Food for all (almost) ? or Free for all

Elections are just 9 months away now. Congress in its second election move has managed to get the National Food Security Bill (NFSB), its draft can be found here http://eac.gov.in/reports/rep_NFSB.pdf passed in Lok Sabha yesterday, the first being creation of telanga.

NFSB entitles Rs 5 kg of food grain per capita at Rs 5 / kg – rice, Rs 3 / kg of wheat and Re 1 / kg of millets. It covers ~ 67 % of population (75% of rural area and 50% of urban area), i.e 84 Cr people. Thus, ~ 420 Cr kg of food grained will have to procured and distributed.

Another grand scheme whose name would certainly have as a prefix MG/ IG / RJ. Executing it would be a nightmare of sorts. Here’s why;

– Since its a law, it creates entitlements and the government is legally obligated to make good the promise. Thus, no matter what the state of production in the country, the government has to procure foodgrains either locally or through imports.

– How would such large government procurements and purchasesd impact prices? Both would be inflationary, procurement locally would drive up prices as higher MSP’s would be required (incentive to produce since the poor farmer wont have any incentive.) Entering the international market would be expensive since prices would shoot up in anticipation of India entering the market.

– Since vast quantities of foodgrains are involved, it would require place to store them.

– Distribution has to be through PDS whose distribution capabilities are known to all with ~ 25 – 30% leakages.

– Are 84 Cr people in India poor? Certainly not. It is critical that the beneficiaries are accurately identified in the shortest time-frame possible. Our earlier post highlighted how despite government’s own planning commission stated how ~ 21% of population is poor i.e. 27 Cr people, the NFSB plans to cover 84 Cr people.

Midnightbreakfast feels that ultimately its jobs and progress that ultimately matters to people and not doles. Giving away doles is an old election strategy and theres nothing new in it per se. Falling growth , high and persistent inflation , corruption at the very highest levels of government has seriously eroded the credibility of this government. Voter anger cannot be assuaged by such doles.

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