Food Security Bill
Vivek Shukla
Billed as a game-changer for the UPA Government, the Food Security Bill was passed in Lok Sabha that would also clear other hurdles before becoming a law; it will be long remembered for being very ill-conceived with several ‘shortcomings’. As BJP leader Murli Manohar Joshi has rightly pointed out during debate on the subject in Lok Sabha. “This is not a Food Security Bill, but a vote security bill.” What is serious and unfortunate that even though the UPA has promised to bring Food Security bill in 2009, they have not done enough homework to clear the series of concerns raised by political parties and economists.
Arguably, there is nothing wrong to provide two square meals each day on a poor family’s table. It is the best form of empowering them and there cannot be any debate on this issue. Of course, nobody can argue against ensuring food security for all Indians. However, it is not a great idea to make poor dependent on an inefficient, wasteful and corruption-ridden foodgrain public distribution system.
At this juncture, one must ask the UPA leaders a very pertinent question: Have they made calculation as to how much India has to spend to provide food to 67 per cent Indians living below poverty line? Before we move further, one may note, while the FSB promises basically 5kg of cereal per person per month (pppm), the average consumption of cereals in the country is 10.7kg/pppm. That means even for cereals, consumers will have to go to the markets for more than half their needs.
While the Government estimates suggest that food security will cost Rs 1,24,723 crore per year; Andy Mukherjee, a noted journalist and columnist with Reuters, puts the cost at around $25 billion. The Commission for Agricultural Costs and Prices (CACP) of the Ministry of Agriculture puts the cost of the food security scheme over a three year period at Rs 6,82,163 crore. During the first year, the cost to the government has been estimated at Rs 2,41,263 crore. Economist Surjit Bhalla puts the cost of the bill at Rs 3,14,000 crore or around 3% of the gross domestic product (GDP). Of course, these are mind-boggling numbers. Experts say that by next year, when hopefully the full roll-out takes place, at least 8-10% more can be added on account of rising support prices and costs of procurement, storage and distribution.
In order to implement FSB, the Food Corporation of India (FCI) will have to expand its capacity pretty much overnight by a whopping 40 per cent. The quantum of foodgrains required will increase inexorably until at least 2035 when the population is expected to stabilise at 1.6 billion. Do you think FCI can handle such a gigantic task given their abysmal track record. Noted economic writers Vivek Kaul says, “The trouble here is that by expressing the cost of food security in terms of percentage of GDP, we do not understand the seriousness of the situation that we are getting into. In order to properly understand the situation we need to express the cost of food security as a percentage of the total receipts(less borrowings) of the government. The receipts of the government for the year 2013-2014 are projected at Rs 11,22,799 crore.”
The cost of food security will also mean a higher expenditure by the government. Can Government stop petrol and diesel subsidy to take care of food bill? Should nation get ready to pay more taxes? It is worth remembering that Finance Minister P Chidambaram pointed out in his budget speech, “There are 42,800 persons admitted to a taxable income exceeding Rs 1 crore per year,” Chidambaram said.
So Indians do not like to pay tax. And just because a tax is implemented does not mean that they will pay up. Of course, this is not possible when the Lok Sabha elections are not far away. In the light of these facts, it is anybody’s guess as to how we bear massive food bill.
In any case, the full year cost will not be below Rs 1,40,000 crore in FY 2015. And this does not include additional costs that would be needed to store grains, in the railways to move the grains, to modernise the PDS at the state level and, above all, in agriculture to stabilise production of grains. If one adds all these additional costs to make the FSB a meaningful ‘Right to Food’ Act, the costs will reach Rs 2,00,000 crore a year.
The question is how will this higher expenditure be financed? Given that the economy is in a breakdown mode, higher taxes are not the answer. The government will have to finance food security plan through higher borrowing. Even credit agency Moody also tears into India’s plan to provide cheap grains to the poor as it will exacerbate the Government’s weak finances. The measure is credit negative for the Indian Government, because it will raise Government spending on food subsidies to about 1.2 percent of GDP per year from an estimated 0.8 percent currently, exacerbating the government’s financial woes.
“The Government will have to work on cutting wasteful spending and get aggressive on reducing fuel and fertiliser subsidy. There is a good probability of the FSB expenditure exceeding the Government’s estimate of Rs 1.25 lakh crore,” said DK Joshi, chief economist at ratings agency Crisil.
Industry also expressed concerns on the massive outlay required for the roll out of the programme, saying it will widen the fiscal deficit by putting an additional burden on the exchequer. “Such a large outlay at this point of time would definitely have a negative impact on the fiscal deficit. This needs to be managed,” CII President Kris Gopalakrishnan said.
Noted writer and journalist Aroon Kumar fears that higher food prices will mean higher inflation and this in turn will mean lower savings, as people will end up spending a higher proportion of their income to meet their expenses. This will lead to people spending a lower amount of money on consuming durables and services and thus economic growth will further slowdown. It will not be surprising to see economic growth go below the 5% level.
In a tearing hurry to pass the FSB in Lok Sabha, it is surprising that UPA leaders forget Rajiv Gandhi once said, only 15 paisa for every rupee spent by the Government on welfare schemes reach the poor, the first and foremost action should be to plug the leakages in PDS, which hover around 40%.“ It is doubtful that state governments, which could not achieve this in the past 50 years, will attain the target over the next year. And if one cannot fix these leakages, especially in Uttar Pradesh, Bihar, Jharkhand and Rajasthan, the FSB will turn out to be a very expensive and failed experiment,” says noted economist Ashok Gulati.
Yasin Bhatkal arrested on Nepal border
Border security at the mercy of God
The arrest of Indian Mujahideen founder and dreaded terrorist Yasin Bhatkal in Bihar near India-Nepal border on August 29 leaves no doubt now that the Indo-Nepal border is freely being used by terrorists and anti-India elements as a transit point. It requires an increased surveillance in the entire border region and also to check the loophole in the national security. Organiser in issue dated September 1, 2013 had extensively reported the vulnerability of Indo-Nepal border in detail.
In the reports ‘Beehive of Islamic terrorists’ from Tanakpur/Banbasa and ‘Nepal: A hub of anti-Bharat terrorists’ from Gorakhpur, Organiser exposed how the porous border is being misused by Islamic terrorists and smugglers for smuggling fake currency and drugs in India. Around 1,924 border pillars are missing from the border and heavy encroachments are being made on the no-man’s land. The Muslim population has swollen enormously in this area and many illegal mosques, madrasas and colonies have mushroomed here providing a safe haven to these terrorists. The jehadis are taking full advantage of the mushrooming of madrasas and mosques in the border areas.
How easily and comfortably terrorists use this border can be understood by the fact that Yasin Bhatkal was confident enough to cross over the border even though Tunda was arrested just a few days before on August 17. It is time for the Government of India to work in collaboration with the Nepalese Government and try to curb such activities; and the people of India must pay their attention to these much overlooked stark realities concerned with the national security.
Twitter Punch
‘Food’ for the Party workers, ‘Security’ for Congress high command and ‘Bill’ for the tax payers, that’s what food security bill is all about!
Vinay Sahasrabuddhe@Twitter
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