Economy Dec 20, 2011
One of the questions one is asked by conscientious people is this: how can anyone oppose food subsidies for the poor and robust schemes to end malnutrition?
This question comes from the heart, and so is worth answering in some depth. No one grudges the poor their food. The problem is with the Food Security Bill (FSB) - which is actually testimony to the poverty of official thinking on food security. We should thus take this opportunity to debunk some myths about the FSB.
Myth # 1: The Food Security Bill is the way to ensure food security. Nothing could be further from the truth. Food security comes from ensuring three things: creating jobs and income, ensuring higher food output by raising productivity, and creating a safety net to feed those who can't do so themselves in distress situations.
What the Food Security Bill does is to make the exception the rule: offering food subsidies to almost all people (65 percent of the population) without an end-date. This is irresponsible populism. A government that does nothing in its seven-year tenure (so far) to improve agricultural productivity and which fails to invest in research and infrastructure suddenly wants to end food insecurity with a bill two years before an election.
If it genuinely cared for the poor, what stopped the government from helping them in phases every year from 2004? By now hunger could have been eliminated. The FSB is thus an attempt to fool the electorate before the elections, with the bill being paid by all of us - either as taxes or higher inflation.
Myth # 2: The FSB is the only answer to hunger and malnutrition. This myth has been busted by UPA-2 itself, which has been arguing that Anna Hazare's my-way-or-the-highway approach to corruption is wrong. If the Jan Lokpal isn't the only answer to the problem, why is it presumed that some NGOs working on food security have all the right answers?
The FSB is just one approach to the problem - and a flawed one - and there can be better ways to ensure food security which will not bust the bank.
Myth # 3: Those who oppose food security for the poor are anti-poor. Why don't they oppose subsidies for the rich?
There is some truth to this assertion, but the boot is on the other foot. The problem with the FSB is not that we should not spare resources for the poor, but that you cannot subsidise everyone for everything all the time.
If UPA-2 and Sonia Gandhi's National Advisory Council want to fund an expensive FSB, they can eliminate the huge subsidies on petro-goods (diesel and cooking gas, for a start, kerosene later), and withdraw tax concessions to the rich.
But this is what the UPA has steadfastly refused to do.
It is afraid of withdrawing any subsidies to the better off for fear of offending them, and then claims that those opposing the FSB are anti-poor. Even a petrol price hike gets Congress partymen worked up enough to get it withdrawn. Pranab Mukherjee is shrinking from imposing a tax on diesel cars.
The UPA is willy-nilly subsidising the rich - and unwilling to back off from this.
Myth # 4: The Union budget subsidises the rich with tax concessions. True. But this comment is also off the mark. The problem is politicians want to eat their growth cake and have it, too.
The last budget (2011-12) put the total revenue forgone as a result of direct and indirect tax concessions at a stupendous Rs 5,11,630 crore.
This sounds like an easy bank to raid to finance the ambitious FSB, but let's look at what these tax-breaks include: Rs 88,263 crore in corporate taxes forgone for encouraging exports, etc, Rs 50,658 crore in individual tax breaks (two-thirds of it is the ubiquitous 80C deductions - PF, NSCs, LIC premia - which the middle class loves), and the balance (Rs 3,72,709 crore) constitutes excise and customs concessions of various kinds.
These are the taxes forgone on the "rich" and in favour of "business". But are they really only that? Concessions to export houses create high-value jobs in the IT and other sectors (and prevent the rupee from crashing much more); concessions to companies to set up industries in backward areas and the north-east are the only way to create jobs there; concessions to middle-class salary earners are the only way to get them to save and buy insurance. And excise and customs cuts lower prices on all goods. Which "benefits" do we want to eliminate?
The finance ministry has fought shy of withdrawing even the 2008 post-Lehman stimulus package, or raise customs duties on items like petroleum goods.
The UPA can choose how it wants to tax the rich to feed the poor. It has ducked this choice - and this is why we are in a financial mess, unable to fund any legitimate food security measure.
Myth # 5: A centralised Food Security Bill will sort out hunger and malnutrition.
This is a variant of the traditional myth about one cap fitting all. India is a continent-sized country - it needs many approaches to problems. The fact is neither the proponents of the FSB nor its opponents know really what will end hunger and deprivation. The best solution is to try many things and adopt the best solutions after trial and error.
The UPA's self-serving answer is to keep throwing money at the problem and hope it gets solved. But the FSB is not India's first crack at hunger. In the past we have had the food-for-work programme (a mix of NREGA-like work with payments being made in kind), the Antyodaya scheme (targeted at the ultra-poor), the mid-day meal scheme for children, and the anganwadi schemes for mother and child. Above it all, we have a leaky public distribution system (PDS) which works well in some states and badly in others.
The only logical way to tackle hunger is to try different methods in different states and see which one works best and extend the model nationally. This is how the mid-day meal scheme introduced in Tamil Nadu - and much derided by critics then - was adopted nationally.
We thus need a multitude of approaches to food security that are tried out in a decentralised manner before we extend it everywhere. The surest way to disaster is to implement a centralised, Stalin-esque solution to a problem that varies across the country. The hunger problem is not the same in Kerala, Chhattisgarh and Jharkhand. They need different solutions. Why should a NAC-proposed solution be forced down everybody's throats?
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