To bolster its pro-poor image the UPA never gets tired of repeating that it is spending more money on subsidy to give cheap ration for the poor. The Finance Minister P. Chidambaram has reiterated this in his every budget speech. But actually, while under the NDA the spending on food subsidy increased by 30 per cent annually, under the UPA the amount got reduced and showed a negative trend.
The fact is, the food subsidy and the number of people benefiting from it and the quantity of foodgrain distributed under the Public Distribution System (PDS) showed a marked decline under the UPA. What is more startling is that while the economic cost of procuring rice and wheat increased during the UPA (2004-2008), the subsidy on food decreased. The UPA played up the game by reducing the number of Below Poverty Line (BPL) families and reducing allocation of foodgrain for distribution for the Above Poverty Line (APL) families.
Here we are dealing only with food management and subsidy. The NDA bequeathed a buffer stock of foodgrain after its six-year rule. The years 2001-03 witnessed high levels of stock build up in the central pool. The foodgrains stock reached a peak of 64.7 million tonnes, an all-time record in June 2002, four years after NDA rule.
The year 2003-04, the FCI procured lower levels of foodgrains because of the previous buffer stock. Till August 2003, India exported wheat and rice.
THE UPA in 2004-05 assumed charge when there was a stock of 20 million tonnes (as on April 1, 2004) and throughout the year the stocks were higher than the buffer requirements (the minimum that should be available in the buffer for emergencies). On April 1, 2005, the stock was 17.4 million tonnes against the minimum buffer requirement of 16.2 million tonnes. By April 1, 2006, the stock depleted to 15.7 million tonnes. By January 2008, the stock position of foodgrains stood at 19.2 million tonnes after imports (5.5 million tonnes of wheat in 2006-07 and 1.8 million tonnes in 2007-08) throughout the two years. The total import was to the tune of 7.3 million tonnes. It is to be noted that during the UPA rule there was hardly any stock left for welfare schemes, whereas the NDA distributed huge quantities of grains under the drought relief operations, Sampoorna Grameen Rozgar Yojana, Antyodaya Anna Yojana which identified 10 million poor families to provide 25 kg of grains per family and Annapoorna scheme and other targeted welfare schemes. In retrospect, it was the golden period of the food story in India. ?The economy today faces a problem of plenty. Public stocks of foodgrains are much more than what the market or PDS can absorb,? the Economic Survey 2001-02 had said, adding that the APL PDS off-take was low ?because of market prices being lower than the rates being offered at PDS for APL category? (p. 119).
What about UPA subsidy regime? Food subsidy showed an annual increase of above 30 per cent during each of the years under the NDA, 2000-01, 2001-02, and 2002-03. In 2003-04 also it was raised, but started falling from 2004, under the UPA. (See table, source Economic Survey 2007-08, p. 178). And in 2005-06, it was so reduced to mark a 10.4 per cent decline. Considering the increase in the economic cost, rise in market price, increased minimum support price this decline is scandalous.
The economic cost of foodgrains consists of three components, MSP, as the price paid to farmers, procurement incidentals and the cost of distribution. The economic cost according to the UPA Economic Survey has witnessed a significant increase for both wheat and rice in 2007-08. While in part it is due to an increase in MSP, it has also been due to an increase in procurement incidentals, particularly for rice. For instance, economic cost of wheat for 2007-08 is Rs. 1371.3 per quintal as against Rs. 1214.4 per quintal in 2006-07. Similarly, economic cost of rice in 2007-08 is Rs. 1572.6 per quintal as against Rs. 1411.6 per quintal in 2006-07. Considering this, the subsidy for food should have shot up. But it did not happen that way. Which means the UPA claims of higher subsidiary to help the poor are total hoax. The government has been anti-poor and misleading the public with false claims.
Food subsidy is the difference between the economic cost of wheat and rice and their issue price for different groups of beneficiaries. This is always linked to the increase in economic cost and the issue prices. While the economic cost of wheat and rice has gone up because of an increase in MSP, the issue price has been kept unchanged since July 1, 2002 till now. The UPA Economic Survey claims the proportion of people below poverty line is less than one per cent for many of the poor states.
How did the government face the declining stock positions? The UPA artfully calls it ?rationalisation of wheat-rice allocation,? which in other simple terms is reducing supply.
The UPA reduced wheat supply for APL category from June 2006. It claims that this was done based on each state'saverage takeoff during the earlier three years. But during that period, under the NDA in particular, the off-take was low because the market prices were lower than the APL price, as pointed out in the earlier paras.
But the UPA somnolently imposed a 25 per cent cut in allocation which it calls rationalisation. The APL category allocations ?were made depending upon the availability of stocks in the central pool,? says Chidambaram'sEconomic Survey. Compare this with the NDA period when foodgrains were distributed freely under different heads to the poor families!
To manage the lowered subsidy, the UPA reduced the number of beneficiaries of the PDS even under the BPL category. There is a steep fall in the number of population under the BPL who benefited from the PDS from 25.8 crore in 2005-06 to 19.9 crore in 2006-07, according to the Survey. (See table) This in economic terms should qualify for a miracle, if the fall had actually taken place. But all other surveys including the IMF report say that the number of people living under poverty line has really increased in the last few years. The NSSO Survey 61st round shows that 27.5 per cent of the population is living below poverty line. That means the PDS is not able to cover almost half of this population.
The two major issues foxing the UPA government as it celebrates its fourth anniversary are inflation and food security. And on both these issues in particular, the UPA Economic Survey is equally evasive. A comparative analysis of the four years of the NDA (1998-2002) and that of the UPA, exclusively looking it on the basis of Economic Survey, is a revealing exercise in economic study. The Economic Survey 2007-08, unlike all its previous editions has edited out a large volume of information on inflation and food subsidy, perhaps to suppress or politically mislead. The Economic Survey 2001-02 covered Prices and Food Management under nine separate heads on inflation and 15 separate segments on food management with special emphasis on PDS (p 110-130). But the Economic Survey 2007-08 has no separate section on inflation?it has dealt with it in brief in a different segment on Prices and Monetary Management (p 59-84) and Food Management finds mention in the section on Agriculture (p 175-180) and there is very little information on PDS. It can be argued that the new format of the contents of the Economic Survey is the reason for this clear departure from the past. But information need not have been the casualty of better editing.
(The views expressed in this column are personal. The writer can be contacted at [email protected])