HELPING THE POOR WITH FOOD-WHAT IS THE BEST DELIVERY SYSTEM

The much touted Food Security Act (FSA) has been rolled out by the "vote eager" government expecting rich dividends during the forth coming general elections in the country. Now that 67% of the population have a "right to food" (whatever that means!), the million dollar question is how to manage the delivery of food grains promised to the right beneficiaries? Going by the experience so far no one in the country is happy with the post-FSA experience and even the government has no clue as to how to achieve even a fraction of what is promised under the Act! Many helpless citizens wonder why the existing Public Distribution System has been side lined, though it has many defects and deficiencies. According to international experts the most efficient way of delivery is through a voucher system that can ensure not only grain security but also nutritional security. Comparison of different delivery systems makes interesting reading and the following extracts of a report by International Food Policy Research Institute provide compelling reasons as to why the voucher system is the most efficient one. 

"WHEN times are tough, how should governments in poor countries ensure their citizens remain fed? In the past most of them used subsidies to keep food prices low for all their citizens. But these policies have become unsustainable: the cost of maintaining Egypt's food subsidies, for instance, nearly doubled between 2009 and 2012. And much of the money goes to the wrong people. In Burkina Faso, Egypt and the Philippines less than 20% of spending on food subsidies goes to poor households. In the Middle East and North Africa only 35% of subsidies reach the poorest 40%, the IMF reckons.

Motivated, in part, by a desire to curb growing budget deficits, many countries are replacing broad subsidies with policies aimed more directly at the needy. But what form should the targeted aid take? Earlier this month Iran introduced free handouts of food to replace its subsidy schemes. Other countries, such as Indonesia and Malaysia, have chosen instead to provide extra cash benefits to the poor. So far, vouchers have been the least popular option. Proposals to introduce food-stamp schemes in such countries as Malaysia have been rejected on the basis they were too American and un-Asian.In this section
   
A new paper* by researchers at the International Food Policy Research Institute (IFPRI), a think-tank, suggests that might have been a mistake. The authors analysed the results of an experiment conducted by the World Food Programme in Ecuador in 2011, which compared handouts of food, cash and vouchers—all conditional on attending nutrition classes. The study found that direct handouts—Iran's new policy—were the least effective option. They cost three times as much as vouchers to boost calorie intake by 15%, and were four times as costly as a way of increasing dietary diversity and quality (see chart). Distribution costs were high, and wastage was also a problem. Only 63% of the food given away was actually eaten, whereas 83% of the cash was spent on food and 99% of the vouchers were exchanged as intended. Food transfers have also been the costliest option in similar projects in Yemen, Uganda and Niger, according to John Hoddinott at IFPRI.

In Ecuador there was little difference in cost between handing out cash and food vouchers, the other two options. But vouchers were better at encouraging people to buy healthier foods because of restrictions on what items could be exchanged for them. It was 25% cheaper to boost the quality of household nutrition using food vouchers than it was by handing out cash.A switch from universal subsidies to vouchers could be the most efficient way of boosting health as well as relieving poverty. This is overdue in many countries, according to Lynn Brown, a consultant for the World Bank. In Egypt subsidising starchy grains and bread has resulted in 70% of adults being overweight and 29% of under-fives being stunted. Either vouchers or cash handouts might reduce the bias against healthier foods (unsubsidised dairy products and vegetables) inherent in the system. But as Iran's populist giveaways show, the politics of cheap food can easily crowd out the economics."

One of the most disturbing features of the FSA is that it arbitrarily decides that 67% of the Indian population needs subsidized foods without any valid basis. It is also condemnable because of its over emphasis on cereals ignoring other protective foods like milk, egg and pulses. Its impact on agriculture could be disastrous with farmers taking up more and more cultivation of cereals like rice and wheat ignoring pulses and oil seeds. With the suspension of the Aadhar based delivery system where one gets the subsidy through the Banks, how the Scheme is going to be managed is any body's guess. It is most unfortunate that the modern India, even after 67 years of independence has not been able to evolve a documentation system to identify low income families who deserve government support for survival. In absence of reliable and dependable data, one suspects that most of the workers in the unorganized sector of the labor market are much above the poverty line requiring no prop from the State! In other words public money is squandered on them for the sake of considerations other than merit. How long this will go on, bleeding the Nation perpetually? The next government must take courage in its hand to drastically retool this project eliminating millions of undeserved beneficiaries from this doling bonanza!  

For further reading refer: http://www.economist.com/news/finance-and-economics/21596987-why-food-vouchers-are-policy-worth-considering-developing-countries-feeding

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

FENCE EATING THE CROPS!-THE GRAIN ALCOHOL "SUBSIDY"

Transferring public money to private pockets is an established game in India and no one is concerned about the ethics or the consequences of such heinous action that is eating into the very vitals of our society. Politicians and bureaucrats of various hues aspire to amass fortunes during their so called "service" through bribes and kick backs under a regime of high corruption. Not to be satisfied with "cuts" from contractors and "commissions" from suppliers, the new game seems to be to declare "subsidies" to be met out of the public exchequer for the benefit of poorer sections of the society under different schemes by state and central governments from time to time. It is an established fact that only a fraction of such earmarked funds reach the ultimate beneficiaries. Of course providing subsidies is not confined to India only as many countries adopt this route to support agricultural and export activities and protect their citizens. Even the WTO regime, now in place has not been able to stop the subsidy practices by its members.

Subsidy is not a bad word by itself but the purpose and beneficiaries of such financial largess must be very clear and the mechanism to award such economic benefits must be transparent. For example providing export subsidy to face competition in the international market cannot be questioned as long as other countries are doing the same blatantly. It is known that the US, Japan and EU countries subsidize their farmers heavily to the extent of almost a trillion dollars, presumably to prevent bankruptcy amongst them who, though less in number, raise all the food necessary for the entire population. 2% of American population engaged in farming provide food to remaining 98% and imagine the consequences of collapse of the farming system on the food security of that country. It is true that the subsidy amounts go to some of the richest farming families in the world but it just cannot be helped.

The subsidy thrust in India took another ugly turn when the Maharashtra State Government quietly put in place an obnoxious scheme to grant financial aid to some of the distilleries there which could switch over from molasses to food grains. It is one of the most devious plans to siphon off the public funds in the name of development and interestingly majority of the distilleries identified belonged to politicians and their supporters. If this is not a blatant favoritism and citizen-unfriendly measure what else it is? It does not bother the government that the country is in the throes of a crisis of gigantic proportion with shortages of foods all around and sky rocketing prices due to inflation and any diversion of food grains can vitiate the situation further. Alcohol industry is one of the few in the manufacturing sector which is rolling in money and why it needs cash infusion at the expense of the poor citizens is begging the question.

Though the present CEO of the state government was responsible for initiating this policy during his previous incarnation, some credit is due to him for scrapping the scheme mid-way heeding to all round criticism about the logic of this strange strategy. Probably the judiciary deserves major credit for injecting some sense in the government when the Bombay High Court sarcastically posed the question 'whether alcohol is an essential commodity' on a petition filed by activists about the logic of the scheme. Consequently the government stayed subsidy to some of the existing units that were granted huge amounts earlier, almost two years ago and assured that no further licenses would be given to new grain-based alcohol distilleries in future. The amount involved is not too small to be ignored as about Rs 1000 crore was set aside for distribution to 21 distilleries, each getting Rs 35 crore to 50 crore under this dubious scheme. Is it not a paradox that when the whole world is moving towards a regime that would preclude use of edible plant foods for bio fuel production, in India the opposite is being encouraged. If there were no an independent judiciary, it would have been a field day for those supposed to guard the interests of the citizens, to divert public funds for personal benefits under one pretext or the other, a case of "the fence eating the crop"!

V.H.POTTY

http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com