Food Security Bill: Good politics to deliver bad economics A bill duly tabled in Parliament promises to give legal right to subsided food to two- thirds of the country 1. 2 billion population. The ambitious proposal should be seen in the context of India being home to roughly one third of the world’s poor; where over 70 per cent of children are malnourished and about 10 million or more people die of chronic hunger or hunger-related diseases every year.
The Food Security Bill, the PUPA-l’s flagship scheme, envisages the distribution of heat, rice and coarse grains at Just RSI 2, RSI 3 and Reel a kilo each to about 65 per cent of the population ? 75 per cent of them in rural areas and the rest in cities and towns. Add to that, some entitlements to ‘special groups,’ like destitute or homeless persons, who will be entitled to at least one meal a day. Through this world’s largest experiment of providing food grain to poor, the government plans to double its food subsidies to 2 per cent of the GAP.
If the government machinery is able to deliver on Congress chief Sonic Sandhog’s pet project, it could mean the end to country widespread malnutrition and poverty elatedly soon! “It’s a most thoughtful and timely action, in the light of coming UP elections and thereafter the 2014 general elections,” said Proof B B Apothecary, eminent economist and former vice-chancellor of Charlatan Nehru University. Then what is the glamour all about?
Why are some people hell-bent on opposing it? The general view is that if the government can pull it off, it can be the biggest trump card for the PUPA government, at a time when nothing seems to be working in its favor at the moment ? neither politics nor economics. Bad economics But, one very important factor worth taking notice is: the scheme can severely impact on Indian’s economic growth prospects, should the populist measure be brought into force.
The proposed Food Security Bill came on a day (Thursday) when the Reserve Bank of India also came out with its Financial Stability Report, which categorically states that Indian’s inflation risk remains high and a slowdown in revenue collections and higher spending on subsidies may make it challenging for the government to achieve the fiscal deficit target of 4. 6 per cent of the Gross Domestic Product (GAP) this financial year (2011-12).
It also said that Indian’s trade deficit for this fiscal is expected to widen sharply to between $1 55 billion and $160 billion from a little above $104 billion a year ago. Should the bill be passed and implemented. But, it is the trade deficit, which will soar manifold since the government will have to resort to large scale import of food grain as our own grain output is not adequate to handle such a voluminous expenditure programmer. It will worsen the fiscal deficit situation, but more than that it is Indian’s trade deficit which will be hit hard as the programmer will require 70-80 million tones of more DOD grain every year. India obviously does not produce that much and the shortfall will have to be met from imports,” said Proof Apothecary. The country produces 225-230 million tones of food grain every year barring a bumper crop year when the output surges by a few million tones more. Where will the rest come from, if not from overseas market!
Economists opine, it will increase food inflation. Analysts at Kodak Maidenhair Bank said that besides skewing the food inflation to a higher side, the move will also result in rise in prices of food grain for non- beneficiaries of the programmer. There will be pressure on prices of food for those outside this scheme,” an economist of Kodak said. Procurement problem As regards the increased requirement of food grain for distribution under the Act, Union food minister K V Thomas said only 15 per cent more supplies would be needed as the Centre is already distributing 526. Lack tones through public distribution system, while the estimated demand under the Act will be 607. 4 Lack tones. He said government can even procure more for the purpose. Currently, government procures only 30 per cent of the total production. But, what about government’s delivery mechanism? “If the government goes in for enlarging the public distribution system without revamping it, where is the guarantee that the intended food grain will reach the poor? ,” Apothecary asked.
Then there is problem of storage. Currently, the state-run Food Corporation of India and the Central Warehousing Corporation have the capacity to store 87 million tones of grain. The COW has 487 warehouses with a capacity of 10. 6 million, while the FCC, with 1,500 godsons, accounts for the rest. The new measure, according to experts, will cost an additional sum of RSI 27,000 core annually to the exchequer, while the government puts it at RSI 21 ,OHO core by way of subsidies.
But, the question is: can a government, burdened with whopping food, fuel and fertilizer subsidies, afford such a large expenditure programmer, especially when the Mahatma Gandhi National Rural Employment Guarantee Scheme is already drilling a large whole in the nation’s kitty? Policymakers say that the government can find resources provided it cuts down or Bill. But the government is unlikely to do that, as it will not go down well among the voters in an election year.
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