FOOD SECURITY ACT-THE OTHER SIDE OF THE COIN!

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.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

RIGHT HAND GIVES, LEFT HAND TAKES!-THE INDIAN SITUATION

One of the flagship programs of the the government of India viz Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), which became the main plank for the UPA I to ride back to power was indeed revolutionary in concept. It is not a mean task to create employment opportunities for millions of people in the rural regions of the country who otherwise would have famished for want of sustainable income to survive. When people do not get work to earn a living in an environment of poverty, providing job at a decent pay for at least 100 days in an year is really God-sent. One of the criticisms against MNREGA is that the outgo of public money ostensibly for the pay out do not reach the intended beneficiaries to the extent expected. Also true is the view that the expenditure was not targeted to create permanent assets at the rural level.  

The government deserved full credits for lifting the wage rates across the country in a dramatic way with every sector of employment attaining the unbelievable growth rate of around 20%! To day the wages demanded by labor, even the most unskilled is in the range of Rs 200-300 per day while a little skill like masonry, carpentry, etc can earn as much as Rs 500-700! In contrast MNREGA was paying out a "measly" Rs 150 per day which has led to a situation where there are hardly any takers for such a low pay! The result is there to see in almost all states where funds under this scheme is grossly under utilized. As there is a minimum pay out guaranteed under MNREGA, labor started demanding higher wages from the private sector entrepreneurs including the land owners for doing jobs like tilling, planting, weeding, harvesting etc. 

In a place like Kodagu, the coffee growing heartland of Karnataka, plantation labor is such short supply that they have to be ferried from far away places for tending and harvesting the crops at costs considered exorbitant by any standards. Same is true with sugarcane cultivation in Mandya district of Karnataka where labor is treated with kid gloves, pampering to their every wish for getting them to the sugar cane fields! Free break fasts, tea and snacks and lunch are standard features in many of these places. Look at the construction industry which depends heavily on labor where an ordinary helper gets Rs 300 a day while a mason demands Rs 500 a day. In states like Kerala these daily wages can soar by almost 50%! Of course every one should be happy that more people are getting more money in their hands, provided it also contributes to increased productivity. Unfortunately this is not happening with absenteeism and boozing becoming more and more rampant!

One of the critical issues is whether such dramatic growth of wages is good for the country as a whole? The answer may not be easy to come but it definitely depresses agriculture to a very significant extent. While small farmers are finding it difficult to tend their land in an efficient way because of shortage of labor, big farmers are increasingly resorting to large scale use of mechanized machinery to do almost all operations connected with agriculture. Is it a desirable trend in the long run? Probably not because of its repercussions on food production. A dispassionate analysis of the present situation obtaining in the country will show that this country will have to suffer steep fall in food production in the coming years because of the consequences of large scale desertion of farmlands by small and marginal farmers as farm activity progressively becomes a losing proposition for these much neglected population eking out a miserable life with hardly any promise or hope for future. It is forgotten that almost 80% of food production comes from the small scale farming community and therefore destroying them will definitely tell on the food production in the country.  

In almost all states, the cost of farm labor is reported to have shot up making it beyond the absorption capacity of millions of small farmers. The cost of inputs like seeds, fertilizers and pesticides has been on an upward swing but not to the extent that can seriously hurt the farmers but it is the cost of labor that is pushing the total cost of cultivation dramatically. It is a common knowledge that the prices for agricultural produce have not kept pace with the escalating cost of cultivation. Recent surveys have revealed that farming is a labor intensive' activity,  with the cost of labor making up almost 50% of the total cost of cultivation of many crops. Is it not a paradox that net return on investment for many farmers is negative for most crops leading to a majority of farmers slowly being pushed 'below poverty line'? How can they survive and sustain themselves under such a hostile environment? Writing off loans and interest burden on these loans especially before the general election does not make any sense and at best it is a short term palliative to the problem. As a consequence of declining availability of cheap labor, acreage under many crops like Ragi, Bajra and Groundnut is progressively coming down. Where is this going to end up and what are its consequences? 

A reckless government announcing the implementation of the much touted Food Security Act, where are they going to find the required grains to be supplied to almost 850 million people, as guaranteed by this imposing Act? Importing is not an option as the required foreign exchange resources are not in the kitty and the measly reserve cannot be frittered away on such a scheme. How is the government going to arrest the fast migration of rural population, with no hope of farming sustaining them, into already bursting cities with very little infrastructure to let people lead a decent life? Future may not be bright as severe shortages are expected vis-a-vis cereals, pulses and oil seeds with the latter two on the import list perennially since a long time due to stagnant production during the last three decades. India happens to be largest importer of Palm oil in the world while for pulses there are only a few sources from where they can be imported. Even if the government is able to garner sufficient cereals to meet its obligations under the Food Security Act, nutritional insecurity is going to haunt the country for a long time to come. 

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com