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How to digest this welfare

A law to provide food security for India's poor is laudable. But there are some caveats.

india Updated: Dec 20, 2011 14:29 IST

The UPA’s most ambitious welfare programme — food security for poor Indians — is about to enter the law-making arena. The scheme, as cleared by Cabinet, proposes to sell grain to two out of every three Indians at a fraction of the price the government buys it from farmers.

The Rs 100,000-odd crore bill is a 40% jump up from this year’s food subsidy, but is not too high a price for what could eventually become the keystone of UPA chairperson Sonia Gandhi’s inclusive agenda. This is just the recurrent cost. The food ministry reckons the country would need to invest another Rs 350,000 crore over time in improving grain yield, bumping up government procurement and publicising the merits of the scheme. Improvements in farm productivity and food storage are welcome, but that kind of money is not easy to come by.

In its present form, the scheme tries to reconcile deep differences within the government that universal food security is far too expensive. India doesn’t produce enough grain to be sold cheap to three-quarters of India’s 1.2 billion people, who were initially proposed to be covered. If we do manage to find the grain, the conservative view went, we don’t have the granaries to stock it, building new ones will add to the food subsidy. By itself the food subsidy will balloon because the government will progressively be buying more grain coming into the market at prices higher than it pays now and selling it to more people at fixed rates. However, estimates on how much grain would be needed, and the tab the government would have to pick up, were significantly lower. Creating a bigger procurement machine, they argued, is also an opportunity to fix the bugs in the one we have. In the event, the Cabinet plumped for a limited roll-out of the food security scheme.

The food security programme will have to address three issues before it can get off the ground. First, identify the poor. A scheme for 750 million people could go completely off the rails if the subsidy reaches those who don’t need it or doesn’t reach those who do. Significant undesirable inclusion and exclusion bedevil our welfare delivery process. If these can’t be fixed, direct cash transfers would be better for tackling hunger. Second, improve the way the government buys grain and stores grain. The carrying cost of 1 quintal of wheat procured in 2003-04 for Rs 138.2 was Rs 289. By July 2002, the Food Corporation of India had accumulated 63 million tonnes of grain, half the world’s total trade, because of rising procurement and declining distribution. Third, get the food to the poor. It cost Rs 6.68 to transfer one rupee worth of benefit to the poor in 1999-2000 through the public distribution system of fair price shops. With perfect targeting of beneficiaries, this figure should have been Rs 1.52.