Food Security Bill to open flood gate for plundering the National Exchequer

National Food Security Bill, which is considered to be the pet project of Congress President Mrs. Sonia Gandhi, has been finally tabled in parliament. The bill brings under its purview 63.5% of country’s total population-75% of rural households and 50% of urban households.The proposed legislation seeks to confer eligible beneficiaries the legal right to receive food grain at highly subsidized prices.The bill seeks to provide rice at Rs. 3 Per Kg, Wheat at Rs. 2 per kg and coarse grains at Re 1 per kg to over two third of India’s total population of over 1.2 Billion.The Bill seeks to provide a minimum of 7 Kg. of foodgrains per month per person to almost two third of India’s total population.The total financial liability to implement the law is expected to be Rs. 3.5 lakh crore, with funds being required to raise agriculture production,create storage space etc.A sum of roughly Rs. 1,10,600 crore would be required to boost farm output with grain requirement increasing from 55 million tonnes to 61 million tonnes annually.

Now look at the current economic scenario, in which the above huge subsidy burden is being proposed. Country’s economic growth is expected to slow down to 7% or lower for the current financial year. India’s benchmark stock market index has almost lost 25% this year, and the Indian rupee has lost nearly 20% in value against the dollar. India’s fiscal deficit for the year through March 31 is expected to be 5.5% of gross domestic product, much higher than the government’s official target of 4.6%.

Given the above economic data and considering the European Debt crisis coupled with US Financial Crisis and their likely impact on overall Global Economy including on Indian Economy, Economists of India as well as International Financial Institutions are alarmed by this misconceived and ill timed introduction of Food Security Bill. According to an ADB official, Food Security Bill would put further pressure on fiscal deficit and worsen inflation. With already high inflation and ballooning budget deficit because of the falling rupee, expenditures on nonproductive activities like this would further aggravate the economic problems of the country which is faltering in many areas. ADB Official further said that the Indian government, facing a trust deficit in the market, does not have enough money. "Still it is planning to spend on nonproductive activities. It is not at all sustainable.”

A senior economist at securities firm CLSA Asia-Pacific Markets says that New spending as proposed by the food security bill “will just make the fiscal side bleed even more,” .he further says that “It just boggles me that a trained economist as a prime minister can allow all this irresponsibility under his watch,” referring to Prime Minister Manmohan Singh.

While the purpose of ensuring food security to the poor is laudable; however the biggest challenge in the implementation of the Act will be proper identification of beneficiaries and effective delivery. It is very interesting to note that the bill seeks to deliver food grains to approx. 80 crore people through the Public Distribution System(PDS). considering our past experience with Public Distribution System, nobody can have any reason to feel optimistic about the efficacy of the bill to provide food security to the intended beneficiaries.

Under existing PDS, Intended beneficiaries often do not get their rightful entitlement in terms of quantity. What's meant for them is diverted to the open market. Ration shops do not open every day. Nor do they keep regular hours. The objective would appear to limit access to people and divert grain and other produce to the open market. Ration shops most often charge people more than the mandated rates, and they often under-weigh the commodities.

In addition to some of the common irregularities as mentioned above, the biggest malady of PDS is the vast corruption associated with it, which has rendered it totally ineffective for meeting the objectives for which it was created. According to the economic survey report of the Govt for last financial year, Public Distribution System(PDS) has totally collapsed. According to it, almost 60% of wheat and 20% of rice procured under PDS meant for poor people are robbed of before they reach the intended beneficiaries.The Robbery of the food grains begins at the sourcing stage itself. Some of the produce that is sourced by the government for public distribution finds its way into the open market. In fact this robbery continues through FCI Godowns to ration shops as well.

The process of issuing cards is, again, rife with corruption.Money and influence are the usual determinants of who gets ration cards, and who doesn't. Worse, bogus cards are often used to divert supplies to the open market. And it takes a lot to effect changes in ration cards. People have to pay bribes even for adding or deleting the name of a family member, or changing the address mentioned in it.

People have difficulty in getting whatever little reaches ration shops. Shop-owners usually get licences to run shops on the basis of political patronage or outright bribes. The only way they can earn profits is by diverting produce to the open market. Result: people get less than they are entitled to, or are charged more for what they get.

The supply offices are lorded over by middlemen and touts. Procedures are made to appear so complicated that people usually end up using middlemen for small tasks too.

In fact, current Public Distribution System is so much rife with corruption that a committee appointed by the Supreme Court (SC) to suggest ways to revamp the public distribution system (PDS) feels that it is next to impossible to eradicate corruption from PDS. This statement comes even before the committee completes public hearings and starts work on its final report.

Given the current hopeless state of affairs of PDS catering to almost 35 crores of people and if the same PDS has to cater to almost 80 crores of people as mandated by Food Security Bill, one may well expect that robbery of the food subsidies will increase more than two times.

If this is the kind of scenario most likely to emerge as a consequence of Food Security Bill, Team Anna’s demand for passage of strong Lokpal Bill by the Parliament before the legislation on Food Security seems to be correct and logical so that the money spent on ensuring food for all reaches the deserved or else this money will go into the pockets of parties, ministers and officers.

In this context,Team Anna said,” it is believed that the cost to the exchequer to implement the objectives of the food security bill would cost around Rs one lakh crore and by late Prime Minister Rajiv Gandhi's estimates, only 15 per cent of the money reaches the public.So only Rs 15,000 crore reaches public while Rs 85,000 crore is lost to corruption. That means food security bill does not give protection to public unless Lokpal is passed.”

It is really very sad that despite all the information available related to massive loot of food subsidy by the nexus of politicians, Govt Babus, Middlemen, Ration Shopkeepers etc., Govt is going ahead with implementation of Food Security Act that too amidst the most difficult financial conditions for the country. The haste with which it was passed by Cabinet even after reservations expressed by its two senior ministers and its introduction in parliament ahead of Lokpal Bill, it is very obvious that it is not intended for providing food security to the Poor People rather it is intended to benefit the ruling party in ensuing assembly elections in six states in 2012 and Parliamentary Elections in 2014.

It is really very sad that Economist Prime Minister, guided by Political calculations of Top Leadership of his party continues to indulge into bad economics. During UPA I, he allowed implementation of a Populist Scheme NREGA and waiver of several thousands of crores of Loan to farmers to win Loksabha Elections and now he is resorting to Food Security Bill with an aim towards winning assembly elections in six states in 2012 and Parliamentary Elections in 2014.As we all know that all these populist schemes have neither helped the intended beneficiaries in the past nor they would help in future and hence the Present Food Security Bill instead of meeting its laudable objective of providing food security to the Poor Sections of the Society would rather open the flood gate for plundering the national exchequer by the nexus of politicians, Govt Babus, Middlemen and ration shopkeepers.