Tuesday, January 14, 2014


One of the most populist schemes churned out by the UPA government during its tenure has been the distribution of government stored food grains practically free to almost two thirds of the population. This scheme was started in a haste without studying in depth the consequences of such pampering of the public on the economic, social and life styles of the beneficiaries who number about 700 million. The subsidy outgo was estimated at 1.3 lakh crore annually which has to come from the general kitty, contributed by the honest taxpayers of the country. No thought was ever given whether such large scale diversion of development funds can be sustained year after year by the succeeding governments that may come to power in future.

One of the consequences already being felt during the operation of this scheme has been uncontrollable food inflation that is eating into the budget of every family in the country. While supply of highly subsidized grains does ensure "survival"of many people by keeping hunger away from their door steps, practically cost of every other thing in life has become intolerably high. It is like taking away with one hand what is given with the other hand! The warped thinking of political shenanigans who came out with the doling scheme is that all it requires for a decent life is cereals like rice and wheat! They seem to have ignored the nutrition security of these beneficiaries by not including pulses, fruits, vegetables or milk in the basket of subsidized "foods"! Is the nation heading for a future where people are destined to stunted growth and less than optimum mental health?

What impact the new scheme will have on the labor market in the country also has been ignored. To day the country is suffering from gross shortage of workers to do any chores, be it farming, manufacturing or civil construction. If food is provided practically free, what incentive people will have to go to work? If this is a correct reading of the labor market, the country may be in an unenviable position of negative growth in almost all spheres of economic activity with grave consequences. The ever escalating cost of getting labor is telling on every front. During the last few years labor has been demanding higher wages but this took a dramatic turn during the last one year with labor cost rising as much as 25-30% in states like Kerala. 

Why was there any necessity to ignore the well developed PDS which was working in many states with reasonable efficiency while propagating the present food security scheme? Many believe that this is largely a ploy to garner votes in the coming election for the present ruling dispensation by stealing the credit from a few states which have been operating their PDS with high management efficiency. It is true that in a few states PDS has not been working as expected and pilferage of rains was reported to be high. But proper reforms of the system and application of modern management technology should have been attempted. 

The quality of food grains supplied under the new food security scheme might not be good as in the case of PDS supplies with many recipients not using them for self consumption but diverting the same to flour mills and poultry industry! From where can the government bring good quality grains as the storage conditions in most ware houses are pitiable and not conducive to preserve the quality. There is even some suggestion that good quality food grains can be imported when there is a shortage in government granaries. With foreign exchange being maintained through generous remittances from immigrant Indians abroad, can the country afford the luxury of importing food grains for doling to the voters? Unthinkable indeed!  

Recent reports from Karnataka which is implementing the food security scheme indicate the ground reality as far as working of the scheme is concerned. Faced with shortage of grains in the state granaries, government started buying grains from the open market and it was soon realized that there was an active recycling process involving collusion between the beneficiaries and the grain trade. The beneficiaries who received grains promptly sold their quota to the private trade which in turn sold the same back to the government!      

Most interesting case regarding the adverse consequences of distribution of freebies comes from the state of Chhatisgarh where it was noticed that the alcohol consumption in the state went up dramatically after implementing the subsidized grain distribution scheme. It appears that beneficiaries of the food scheme in the state were selling the grains they received and using the money they got for buying alcoholic beverages! The State seemed to be happy because its liquor revenue jumped by as much as 90% during the last year. In 2013-14, Chhattisgarh is reported to have earned Rs. 1,900 crore from liquor sales, nearly Rs. 500 crore more than the revenue earned in the previous year. Paradoxically  the earning from liquor sales appears to be going to subsidize the food security program of the state! In effect the food security program intended to improve the health of the people inadvertently is driving them to be alcoholics! Probably the same story will be repeated in other states also and the only beneficiary is likely to be alcoholic beverage industry! Mahatma Gandhi must be turning in his grave seeing such things happening in his Motherland for which he sacrificed his life.

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