over lack of preparation to roll out the scheme. Now, none of the Opposition parties will take a chance to vote against the Ordinance that too in an election year as it may project them as anti-poor.
Passing the Ordinance technically means the bill is ready for implementation, but the government still has not been able to prepare a list of beneficiaries. States have been given the responsibility to decide on the eligibility criteria based on socio-economic and caste census data. The survey for the same is likely to take six more months. Then, the Centre’s below poverty line list has also not been finalised yet.
Last but not the least, there are huge inflationary consequences of the bill. According to Union food minister, India needs close to 61 million tonne of foodgrain. Every year it is expected to rise and for this, the government needs to give incentives to farmers, implying minimum support prices will actually have to go up at a higher rate in order to incentivise. Rise in MSP is always inflationary. Then there are years of drought just as years of good monsoon and in a drought year, the government may need to import foodgrain. The cost of imported grain is always high.
Despite being one of the biggest producers of foodgrain in the world, India still accounts for 25 per cent of world’s hungry population. Only time will tell whether bringing more legislations will solve the problem.