Thursday, 2 June 2011

POVERTY: Make food subsidy self-selecting

Subir Roy / New Delhi May 25, 2011,
Make food subsidy self-selecting

Those who want to avail themselves of the subsidy should be able to buy the subsidised grain
The management of food and poverty in India is getting increasingly unreal. On the one hand, the country has a bumper harvest with every likelihood of the grain mountain to be procured adding to the existing mountain of official stocks. Without adequate storage space, a not-so-insignificant part of it will rot and go to waste. On the other hand, the government will not allow wheat exports until it is clear on two fronts — the nature of the monsoon and the amount of food needed for the government to discharge its obligations under the proposed food security legislation. That law, which is said to be round the corner, will oblige the government to provide some food to those who may not be able to pay for it at market rates, by selling it at Rs 2-3 a kg to people living below poverty line (BPL).
It is unsurprising that given the paralysis in officialdom, voluntary organisations have approached the Supreme Court to do something about the incongruity of two concurrent realities — food in official godowns and acute poverty in pockets on the ground. In particular, the court has been requested to look at the corruption and inefficiency in the public distribution system (PDS) and the organisation that serves it, the Food Corporation of India. Earlier this month, the court, being manned by rational and logical people – unlike, it seems, the ministers and officials – asked that five million tonnes of food be released and distributed free or at a low price immediately in the 150 most impoverished districts, in addition to the five million tonnes that the government has already committed to allocate.
Here’s what is holding the government back: to whom should it distribute the food (the BPL population, the destitute or through the Antyodaya Anna Yojana); who will foot the subsidy of Rs 8 to Rs 12 per kg for the food thus distributed; and can those above poverty line be denied the benefit — which will lead West Bengal, Andhra Pradesh and Kerala to howl in protest? You have to be severely challenged not to realise that you should not procure what you cannot store. Or if you have to, then either export or give away what will inevitably rot to the starving population, at whatever price. As if this was not enough of a drama of the absurd, the Planning Commission has told the court that a rural dweller who is spending over Rs 15 every day on food, health care, education and housing is not poor.
The government’s attempt to play down the level of poverty is obviously related to having a huge food subsidy bill on its hands once a Food Security Act comes into play. Under the Act, highly subsidised food will have to be given to the poor. So, one more census has been ordered to estimate the number of the poor in the country. Such censuses have been undertaken since 1992 and it is unlikely that the latest one will solve the problem. Ultimately, it is the foot soldiers in the states who will fan out into the interiors and conduct the enumeration exercise. No matter how good or rational the asset-based system of inclusion and exclusion is, state governments like Bihar and Chhattisgarh have already threatened not to cooperate, since they have far more BPL households than estimated by the Centre. Amid this confusion, individual states like Tamil Nadu and Chhattisgarh have done a good job of running the good old PDS.
Much informed thinking has veered round to the view that it is best to give cash to the poor to buy their food instead of running an inefficient and leaky PDS and that with the use of information technology and unique identification, it will be possible to pay through smart cards in the not-too-distant future, thus obviating the need for handling cash or printing food coupons. What is being forgotten is that though technology solves the problem of impersonation, it leaves open the issue of administratively categorising someone as poor, depending on which she receives certain benefits. Large-scale inclusion of those who miss (go above it) the poverty line by a margin is bound to happen, though the menace of BPL ration cards being issued in the name of fictitious people should be a thing of the past soon.
There is only one solution to this, other than, of course, waiting for the day when no poor people are left. Make food subsidy self-selecting, much like joining the employment guarantee programme. Those who want to avail themselves of the subsidy should be able to buy the subsidised grain. One way of restricting the bill is to make available only “inferior goods”, which include rice or wheat of absolutely basic or average quality. A useful suggestion made by an expert is to offer a new kind of highly nutritious wheat flour fortified with soya. If you belong to the middle class and don’t like the taste of such food, you will not go for it. Once cheap, low-quality cereals become readily available at throwaway prices for everyone to buy, the scope for leakage will vastly diminish.
Will this send the fiscal balance for a six? Readily available cheap cereals should marginally bring down food inflation. Ending the PDS, as we know it, should save some revenue. The government’s revenue income can be partially increased by vigorously going in for more disinvestment. And a better- fed population should, again at the margin, raise overall productivity. It is worth a try.

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