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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Myth # 6: Only the National Advisory Council knows best about food security. Nothing can be more arrogant that this (unstated) assertion where all other approaches to food security are deemed unworthy of consideration. The FSB is a patent attempt to garner the political gains accruing from the bill for the Congress party without taking the states into confidence.
If Sonia Gandhi and NAC were genuinely concerned about food security and not just re-election, the first thing to do is consult states and ask them for suggestions since it is the states that are going to implement the scheme. If Bihar wants to distribute cash instead of cheap food, and Chhattisgarh wants to distribute only rice under FSB, so be it.
It is the attempt to corner all credit for the scheme and leave the debits for poor implementation to states that shows up the narrow political goals of the Congress in promoting its version of the FSB.
Myth # 7: Food security can be divorced from income schemes. Like burning a candle at two ends, social security should either target the income-generating side of livelihood (which is what NREGA tries to do) or the consumption side (which is what the FSB tries to do). Ensuring that at least one works well will ensure the other. Both need to be backed with an efficient public distribution system - which need not be publicly owned.
However, what do we see now? NREGA is in the doldrums, since states and district administrations are unable to provide enough work for the poor. The scheme is riddled with massive corruption. Money is being spent carelessly, and the scheme is not achieving its basic goals - ensuring higher incomes, and the creation of tangible assets in rural areas that will ultimately improve agricultural productivity.
The right way to approach food security is to fix NREGA first - even by extending it to six or nine months a year - and then launching food security schemes in places where NREGA has not worked. By making both a creaky NREGA and FSB nearly universal, the UPA is actually saddling us with huge costs without delivering worthwhile results.
An efficient NREGA would have generated incomes and created the right assets for agriculture - making food security a reality without the FSB. Rushing from scheme to scheme without proper implementation is the road to wastage and failure.
Myth # 8: FSB can be divorced from farmer welfare and agricultural productivity. India faces multiple problems on the food security front. India's agricultural revolution is lopsided, with north-west India (and some parts of the south) providing the food surplus, and the rest of the country consuming it. On the other hand, farming is sub-optimal and unremunerative in many parts of the country, even after giving farmers fertiliser, water and electricity subsidies. This year, many farmers in Andhra have declared a crop holiday to protest against low prices.
The country spends less than a tenth of what is proposed to be spent on the Food Security Bill (Rs 2,00,000 crore annually, according to Ashok Gulati) on agricultural research. We spend years arguing about whether genetically-modified seeds are good or bad, while poor people starve. But the same NGOs who want an FSB pronto are the ones delaying other parts of the agricultural revolution.
Rural India's economic problem is that there are too many people feeding off unviable agriculture when more people should be moving towards industry and urban areas. But the UPA is preventing this by making land for industry and urbanisation (Land Acquisition Bill) expensive to acquire - thus slowing the process of people moving from unproductive jobs to more productive ones elsewhere.
Why isn't UPA able to improve agricultural productivity? The answer is a battle of egos with Agriculture Minister Sharad Pawar. You can't provide food security without fixing agriculture, but for this you need Pawar on board.
The Congress does not want to share political credit for food security with Pawar. Hence it chose to divest Pawar of his food supplies ministry. This is the main reason why we have an FSB and no corresponding agricultural revolution and real food security enablers.
Myth # 9: Food security can only be ensured by government. This means stocking millions of tonnes of food in Food Corporation godowns and transporting it from Punjab, Haryana and Western UP to south and east India.
Nothing could be more foolish. Food security is the result of enabling policies which improve both production and distribution locally. This calls for localised innovations in productivity so that food can be moved from western Maharashtra to Nagpur rather than from Hisar or Bhatinda to Dibrugarh.
Lower costs of production and transport will make FSB more viable.
Myth # 10: The poor should get everything subsidised. This is the ultimate myth we need to kill. A subsidy makes a beggar out of the poor. It is demeaning. An income is what the poor need - though no one denies the need for direct food supply schemes when the going is bad.
Look at our current approach to any problem. Most farmers don't find farming remunerative, so we give them cheap electricity, cheap fertiliser, subsidised power and discount diesel and a minimum support price for their produce. Plus, we don't tax the rural rich - who are basically agriculturists.
After subsidising everything that goes into food production by poor farmers, we then buy it at a high price and then tell the poor, look, we are giving you cheap food. What can be more demeaning to the poor than this?
Is this logical? Is this sustainable? You judge.
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