Saturday, June 27, 2009


The pre-election promise by UPA to give wheat or rice to all BPL card holders at Rs 3 per kg was not taken seriously by many as such declarations are often forgotten once the election was over. But mentioning this program as a priority area of the GOI by the President in her address to the parliament and proposing enacting a "National Food Security Act" (NFSA) raises many questions regarding the propriety of such a move at the expense of the tax payer. This comes on the heels of the massive loan waiver scheme worth Rs 60000 crore last year announced on the eve of the election. While poor must be treated compassionately from every angle, giving away food practically free is fraught with grave implications for future. The economic contours of the "Rs 3 per kg scheme" are yet to emerge but it certainly would be a serious drain on the exchequer. The July budget of GOI is reported to be making a provision of Rs 50000 crore for this scheme. Already some states have announced such schemes offering food grains at Re 1 or Rs 2 per kg and how far these schemes will be practical and beneficial remains to be seen.

It is true that suicide by farmers is on the increase because of unbearable debt burden caused by frequent crop failures and unemployment is supposed to be very high in spite of dramatic rise in the GDP during the last 5 years. However the wages are looking up with daily income for unskilled workers crossing Rs 100. Still dearth of workers is felt in many regions reflecting significant rise in personal income and incidence of unemployment practically non-existent, though there could be considerable under employment. NREGA assures 100 days work for those not finding gainful employment and this works out to more than Rs 10000 an year or Rs 850 a month or Rs 28 Rs a day. By international standards this may be low but in India this amount can buy adequate foods sufficient to stave off starvation. Giving away food grains at such low prices is bound to divert the earnings for other undesirable purposes. If the principle, that one need not work to earn a livelihood under a dispensation where loans are written off and food grains are given practically free, gets established what type of future is awaiting this country remains to be seen. Are we making a significant segment of our population zombies without any initiative or zest for working as government dole will take care of their lives?

Implementing such populist programs is fraught with practical problems because of the propensity of the people to be dishonest while declaring their income to derive government benefits for which they are not really entitled. It is already well known that not even 15 paise of a rupee earmarked for developmental projects reach the real beneficiaries in a system rigged to siphon off public funds by those vested with the responsibility of executing them. It was reported in 2003-04 that of the 14.07 million tons (mt) of subsidized food grains supplied to PDS, only 5.93 mt reached the poor beneficiaries, 8.14 mt being siphoned off! Imagine the fate of the "Rs 3 per kg" extravaganza being proposed under the NFSA! According to GOI statistics there are 2.5 crore Anthyodaya Anna Yojana (AAY) scheme under which each AAY card holder gets 35 kg of grains, rice @ Rs 3/kg and wheat @ 2/kg. Similarly there are 4 crore BPL card holders getting 35 kg grains, rice @ Rs 5.65/kg and wheat @ 4.15 /kg. If such schemes are already in force, what purpose the new proposal serves, is not clear. Is it the proverbial "old wine in new bottle" trick being played for the galleries?

If the logic of NFSA is accepted, probably similar splurging of resources on other populist schemes to provide housing security and clothing security may not be far off. What about the fuel needed for cooking the food grains given away under NSFA? A scheme can also be thought off providing fire wood at subsidized prices to those receiving subsidized grains?. If all these schemes are taken up, there may not be any necessity to do any work and any personal income earned can be used for non-productive purposes like drinking, gambling etc. What will be the consequences arising out of such intervention programs by government? Who is going to work in the productive sectors like agriculture, industry and services? Is there a real threat to the economy of the country with production declining progressively, exports dwindling and the assets eroding rapidly under such a situation? Only time will tell.


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