Just how stupid and economically illiterate Indians are, and how wise and benevolent the political class is can best be captured by a single figure, the number 66. A little over 66% of Indians, the latest Census tells us, have access to electricity; a little under 66% (63.2% actually) are able to find enough money to pay for a mobile phone each month—this figure is up from just 9.1% a decade ago; yet 66% of Indians remain so dirt poor, they need to be given 5 kg of wheat and rice each month at hugely subsidised prices of R2 and R3 per kg, respectively. At least that’s what the political class will have us believe—Indians may have become richer, even the bottom half of the rural population may be spending just a third of its food expenditure on cereals and food itself has become a smaller component of total expenditure, but the political class isn’t quite ready to accept India has changed.
But then this is also the political class that will have us believe, through newspaper advertisements, that a scheme like MGNREGA has transformed people’s lives even though it accounts for just 1% of total jobs in the country—indeed, the government advertisements even tell us that MGNREGA has helped release bonded labour from the clutches of evil moneylenders and the like. If labour were truly bonded, it’s difficult to see how 40-45 days of employment in a year with a daily wage of R70-80 can be enough to allow labourers to pay off the debts that, presumably, got them into the bonded position they were in.
But this column is not about running down the political class, it is about helping it out. While there are many reasons apart from the 66% figure one just cited for why the Food Security Bill should be junked—the 40% leakages in the PDS and the inability of Food Corporation of India to reach all over the country are some other good reasons—it’s a good idea to take it as a given. Sonia Gandhi’s NAC has unleashed a monster that will be difficult for anyone to slay now, but let’s keep in mind that the bill for this will have to be paid by the next government. So if either the UPA or the NDA think they have more than even a slight chance of coming to power, they need to start looking at ways to minimise the damage. A special session of Parliament, we’ve been told, will be called to pass the Bill and given how even the post-Modi freshly-rejuvenated BJP continues to think like Sonia Gandhi’s B-team, it’s almost certain to be passed—a press release from the Confederation of All-India Traders last week quotes Modi as having told them that “forward trading in commodity exchanges is detrimental to national economy and I am opposed to it”. It would be instructive to see how the party’s trader base reacts to such economic illiteracy though it shouldn’t be too surprised because the BJP is, in any case, driving traders out in commodities like wheat and rice in states ruled by it by offering large bonuses over what even the central government is offering for public procurement.
If the Food Security Bill is a given, how do you reduce its costs? Let’s keep cash transfers out for the moment since this is a red rag to the food activists and, let’s face it, the government hasn’t been able to make cash transfers work either because of incompetence or because the vested interests in the leaky system that disburses goodies worth R2,50,000 crore a year are too strong. A discussion paper, to be uploaded on the Commission for Agricultural Costs and Prices’ website in a day or two, offers some useful suggestions (see graphic).
In a nutshell, it points out that India’s procurement of grain is way too high. While it was around three times what was required by way of buffer stocks earlier, it is way too high even if you go by the needs of the Food Security Bill. Against a comfortable buffer stock of around 45 million tonnes, India’s stocks are likely to be around 82 million tonnes on July 1—this means an additional deadweight loss of R80,000 crore or so. CACP has some suggestions on how to reduce these losses in its discussion paper, and the government would do well to read them. Indeed, in the cereal surplus states and cities with large populations where bank accounts are unlikely to be a problem, direct cash transfers would reduce this deadweight loss hugely.
So here’s the argument: even if you want the Food Security Bill so that the stupid and illiterate Indian can go and spend some more money on buying mobile phones, why not find ways to cut the waste? Why give extra money to FCI to waste or extra grain to the rats to eat since FCI can’t store more than even half its grain in closed areas, why contribute more to Punjab and Haryana’s exchequer since these states coolly levy a 14.5% tax on all procurement in the state? In the case of the NDA, in case it feels it has not already won the 2014 elections and needs the help of the trading class, reducing FCI’s procurement will allow private traders some space to operate. Think about it.