Food Security Ordinance: Reckless and opportunistic gambit
by Virendra Parekh on 15 Jul 2013 4 Comments

With defeat in the next election staring at it in the eye, the UPA government has played what it evidently considers its trump card: the food security ordinance promising ample quantity of highly subsidized grains to 67 per cent of the population. The Congress leadership certainly believes that this will be a game-changer which will make people overlook, if not forget, its numerous gigantic corruption scandals, unconscionable inflation in essential commodities, and grave deterioration in internal and external security environment.   


No doubt the ordinance is an example of reckless populism and opportunistic politics at its worst. Implemented in its present form, it can play havoc with our agriculture and food economy, make life miserable for millions, and send the fiscal deficit through the roof.


Politically, however, it is a master stroke. If it becomes law, Congress will claim the whole and sole credit for its authorship. At the same time, no other party can afford to oppose and run the risk of being dubbed anti-poor. Then again, while implementation of the scheme - right from identification of beneficiaries to providing compensation for failure to supply grains - is the responsibility of the state governments, it is the ruling dispensation at the Centre that will be credited for conceiving and introducing it.


Under the ordinance, up to 75 per cent of the rural population and up to 50 per cent of the urban population will have uniform entitlement of five kg of food grain per month, at highly subsidised prices of Rs. 3, Rs. 2, Re. 1 per kg for rice, wheat and coarse grains, respectively. The poorest of poor households would continue to receive 35 kg food grain per household per month under the Antyodaya Anna Yojna at subsidised prices of Rs. 3, Rs. 2 and Re. 1. Pregnant women and lactating mothers are entitled to nutritious meals plus maternity benefits of at least Rs. 6000 for six months. Children up to the age of 14 can opt for grains or hot cooked nutritious meals.


Remarkably, this is a legally enforceable entitlement. In case of non-supply of food grain or meals to entitled persons, the concerned State/UT governments will be required to provide such food security allowance to the beneficiaries as may be prescribed by the Central Government. Public servants will be penalized for failure to comply with the relief recommended by the District Grievance Redressal Officer (DGRO).


Nobody can deny that the purpose of the bill is laudable. Laudable intentions, alas, are not sufficient to ensure wise conduct. The road to Hell, as is well said, is often paved with good intentions.


The first question is: do we have the financial, organizational and administrative resources to implement a scheme like this? The union budget for 2013-14 provides Rs. 90,000 crore for food subsidy, including a special provision of Rs. 10,000 crore for food security scheme. Every estimate of the scheme’s cost vastly surpasses this provision.


The intrepid and outspoken Mr. Surjit Bhalla has shown that if the scheme is implemented fully as outlined in the ordinance, then it will cost Rs. 314,000 crore (3 per cent of the GDP) in a full fiscal year. Mr. Bhalla has used only NSS data, official numbers and simple arithmetic to arrive at this figure, and challenged the government spokesmen to disprove him. The chairman of Agriculture Costs and Prices Commission Mr. Ashok Gulati has estimated it at Rs. 200,000 crore a year. Even the UPA Government’s own estimates put it at Rs. 125,000 crore, far larger than the budget provision.


If the ordinance becomes law and is implemented, India will have to forget about fiscal consolidation and deficit control for a long time, with all its attendant consequences on public investment, economic growth, the country’s credit rating and foreign investment climate.


Again, no thought seems to have been given to actual implementation on the ground. The scheme will be implemented by the Food Corporation of India, arguably the most inefficient and corrupt organ of the government. FCI does not have storage capacity even for the grain that it currently procures. Lakhs of tonnes of food grains are stored in the open to rot, to be pilfered or to be eaten by rodents. The very same FCI will now be asked to expand its operations substantially.    


No government anywhere else in the world has ever undertaken to provide food almost free to its people at such a colossal cost.


It is possible to argue that when it comes to feeding the hungry the budget does not and should not matter. India’s problem, however, is not so much hunger as malnutrition, caused by a shortage of proteins, vegetables, fruits and poultry products which are priced out of the reach of the poor.


If the malnutrition statistics are to be believed, India is in the grip of a severe crisis. However, these malnutrition statistics need not be accepted unquestioningly. These are based on an international norm which does not take into account ethnic differences. Symptoms of malnutrition could sometimes be caused by poor public health, especially by abysmal sanitation or lack of clean drinking water. Most importantly, the cure for malnutrition is not more nutrition, which the food security ordinance seeks to provide, but better nutrition, which it will make even scarcer and costlier.


The scheme envisaged in the ordinance will introduce severe distortions in the agricultural economy of the country and make life miserable for those who, for whatever reasons, are left out of it. With assured returns from even higher procurement by FCI, farmers will be even less inclined to produce anything other than food grains. Already, production of pulses has stagnated despite higher prices. That imbalance will become worse, compounding the problem of malnutrition.


As regards distortion of markets, consider this scenario. As awareness about the ‘right’ to 5 kg of rice or wheat per month at Rs 2-3/kg spreads, there will be a spurt in demand for PDS grains. Even farmers, who currently retain a significant portion of the grain they produce for captive consumption, will now choose to sell this entire quantity and meet their family requirement solely from the PDS. When PDS wheat costs just Rs. 2/kg, as against its minimum support price of Rs. 13.5, isn’t this inevitable? It is also possible that the poor may sell back part of their subsidized quota in the open market to buy other necessities e.g. cooking oil or kerosene. What will it do the market?


Since the government buys over almost entire grains production, the private trade in grains will shrivel and prices will shoot up. Please remember that one third of the population is left out of the scheme. They will have to pay exorbitant prices for all their foods - grains as well as others. Do not be under the impression that only the well-to-do will be excluded. If experience is any guide, there will be errors of identification on both the sides: many of the undeserving will be included while the deserving will be left out. Their lives will be miserable.


The contours of the scheme make it evident that it is handiwork of whimsical idealists divorced from reality. They live in ivory towers, without having to work for a living or being held accountable for their views. The ministers, who ought to know better, have gone along because they view the scheme primarily as an election ploy rather than a national effort to tackle a chronic problem.


Add all of this together and the picture we get is that of a wholly uncalled for and highly expensive scheme that will spawn corruption, wastage and mismanagement on a massive scale, distort our agricultural economy, cause food prices to shoot up, cripple open market in food, put severe strain on the government coffers and make life miserable for millions of people. All this to satisfy the Signora who thinks this will cover her misdeeds and win her the next elections. Neither the BJP nor the Left has gumption to call the bluff. Such are the wages of competitive populism.


Ironically, this is happening under the watch of Dr. Manmohan Singh, a seasoned economist of international repute. But then he is long past any sense of shame, resistance or accountability.


Real food security comes not from the ration card but from a stable job with decent income. The need of the hour is to promote development that will create gainful employment. Equally important is to bring down the cost of production in agriculture so that a price that is remunerative for the farmer becomes reasonable for the consumer. If the government gets out of sale and purchase of food grains (as also fruits and vegetables) and allows the country to become a single unified market, shortages will disappear and prices will decline. But this is an agenda for those who aim at nation building. It will leave cold those who cannot see beyond the next election.  

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