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Ideology, policy divide debate on the Food security Bill

The success of the Bill rests on the public distribution system, which is the country’s ‘oldest, widest and biggest corruption racket’.

Kabir Taneja  New Delhi | 11th May 2013

A watchman sits next to stacked sacks of rotten wheat crop at Dera Mir Miran village in Punjab in June last year. Every day some 3,000 children die from illnesses related to malnutrition, and yet countless heaps of rodent-infested wheat and rice are rotti

obel Laureate and India born economist Amartya Sen kicked up a storm this week after he blamed the Indian opposition of delaying the passing of the Food Security Bill (FSB), which has got Sen's personal backing. However, the bill, which is a brainchild of Congress president Sonia Gandhi, has received divided sentiments with many economists and politicians alike.

The FSB aims to subsidise food grain to 67% of the country's population. The estimated cost to get the project off the ground is seen to be around Rs 120,000 crore, which, according to some, is still a modest number (to put it in further perspective, it may cost up to 1.5% of the GDP). One of the main worries of the FSB being aired is that it will still utilise the notoriously inefficient public distribution system (PDS), only at a much bigger and deeper level. According to estimates, nearly 40% of the current total of highly subsidised food supply is lost to middlemen, corruption, non-existent storage facilities and so on. Another area of concern raised is the erratic implementation time-frame for the bill.

According to the pro-FSB debate, both the financial and food grain requirements are not more burdening than existing allocations. Supporters also suggest that the financial numbers presented are not in real terms, as only about Rs 21,000 crore more from current subsidies bill will be required.

"You can do a lot with 7% (GDP) growth, which means doubling of per-capita GDP (and public revenue) every ten years," explains Professor Jean Drèze, honorary professor, Delhi School of Economics. "The cost of the bill, which is around 1% of GDP today, would come down to 0.5% within ten years, if the entitlements remain unchanged in real terms."

However, on both sides of the debate, the PDS seems to be the make or break point for the success of the FSB.

"The public distribution system is independent India's oldest, widest and biggest corruption racket. The FSB will not reform this or end the corruption that goes with it," says Nitin Pai, director, The Takshashila Institution.

"Instead of reviewing whether the economic costs of the PDS are worth it, whether alternative market-based approaches can be more effective and how benefits can reach the needy, the UPA government's FSB is essentially 'more money for the same'. The question is not merely whether India can afford Rs 1.2 lakh crore. We can find the money by cutting other programmes, raising taxes or borrowing just like in the 1960s and 70s. The question is whether this is the best way to spend the Rs 1.2 lakh crore. Few dispute the need for the state to provide help for the really needy. However, the UPA has done nothing to unshackle the economy to enable people to feed themselves — even small reforms to liberalise labour and investment will have disproportionate results in terms of lifting people out of deprivation."

Drèze, on the other hand, believes that the PDS will not be pressurised further, but given a facelift to make it more efficient (such as food distribution scheme in Chhattisgarh, which is seen as a success). "The FSB does not involve any 'bloating' of the public distribution system," he says. "It involves putting it on a different footing, a new framework that will make it much more effective and also help to reduce the leakages. The possibility of doing that has been demonstrated by many states in recent years and the FSB is an opportunity to extend this progress across the country."

Even though the FSB may not be perfect, or even workable in some opinions, many believe that a bill that may be effective even by 50% is better than no bill at all, and should be passed, which will force future governments to perfect the act over time. India, even as one of the fastest growing countries in the world, has the dubious claim of having some of the poorest people in the world. Recent reports suggested that an un-justifiable 5,000 children die every day around the country from starvation. That is over 1,800,000 children every year. India also loses over 300,000 children a year to commonly curable diseases such as diarrhoea, according to UNICEF estimates. However, experts suggest such problems in India are largely due to ineffective governance and public policy formulation and execution.

"The bill (FSB) is a step backwards in rationalising the distribution of public goods and services to the poor and destitute in India," says Vivek Dehejia, professor of economics at Carleton University, Canada, and co-author of the book Indianomix. "The idea that a future government will be forced to iron out inaccuracies in the current bill is pinning too much hope in the future and mortgaging the present, which will foot the huge fiscal bill. It would be far better to take a proper reckoning of the bill, today, and then decide on its merits, rather than to defer difficult decisions to a future government."

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