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Five myths about the Food Security Bill
Criticism of the Food Bill is drowning out the fact that its passage
is a seminal moment for the entitlement revolution
Anil Padmanabhan
SUN, SEP 01 2013. 04 04 PM IST

The passage of the food security Bill has led to a clutch of
economists, analysts and the paper tigers that inhabit television
studios unleashing a vicious assault against the Bill and Sonia
Gandhi. Photo: Mint
Updated: Sun, Sep 01 2013. 05 51 PM IST
The passage of the proposed food security law in the Lok Sabha last
week told us two things.
One, Sonia Gandhi proved once again that she is the politician to
beat. Gandhi got an otherwise completely divided Parliament to
collectively endorse the proposed law and revive momentum for the
otherwise struggling coalition. The additional spin-off was of course
that the Bharatiya Janata Party (BJP), which, rightly or wrongly,
believes it is just months away from acquiring power, was once again
shown up as a party without a positive agenda, especially in
showcasing a credible economic alternative.
Second, it led to a clutch of economists, analysts and the paper
tigers that inhabit television studios unleashing a vicious assault
against the Bill and Gandhi. From a healthy debate they turned it into
something personal. Allegations varied from being mistimed (they are
right, it should have come about earlier) to how it will cause the
fiscal deficit to go off the rails (implicitly claiming that it is in
the pink of health) and how Gandhi had inspired bad politics to trump
good economics.
Somehow the nature of the unravelling discourse is such that if you
repeat the same point enough times, even if it is gravely wrong, it
gains legitimacy. But actually these are myths and the facts show them
up.
First, the Food Security Bill will completely derail the fiscal
arithmetic of the Centre. While the government has claimed that it
will cost an additional Rs.25,000 crore to what is already being spent
on the food subsidy, some have argued that the actual cost will be
anywhere upwards of Rs.200,000 crore annually. Complete nonsense. A
bunch of erudite economists have dismissed this claim in a brilliant
piece published in The Financial Express . That aside, the scheme is
to kick in after a year. So then why would it impact the fiscal
deficit target for this year. What were the foreign institutional
investors (FIIs) thinking when they bolted for the door? And to think
they draw six figure bonuses!
Second, since the Bill states that only 67% of the population will be
covered, some bright minds are claiming that this is the actual
poverty level in the country.
If I may, this is the level at which the government, based on
scientific criteria, concludes that 33% of the population is
automatically excluded.
Yes, there would be people within the 67% cut-off who should not be
eligible for concessional food. But then, if the authorities press the
criteria of exclusion, there is a risk of leaving out the genuinely
needy—an error of commission.
The hope and belief is that there will be self-selection—just like we,
who possess cars and homes, will presumably never claim the cooking
gas subsidy on our first nine cylinders when the government moves to
cash transfers.
For the record, the poverty level in the country as estimated by the
Planning Commission is 22% at the end of 2011-12.
Third, it is claimed that the Food Security Bill would put a massive
burden on an already overburdened exchequer as the government would
have to procure additional food grain. Not only would they have to
find more storage but also spend extra to procure the grain. Yes, it
is fact that the procurement will have to be 62 million tonnes (mt) a
year.
But guess what, the country procured 72 mt of foodgrain in 2012-13.
And in case you wonder, in the previous year procurement was 63.38 mt,
with the existing infrastructure at its disposal.
Fourth, leading on from the previous point, the additional procurement
will drive up food inflation, even as fiscal overruns will create even
more inflationary impetus. Bizarre as it turns economic logic on its
head. At the moment one of the key reasons why food, especially
cereal, inflation is up is because there is not enough supply in the
market even while the food stocks—at 73.51 mt on 1 July—are mostly
rotting. Now, if these stocks were instead offloaded through the
public distribution system (PDS) at a subsidized price, what do you
think will have happen to food inflation?
Fifth, it is claimed that the entire scheme entails throwing good
money after bad. Bandying previous numbers, outlandish claims of
leakages of food through the PDS are being used to make this argument.
This may be true of a few states, but not all. It ignores the fact
that several states, under the pressure of the Supreme Court,
including Tamil Nadu, Odisha and Chhattisgarh, have shown a remarkable
improvement in both the coverage as well as reduction in leakages.
This point has been made explicitly by Himanshu, assistant professor
in Jawaharlal Nehru University and a Mint columnist, in a comment
published on 7 August, where he argues that the improvements as well
as expansion of PDS coverage has increased consumption of cereals from
23% households in 2004-05 to 44.5% in 2011-12. Yet, critics claim this
is bad economics.
In the final analysis, it is clear that it is a seminal moment for the
entitlement revolution that was inspired by Gandhi and Parliament
should be saluted for its unanimous support. The deluge of criticism
will drown out this point.
Unfortunately, to talk in its defence is to invite the charge of being
a Congress stooge or being fiscally irresponsible or being politically
correct. Obviously, we conveniently forget that Bharat is also part of
India and any sustainable progress requires them to be included as
stakeholders.
Anil Padmanabhan is deputy managing editor of Mint and writes every
week on the intersection of politics and economics. Comments are
welcome at capitalcalculus@livemint.com.
SUN, SEP 01 2013. 04 04 PM IST
MORE TOPICS: FOOD BILL | SONIA GANDHI | CAPITAL CALCULUS |
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Saurav Datta

Twitter: SauravDatta29


"To those who believe in resistance, who live between hope and
impatience and have learned the perils of being unreasonable. To those
who understand enough to be afraid and yet retain their fury."

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