It’s a colossal dole that will impact production and push up prices without improving the condition of the hungry
All through his election campaign, Congress vice-president Rahul Gandhi made a song and dance about a list of fundamental rights granted to people under the UPA dispensation. Among these, he talked loudest of the right to food to demonstrate that his party was sensitive to the livelihood concerns of the poor.
Vain promises
The Congress ruled the country for over six decades. Through most of this period, the party has consistently proclaimed its commitment to ameliorating the lot of the poor. It milked the Garibi Hatao slogan to the hilt, getting successive mandates from the public to rule the country. Yet, several decades down the line, it is still harping on combating poverty.
Take the example of the Food Security Act (FSA). It guarantees the supply of 5 kg of cereals per person per month at ₹3/2/1 a kg for rice, wheat and coarse cereals, respectively, to 67 per cent of nearly 800 million of India’s population.
The prices are close to zero and are substantially lower than the economic cost of storing and distributing food, which is over ₹20 a kg for wheat and rice.
Clearly, as the authors of the FSA admit tacitly, the income of a vast majority has not kept pace with the cost of food. Rahul Gandhi needs to introspect as to why they have been kept in deprivation for so long.
Why has the Congress not focused on increasing their income? Why has it allowed runaway inflation, especially in food prices? Why has it not enabled the poor to lift their status to a level where they do not need subsidy? A dole may enable a person to make both ends meet. It might ensure that he does not go to bed on an empty stomach. But it won’t let him make a living with pride and dignity.
Unfortunately, this paradigm had never been part of the UPA’s agenda. It made no efforts to extricate the poor out of the low-income trap. It remained obsessed with doles, which, too, are far from helpful in mitigating their hunger. Leakages in delivery systems made matters worse.
Paying more
According to the National Sample Survey office (NSSO), during 2011-12, the average monthly consumption of cereals per month was 11.2 kg in rural areas and 9.3 kg in urban areas.
For the bottom 10 per cent of the population, which has the lowest household expenditure, monthly cereal consumption was 10 kg in urban areas and 9.4 kg in rural areas.
Against this, the FSA promises to give only 5 kg a month or 50 per cent of the requirement. Under the existing targeted public distribution system (TPDS), below-poverty-line (BPL) families and those covered by the Antyodaya Anna Yojana (AAY) scheme get 35 kg of grains a month. Taking average family size to be five, per person entitlement comes to 7 kg.
Under FSA, they get only 5 kg a month — which is 2 kg less. This will have to be made up by buying grain from the market paying 10 times the subsidised price. Obviously, this will affect 325 million persons in the 65 million BPL/AAY families.
To gauge the precise impact, let us look at following: a rice-eating BPL/AAY person needing 10 kg a month (according to NSSO) spends ₹15 on 5 kg available under FSA at ₹3 per kg. For the rest of his requirement of 5 kg, he will have to spend a minimum of ₹150 at ₹30 per kg.
So, his total expenditure under FSA would be ₹165 a month. Against this, under TPDS, his expenses are only ₹111 a month (7×3+3×30) based on 7 kg at ₹3 a kg and 3 kg at ₹30 a kg. FSA makes him poorer by ₹54 a month.
Further, there are substantial leakage in the system and things are not going to change overnight. So, with 50 per cent leakages, a BPL/AAY person will get only 2.5 kg. He will be forced to buy 7.5 kg from the market. In this scenario, he will spend ₹232.5 (2.5×3+7.5×30).
A rights-based access to food at throwaway price aggravates demand-supply imbalances. While on the one hand the proliferation of bogus claims on subsidised food props up demand, on the other production is impacted.
Hitting production
A vast majority of farmers in India are ‘subsistence’ farmers; they produce food for self-consumption. In other words, they have no surplus to sell. When food is available at ₹1/2/3 a kg, why would they produce at much higher cost? Even surplus-producing farmers will be lured into garnering the food supplied by the state at throwaway prices and make money by reselling/trading, instead of toiling on the land.
True, farmers are assured of a minimum support price (MSP). But unlike consumers, the Government does not assure purchase of their entire produce at MSP as a matter of fundamental right. Therefore, production is bound to be affected.
Clearly, the Government will face a monumental challenge in meeting food requirements under FSA. It may even have to go for heavy imports perpetually at high prices. There will be a deluge of foreign exchange outflow and aggravated current account deficit woes.
With much of the available production blocked by FSA, supplies to the market will diminish. This is pregnant with the possibility of stirring inflation and attendant macro problems such as high interest rates, rising fiscal deficit and stifled growth.
This shows the approach to food security is flawed. TPDS was bad enough. Now, FSA — by substantially increasing coverage and lowering target price to rock bottom — has pushed things to a tipping point. This must be abandoned before it is too late.
Having got a mandate for more jobs and higher income, the Modi government is eminently positioned to take bold decisions.
It should take steps to liberate food sector from controls, incentivise production and foster competitive markets. Food security for the poor should be addressed through direct benefit transfers.
The writer is a policy analyst