Indian electorate has given an overwhelming mandate to Narendra Modi led NDA to conduct affairs of nation on plank of development and good governance. Congress led UPA has been routed. People have rejected its hollow promises of access to quint-essentials of life as a matter of right.
All through his election campaign, Rahul Gandhi (RG) brow beated about a volley of fundamental rights granted to people under UPA dispensation. He talked loudest about right to food to demonstrate that his party was sensitive to livelihood concerns of poor.
India has been ruled by Congress for over six decades. Through most of this period, it has consistently proclaimed its commitment to ameliorating lot of poor. It milched ‘Garibi Hatao’ slogan to the hilt getting successive mandates from public to rule. Yet, several decades down the line, it is still harping on combating poverty.
Food Security Act (FSA) guarantees supply of 5 kg of cereals per person per month at R3/2/1 per kg for rice, wheat and coarse cereals respectively to 67% of India’s population or 800 million.
The prices are almost close to zero and are substantially lower than economic cost of procurement and distribution of food which is Rs 20 per kg plus for wheat and rice. Clearly, as authors of FSA admit tacitly, income of a vast majority has not kept pace with cost of food. RG needs to introspect as to why they have been kept in depredation for so long.
Why has Congress not worked for giving them jobs? Why has it not focused on increasing their income? Why has it allowed run-away inflation especially in food prices? Why has it not enabled them to lift their status to a point where they do not need subsidy? Why does it want to keep them perpetually on doles?
A dole may enable a person to make his both ends meet. It might ensure that he does not go to bed empty stomach. But, it won’t let him make a living with pride and dignity. Ideally, any well meaning and caring government should enable every one earn a decent income and ensure low inflation.
Unfortunately, this paradigm had never been in UPA’s grain. It made no efforts to extricate poor out of 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.
According to National Sample Survey office (NSSO), during 2011-12 average monthly consumption of cereals per month was 11.2 kg in rural areas and 9.3 kg in urban areas. For bottom 10% of population which has lowest household expenditure, monthly cereal consumption was 10 kg in urban areas and 9.4 kg in rural areas.
Against this, FSA promises to give only 5 kg per month or 50% of requirement. Under existing targeted public distribution system (TPDS), below-poverty-line (BPL) families and those covered by Antyodaya Anna Yojana (AAY) get 35 kg of grains a month. Taking average family size of 5, per person entitlement comes to 7 kg.
Under FSA, they get only 5 kg per month which is 2 kg less. This will have to be made up by purchase from market paying 10 times higher than subsidized price. This will affect 65 million BPL/AAY families or 325 million persons.
To gauge the precise impact, let us look at following: A rice eating BPL/AAY person needing 10 kg a month (as per NSSO), spends Rs 15 on 5 kg available under FSA @ Rs 3 per kg. For balance 5 kg, he will have to spend a minimum of Rs 150 @ 30 per kg.
So, his total expenditure under FSA would be Rs 165 per month (5×3+5×30). Against this, under TPDS, his expenses are only Rs 111 per month (7×3+3×30) based on 7 kg @ Rs 3 per kg and 3 kg @ 30 per kg. FSA makes him poorer by Rs 54 per month.
There are substantial leakages in the system and things are not going to change overnight. With 50% leakages, a BPL/AAY person will get only 2.5 kg. He will be forced to buy 7.5 kg from market. In this scenario, he will spend Rs 232.5 (2.5×3+7.5×30).
A rights based access to food at throw-away price aggravates demand-supply imbalances. While, on one hand, proliferation of bogus persons (to lay claim on subsidized food) props up demand, on the other, production will be negatively impacted.
A vast majority of farm households in India are ‘subsistence’ farmers producing food for self-consumption. In other words, they have no surplus to sell. When, food is available at R1/2/3 per kg, why would they produce at much higher cost?
Even surplus producing farmers will be lured in to garnering food supplied by state at throwaway prices and make money by re-selling/trading, instead of toiling on the land.
True, farmers are assured of a minimum support price (MSP). But, unlike consumers, government does not assure to buy their entire produce at MSP as a matter of fundamental right. Therefore, production is bound to get affected.
Clearly, 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 deluge of foreign exchange outflow and aggravated CAD woes.
With much of available production blocked by FSA, supplies for market will diminish. This is pregnant with the possibility of stirring inflation and attendant macro problems viz., high interest rate, fiscal deficit, stifled growth etc.
The extant approach to food security is flawed. TPDS was bad enough. 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, Modi government is eminently positioned to take a plunge. It should take steps to liberate food sector from controls, incentivize production and foster competitive markets. Food security for poor should be addressed through direct benefit transfer (DBT).