Nationalfoodsecuritybill by John Khonai

Table of contents

Lok Sabha clears the Food Security Bill Food Security Bill passed in Lok Sabha after nine-hour debate

Must end the problem of hunger, Sonia Gandhi tells Lok Sabha

All you need to know about National Food Security Bill Sonia rushes to AIIMS, misses Lok Sabha passing Food Bill Why Modi should be worried about how the Food Bill was passed

7 10 11

The Food Security Bill: The bad... Food Bill is the biggest mistake India might have made till date

RTI to Food Security: Sonia’s five rights, India’s misery

Fund outlay for food security bound to hit fiscal deficit, says India Inc

... and the good Sonia’s food bill will bring great pain, bankruptcy... and reform

‘Food Security Bill is a good opportunity to fix PDS’

Food Security: What’s so wrong about it?

Will Congress reap the benefits of the bill? Why neither Congress nor Indian economy may benefit from Food Security Bill

Why Congress won’t gain in 2014 LS polls

Land Acquisition Bill: Congress readies to keep food bill momentum going

Lok Sabha clears the Food Security Bill

Food Security Bill passed in Lok Sabha after nine-hour debate After a nine hour debate, Speaker of the House, Meira Kumar announced that the bill has been passed after considering all amendments. FP Staff Aug 27, 2013

ok Sabha on Monday passed the Food Security Bill after considering all the amendments, with the Opposition saying they will support the bill even though it is half-baked. The bill seeks to provide cheap foodgrains to 82 crore people in the country, ushering in the biggest programme in the world, to fight hunger.

the name of the Food Security Bill.” Meanwhile, Sonia Gandhi had to leave Parliament because she was feeling under the weather. Gandhi was rushed to AIIMS in a car from Parliament house when voting was underway on the National Food Security Bill. Sonia Gandhi earlier in the day had urged the Parliament to pass this legislature, which she termed a ‘historic’ one. “The food bill is meant for the less fortunate sections of our society,” she said while taking part in an animated discussion in Lok Sabha. “It is a historic step to eradicate hunger.” “It is time to send out a big message that India can take the responsibility of ensuring food security for all its citizens,” she added, to loud thumping of desks by members of the Congressled UPA.

The ambitious bill was adopted by the House through a voice vote after a nine-hour combined discussion on the measure and a statutory resolution seeking to disapprove the ordinance promulgated on 5 July. Over 300 amendments moved by the opposition were rejected Prime Minister Manmohan Singh lauded the passage of the bill. “It is yet another step of UPA government in direction of pro-people policies,” he said. Leader of Opposition Sushma Swaraj, endorsing the bill said “This bill is half baked, but we have still decided to support it.” Sharad Yadav too pitched in to the last minute debate saying, “The farmers must not suffer in

“It’s time to take the historic step,” Gandhi said of the bill, her pet welfare legislation and which many feel may prove to be a game-changer in the next Lok Sabha election. “It is my fervent appeal that we shall pass this unanimously,” she had said. As the house listened to her in silence, Gandhi explained the significance of the legislation. “Our foreseeable future must be to wipe out hunger and malnutrition from our country. This legislation is only a beginning. As we move forward, we will be open to constructive suggestion, we will learn from experiences, have an opportunity to transform the lives of millions of people.” “I believe we all must rise to the occasion, set Copyright © 2012 Firstpost

aside our differences and affirm our commitment to (people’s) welfare and well being. Meanwhile Mulayam Singh had alleged that the bill was being brought with an eye on the elections. “It is clearly being brought for elections…Why didn’t you bring this bill earlier when poor people were dying because of hunger?…Every election, you bring up a measure. There is nothing for the poor,” he had said.

The bill proposes subsidised foodgrain for up to 75 percent of the rural and up to 50 percent of the urban population. It proposes meal entitlement to specific groups. Eligible households would get five kg of foodgrain per person every month at Rs.3 per kilo of rice, Rs.2 per kilo of wheat and Rs.1 per kilo of coarse grains.

Must end the problem of hunger,

Sonia Gandhi tells Lok Sabha Opening the Congress innings on the debate in Lok Sabha on Food Bill, she rejected questions over whether the country had resources to implement the landmark measure. PTI, JAug 27, 2013

ew Delhi: Declaring Congress’ goal to “wipe out hunger and malnutrition”, Sonia Gandhi had on Monday asked all political parties to set aside differences and support the Food Security Bill so that a “big message” could be sent out about India’s capabilities.

Making a strong pitch for smooth passage of the landmark legislation, the UPA chairperson said the measure is a historic opportunity to provide food security to tens of millions of people in the country which will end the problem of hunger once for all. She sought to dismiss questions over whether the ambitious scheme could be implemented. “The question is not whether we have enough resources or not and whether it would benefit the farmers or not. We have to arrange resources for it. We have to do it,” she said in the House where Prime Minister Manmohan Singh was present. Gandhi said farmers and agriculture have always remained priority of the UPA.

Opening the Congress innings on the debate in Lok Sabha on Food Bill, she had rejected questions over whether the country had resources to implement the landmark measure. “It is time to send out a big message that India can take responsibility of ensuring food security for all Indians…our goal is to wipe out hunger and malnutrition all over the country,” Gandhi said about her pet agenda.

Agreeing that reforming public distribution system (PDS) was a must for the food law, Gandhi noted that there was basic need to remove the leakages to ensure that benefits of the food bill reached the intended beneficiary. Gandhi said the Congress had made a commitment to the nation in the 2009 election manifesto to bring forward such a legislation. It is one in a series of various rights promised and provided by UPA like Right to Information, Right to Education, Right to Work and Right to Forest Produce.

All you need to know about

National Food Security Bill National Food Security Bill: All you need to know. A dummy’s guide to the UPA’s latest flagship scheme. Includes what analyst companies have to say about the law. FP Staff Aug 27, 2013

he Lok Sabha on Monday endorsed the Food Security Bill, which makes subsidised foodgrain a right for 67 per cent of the population, or 82 crore Indians. The bill is expected to cost the government exchequer Rs 1.3 lakh crore ($22 billion) every year.

almost all parties have found themselves compelled to endorse it. In fact, even the proponents of the Bill have criticised the Congress party’s haste in getting the bill cleared without completed the required groundwork. “I am quite dismayed by this ordinance and also very concerned about the possible consequences of excessive haste. A sense of urgency is certainly required, but rushing the implementation of the bill for short-term electoral gain could be counter-productive, and even defeat the whole purpose of the bill,” former National Advisory Council member Jean Dreze had told Mumbai Mirror in an interview. Dreze had resigned from the council due to his differences with the Bill. Here are a few facts about the Bill:

With this law being pegged as the Congress party’s gamechanger for the 2014 Lok Sbaha elections, UPA chairperson Sonia Gandhi made a rare speech in Parliament, terming the Bill a historic step towards eradicating poverty. “The food bill is meant for the less fortunate sections of our society,” she said.

The chronology

Expectedly, the Opposition has criticised the bill as an attempt by the Congress to get mileage in the run-up to the 2014 polls.

• The Bill was originally conceived by the National Advisory Council headed by Congress President Sonia Gandhi, who on 27 October, 2010, forwarded the basic framework of the proposed National Food Security Bill (NFSB) to Prime Minister Manmohan Singh. The Bill envisaged covering 75 per cent of the country’s population, 90 per cent in rural areas and 50 per cent in urban areas.

“This bill is half baked, but we have still decided to support it,” Leader of Opposition Sushma Swaraj said. Needless to say, the timing of the Bill’s introduction in Parliament is such that

• The prime minister set up an expert panel nder the chairmanship of C Rangarajan to study the NAC’s proposal. The committee estimated that the total annual foodgrain requirement to Copyright © 2012 Firstpost

roll out the NAC’s recommendations covering 72 per cent of the population in the first phase and 75 per cent in the final phase was 68.76 million tonnes and 73.98 million tonnes, respectively. • The panel brought down the coverage to 67 per cent of the population and suggested reforming the public distribution system. • The government finally in July promulgated the National Food Security Ordinance, which has been made into a Bill now. The details • The Bill seeks to offer rice at Rs 3 per kg, wheat at Rs 2 per kg and coarse cereals at Rs 1 per kg to the intended beneficiaries. Up to 75 per cent of the rural population and 50 per cent of the urban population will get 5 kg of foodgrain monthly. The poorest who fall under the Antyodaya Anna Yojana will continue with their present monthly entitlement of 35 kg of food grains. • The Bill will entitle around 80 million of India’s 1.2 billion population to subsidised foodgrain under the Targeted Public Distribution System. • States are given the responsibility to decide on eligibility criteria based on socio-economic and caste census (SECC) data. However, the SECC survey is likely to take six more months. • Pregnant women and lactating mothers would receive a maternity benefit of at least Rs 6,000 . • Children aged six months to 14 years will get take-home rations or hot cooked food. • The central government will also provide money to states and union territories if it runs low on grain as well as providing them with “assistance” towards the cost of intra-state transportation and handling of grains. • In a bid to give women more authority in running their households, the oldest adult woman in each house would be considered the head of that household for the issuing of ration cards.

• At the coverage and entitlement now proposed, the total estimated annual foodgrains requirement is 612.3 lakh tons and the corresponding estimated food subsidy for implementation of NFSB, at 2013-14 costs, is about Rs 1,24,747 crore. • There will be state and district level redressal mechanism with designated nodal officers. Redressal mechanism may also include call centers, helpline etc. • The Bill provides for penalty to be imposed on public servants or authority, if found guilty of failing to comply with the relief recommended by the District Grievance Redressal Officer Merits and demerits • Crisil Research believes the proper implementation of the Bill “will lower spending on foodgrains by below poverty line households, and free up resources for spending on other goods and services, in particular health, education, and nutritious food.” • It sees the Bill enabling an additional savings of around Rs 4,400 this year for each BPL household that begins to purchase subsidised food. This savings equals around 8 per cent and 5 per cent of the annual expenditure of a rural and urban household, respectively. • For rural households the savings amount exceeds their current annual medical and educational spends. Higher disposable income would also allow BPL households to spend more on protein-rich food, thereby improving their nutritional intake, Crisil said. • However, the research house has said key to accruing all these benefits is the proper implementation. “While the benefits of the Bill could go well beyond just the provision of food, the success of the scheme and its welfare impact lies in identifying the poor and making sure that they are able to avail the food subsidy,” it said. • Many critics of the scheme converge on this point. They say beneficiaries do not stand to gain as about 40 percent of rice and wheat earmarked for the poor gets siphoned off due to corruption. An inefficient distribution channel Copyright © 2012 Firstpost

also leads to waste. • Implementing the bill in a fair, equitable and transparent manner is going to be a big challenge for the government. • Many agriculture experts believe that Food Bill which proposes to provide grains to people at very cheap rates may discourage the agriculture production in the country. Hence it must make sure that farmers should not be burdened with the cost of subsidising the supply. • Economists have raised concerns about the cost to the exchequer at a time when the government is struggling to bridge the fiscal and current account deficits. Fitch Ratings has said it was getting more challenging for India to meet its fiscal deficit target in the current fiscal year ending March 2014 with revenues slowing, Reuters reported today.

• Economists of the Government’s Commission for Agricultural Costs and Prices (CACP), who define the roadmap of agricultural policies, have calculated “additional” subsidy burden of Rs 1.20 lakh crore per annum from the existing Rs 90,000 crore • The Centre intends to delegate the task of construction of additional storage to the states, which may not be practically feasible given constrained centre-state relations among diverse political parties. • The government does not even have enough storage capacity to store the amount of grain that it currently procures and will have to procure from the farmers in the years to come. So more grains could be dumped in the open and will rot as a result. • Experts believe the rush to pass the bill implies the intent is nakedly political.

Sonia rushes to AIIMS,

misses Lok Sabha passing Food Bill

Sonia Gandhi was rushed to AIIMS hospital after complaining of ill health during the Lok Sabha session where the Food Bill was being debated. PTI

Earlier in the day, Sonia Gandhi had defended the Food Bill and said it was essential for Parliament to pass the legislation. PTI Copyright ÂŠ 2012 Firstpost

Why Modi should be worried about

how the Food Bill was passed There were multiple reasons due to which the passing of the Food Bill by the Lok Sabha should be a matter of concern for Narendra Modi. Here’s what they are. Sanjay Singh Aug 27, 2013

n the end UPA chairperson and Congress president Sonia Gandhi won the battle hands down. She not only got the most expensive and mother of all populist schemes, the Food Security Bill, through the Lok Sabha, but also made almost all parties, including the BJP, desperately vie with the Congress for some credit for the legislation.

ulism, the BJP’s central leadership apparently decided it was more prudent to support the UPA in getting the bill passed and not do anything that could even remotely be construed as an attempt to spike it.

However, what was perhaps the most interesting aspect of the approximately nine-hour-long discussion on the bill in the Lok Sabha, were the indications of an early build up of a fresh political alignment that may spice up the next parliamentary polls. The hints of new formations are something that should concern Narendra Modi the most, both in his capacity as the de-facto leader of the BJP and as the face of the party’s campaign for the next general elections. Despite the hype surrounding Modi and the backing of his party’s activists, the turn of events in Parliament suggested that the BJP hadn’t cared to listen to his opinion on the Food Security Bill. It’s perhaps the clearest indicator that the Guajrat Chief Minister’s battles within his party aren’t over and he will need to battle for command. The BJP’s lead speaker in the Lok Sabha, Murli Manohar Joshi, who incidentally began the debate on the bill, did not once refer to Modi’s principal demand of a meeting between Prime Minister Manmohan Singh and the nation’s chief ministers. In a letter to the Prime Minister, Modi had suggested the meeting should be called to discuss the legislation threadbare before the ordinance was taken up for ratification by Parliament. However, in the politics of competitive pop-

If Murli Manohar Joshi’s omission of Modi demands should concern him as party’s potential prime ministerial candidate, there are other developments that should concern him as the BJP’s campaign committee chief. The most notable one being the Bahujan Samaj Party floor leader, Dara Singh Chauhan, and JD(U) leader, Sharad Yadav, showering praise on Sonia Gandhi for something as trivial as her speaking in Hindi in Parliament. The voting on the party’s amendment on the Food Security Bill, proposing to adopt the Chhattisgarh model for PDS, became a BJPversus-the-rest affair in the Lok Sabha, which should also be a matter of concern. The government on the other hand easily sailed through all amendments suggested. Consider the letter that Modi had sent the Copyright © 2012 Firstpost

Prime Minister on August 7, and copies of which were sent all top BJP leaders. In the letter Modi began by saying “in my clear view this (ordinance) does not contain basic tenets which any food security legislation should meet…..the ordinance which your government has promulgated, in which unworkable statutory responsibilities have been devolved to central and state governments.” He had argued that since the bill has “far reaching implications” on the people, on agriculture sector and “centre-state issues”, it was only appropriate that the provisions of the bill ought have been widely debated and discussed at proper forums, something which he said “had not been done so far”. He called for a meeting of all chief ministers be called before the ordinance was taken up by the Parliament. However, in his hour long speech in Parliament, Joshi did not talk of convening a meeting of chief ministers to resolve the centre-state issues. At most, at one point the former HRD minister made a mention of the fact that the government ought to have carried out “a wider nationwide debate” and that “the provisions of the bill is against the spirit of federal structure”. The rejection of Modi’s view didn’t go unnoticed by several BJP leaders but since the issue concerned the senior leaders of the party, they’ve chosen not to talk openly about it. Ironically, it was Samajwadi Party chief Mulayam Singh Yadav who seemed to have taken a cue from Modi’s letter and slammed the UPA government for not talking to the chief ministers, particularly when the bill listed multiple tasks for the state governments to implement. He also pointed out the absence of criteria to identify the beneficiaries. Tamil Nadu Chief Minister and AIADMK chief J Jayalalithaa had also expressed a similar opinion in the past.

To be fair to Mulayam, he is involved in the running of the state government in Uttar Pradesh, and is well aware of the problems that state governments are going to face in implementation of the bill. If Mulayam’s opposition to Modi hadn’t been so firm, it might even have been an unusual common ground for the two leaders. Sonia’s strategic assertiveness on the Food Bill allowed her to keep her halo of supremacy and may or may not translate into votes, but it certainly won her two powerful admirers. The BSP, with whom the Congress has had a rocky relationship, and the JD(U), which seems to be leaning towards the UPA. BSP leader Dara Singh Chauhan began by complimenting Sonia’s pro-poor tilt and praising her for her choice to speak in Hindi, and not in English. JD(U) leader Sharad Yadav, who so far has been known for his anti-Congress stance in his opening statement said he was “overwhelmed by Sonia Gandhi speaking in a language, Hindustan spoke”. “Now since Soniaji has spoken in that language the nation would have well understood her message,” Yadav said. Incidentally, this was Sonia’s first speech in Parliament in four-and-half years of the UPA II government. Could the BSP and JD(U)’s discovery of the merits of the Congress president translate into a stronger relationship and even a pre-poll understanding in UP and Bihar? It may be too early to say, but politics is an art of the impossible. Given there are 120 seats between UP and Bihar, the two states have the capacity to change the electoral demography in Lok Sabha and the victor in those two states will play a major role in the formation of the next government.

The Food Security Bill: The bad,…

Food Bill is the biggest mistake India might have made till date Once we express the cost of food security as a percentage of the total estimated receipts of the government, during the current financial year, we see how huge the cost of food security really is. Vivek Kaul Aug 27, 2013

istorians often ask counterfactual questions to figure out how history could have evolved differently. Ramachandra Guha asks and answers one such question in an essay titled A Short History of Congress Chamchagiri, which is a part of the book Patriots and Partisans.

vate life. The former would be a (failed) entrepreneur, the latter a recently retired airline pilot with a passion for photography. Finally, had Shastri lived longer, Sonia Gandhi would still be a devoted and loving housewife, and Rahul Gandhi perhaps a middle-level manager in a private sector company.”

In this essay Guha briefly discusses what would have happened if Lal Bahadur Shastri, the second prime minister of India, had lived a little longer. Shastri died on January 11, 1966, after serving as the prime minister for a little over 19 months.

But that as we know was not to be. Last night, the Lok Sabha, worked overtime to pass Sonia Gandhi‘s passion project, the Food Security Bill. India as a nation has made big mistakes on the economic and the financial front in the nearly 66 years that it has been independent, but the passage of the Food Security Bill, might turn out to be our biggest mistake till date. The Food Security Bill guarantees 5 kg of rice, wheat and coarse cereals per month per individual at a fixed price of Rs 3, 2, 1, respectively, to nearly 67% of the population.

The political future of India would have evolved very differently had Shashtri lived longer, feels Guha. As he writes “Had Shastri lived, Indira Gandhi may or may not have migrated to London. But even had she stayed in India, it is highly unlikely that she would have become prime minister. And it is certain that her son would have never have occupied or aspired to that office…Sanjay Gandhi and Rajiv Gandhi would almost certainly still be alive, and in pri-

The government estimates suggest that food security will cost Rs 1,24,723 crore per year. But that is just one estimate. Andy Mukherjee, a columnist with Reuters, puts the cost at around $25 billion. The Commission for Agricultural Costs and Prices(CACP) of the Ministry of Agriculture in a research paper titled National Food Security Bill – Challenges and Options puts the cost of the food security scheme over a three year period at Rs 6,82,163 crore. During the first year the cost to the government has been estimated at Rs 2,41,263 crore. Economist Surjit Bhalla in a column in The Indian Express put the cost of the bill at Rs 3,14,000 crore or around 3% of the gross domestic product (GDP). Ashok Kotwal, Milind Murugkar and Bharat Ramaswami challenge Copyright © 2012 Firstpost

Bhalla’s calculation in a column in The Financial Express and write “the food subsidy bill should…come to around 1.35% of GDP, which is still way less than the numbers he(i.e. Bhalla) put out.” The trouble here is that by expressing the cost of food security in terms of percentage of GDP, we do not understand the seriousness of the situation that we are getting into. In order to properly understand the situation we need to express the cost of food security as a percentage of the total receipts(less borrowings) of the government. The receipts of the government for the year 2013-2014 are projected at Rs 11,22,799 crore. The government’s estimated cost of food security comes at 11.10%(Rs 1,24,723 expressed as a % of Rs 11,22,799 crore) of the total receipts. The CACP’s estimated cost of food security comes at 21.5%(Rs 2,41,623 crore expressed as a % of Rs 11,22,799 crore) of the total receipts. Bhalla’s cost of food security comes at around 28% of the total receipts (Rs 3,14,000 crore expressed as a % of Rs 11,22,799 crore). Once we express the cost of food security as a percentage of the total estimated receipts of the government, during the current financial year, we see how huge the cost of food security really is. This is something that doesn’t come out when the cost of food security is expressed as a percentage of GDP. In this case the estimated cost is in the range of 1-3% of GDP. But the government does not have the entire GDP to spend. It can only spend what it earns. The interesting thing is that the cost of food security expressed as a percentage of total receipts of the government is likely to be even higher. This is primarily because the government’s collection of taxes has been slower than expected this year. The Controller General of Accounts has put out numbers to show precisely this. For the first three months of the financial year (i.e. the period between April 1, 2013 and June 30, 2013) only 11.1% of the total expected revenue receipts (the total tax and non tax revenue) for the year have been collected. When it comes to capital receipts(which does not include government borrowings) only 3.3% of the total expected amount for the year have been collected.

What this means is that the government during the first three months of the financial year has not been able to collect as much money as it had expected to. This means that the cost of food security will form a higher proportion of the total government receipts than the numbers currently tell us. And that is just one problem. It is also worth remembering that the government estimate of the cost of food security at Rs 1,24,723 crore is very optimistic. The CACP points out that this estimate does not take into account “additional expenditure (that) is needed for the envisaged administrative set up, scaling up of operations, enhancement of production, investments for storage, movement, processing and market infrastructure etc.” Food security will also mean a higher expenditure for the government in the days to come. A higher expenditure will mean a higher fiscal deficit. Fiscal deficit is defined as the difference between what a government earns and what it spends. The question is how will this higher expenditure be financed? Given that the economy is in a breakdown mode, higher taxes are not the answer. The government will have to finance food security through higher borrowing. Higher government borrowing by the government as this writer has often explained in the past crowds out private borrowing. The private sector (be it banks or companies) in order to compete with the government for savings will have to offer higher interest rates. This means that the era of high interest rates will continue, which will not be good for economic growth. Also, it is important to remember that the food security scheme is an open ended scheme. As Nitin Pai, Director of The Takshashila Institution, writes in a column “The scheme is openended: there’s no expiry date, no sunset clause. It covers around two-thirds of the population— even those who are not really needy. This means that the outlays will have to increase as the population grows.” This might also lead to the government printing money to finance the scheme. It was and remains easy for the government to obtain money Copyright © 2012 Firstpost

by printing it rather than taxing its citizens. F P Powers aptly put it when he said that money printing would always be “the first device thought of by a finance minister when a large quantity of money has to be raised at once”. History is full of such examples. Money printing will lead to higher inflation. Prices will rise due to other reasons as well. Every year, the government declares a minimum support price (MSP) on rice and wheat. At this price, it buys grains from farmers. This grain is then distributed to those entitled to it under the various programmes of the government.

The grain to be distributed under the food security programme will also be procured in a similar way. But this may have other unintended consequences which the government is not taking into account. As the CACP points out “Assured procurement gives an incentive for farmers to produce cereals rather than diversify the production-basket…Vegetable production too may be affected – pushing food inflation further.” And this will hit the very people food security is expected to benefit. A discussion paper titled Taming Food Inflation in India released by CACP in April 2013 points out the same. “Food inflation in India has been a major challenge to policy makers, more so during recent years when it has averaged 10% during 2008-09 to December 2012. Given that an average household in India still spends almost half of its expenditure on food, and poor around 60 percent (NSSO, 2011), and that poor cannot easily hedge against inflation, high food inflation inflicts a

strong ‘hidden tax’ on the poor…In the last five years, post 2008, food inflation contributed to over 41% to the overall inflation in the country.” Higher food prices will mean higher inflation and this in turn will mean lower savings, as people will end up spending a higher proportion of their income to meet their expenses. This will lead to people spending a lower amount of money on consuming good and services and thus economic growth will slowdown further. It might not be surprising to see economic growth go below the 5% level. Lower savings will also have an impact on the current account deficit. As Atish Ghosh and Uma Ramakrishnan point out in an article on the IMF website “The current account can also be expressed as the difference between national (both public and private) savings and investment. A current account deficit may therefore reflect a low level of national savings relative to investment.” If India does not save enough, it means it will have to borrow capital from abroad. And when these foreign borrowings need to be repaid, dollars will need to be bought. This will put pressure on the rupee and lead to its depreciation against the dollar. There is another factor that can put pressure on the rupee. In a particular year when the government is not able to procure enough rice or wheat to fulfil its obligations under right to food security, it will have to import these grains. But that is easier said than done, specially in case of rice. “Rice is a very thinly traded commodity, with only about 7 per cent of world production being traded and five countries cornering threefourths of the rice exports. The thinness and concentration of world rice markets imply that changes in production or consumption in major rice-trading countries have an amplified effect on world prices,” a CACP research paper points out. And buying rice or wheat internationally will mean paying in dollars. This will lead to increased demand for dollars and pressure on the rupee. The weakest point of the right to food security is that it will use the extremely “leaky” public distribution system to distribute food grains. As Jagdish Bhagwati and Arvind Panagariya write in India’s Tryst With Destiny – Debunking Copyright © 2012 Firstpost

Myths That Undermine Progress and Addressing New Challenges “A recent study by Jha and Ramaswami estimates that in 2004-05, 70 per cent of the poor received no grain through the pubic distribution system while 70 per cent of those who did receive it were non-poor. They also estimate that as much as 55 per cent of the grain supplied through the public distribution system leaked out along the distribution chain, with only 45 per cent actually sold to beneficiaries through fair-price shops. The share of food subsidy received by the poor turned out to be astonishingly low 10.5 per cent.” Estimates made by CACP suggest that the public distribution system has a leakage of 40.4%. “In 2009-10, 25.3 million tonnes was received by the people under PDS while the offtake by states was 42.4 million tonnes- indicating a leakage of 40.4 percent,” a CACP research paper points out. Bhagwati and Panagariya also point out that with the subsidy on rice being the highest, the demand for rice will be the highest and the government distribution system will fail to procure enough rice. As they write “recognising that the absolute subsidy per kilogram is the largest in rice, the eligible households would stand to maximize the implicit transfer to them by buying rice and no other grain from the public distribution system. By reselling rice in the private market, they would be able to convert this maximized in-kind subsidy into cash…Of course, with all eligible households buying rice for their entire permitted quotas, the government distribution system will simply fail to procure enough rice.” The jhollawallas’ big plan for financing the food security scheme comes from the revenue foregone number put out by the Finance Ministry. This is essentially tax that could have been collected but was foregone due to various exemptions and incentives. The Finance Ministry put this number at Rs 480,000 crore for 2010-2011 and Rs 530,000 crore for 2011-2012. Now only if these taxes could be collected food security could be easily financed the jhollawallas feel. But this number is a huge overestimation given that a lot of revenue foregone is difficult to capture. As Amartya Sen, the big inspiration for the jhollawallas put it in a column in The Hindu in

January 2012 “This is, of course, a big overestimation of revenue that can be actually obtained (or saved), since many of the revenues allegedly forgone would be difficult to capture — and so I am not accepting that rosy evaluation.” Also, it is worth remembering something that finance minister P Chidambaram pointed out in his budget speech. “There are 42,800 persons – let me repeat, only 42,800 persons – who admitted to a taxable income exceeding Rs 1 crore per year,” Chidambaram said. So Indians do not like to pay tax. And just because a tax is implemented does not mean that they will pay up. This is an after effect of marginal income tax rates touching a high of 97% during the rule of Indira Gandhi. A huge amount of the economy has since moved to black, where transactions happen but are never recorded. To conclude, the basic point is that food security will turn out to be a fairly expensive proposition for India. But then Sonia Gandhi believes in it and so do other parties which have voted for it. With this Congress has firmly gone back to the garibi hatao politics of Indira Gandhi. And that is not surprising given the huge influence Indira Gandhi has had on Sonia. As Tavleen Singh puts it in Durbaar “When she (i.e. Sonia) refused to become Congress president on the night Rajiv died, it was probably because she knew that if she took the job, she would be quickly exposed. In her year of semi-retirement she learned to speak Hindi well enough to read out a speech written in Roman script, and studied carefully the politics of her mother-in-law. There were rumours that she watched videos of the late prime minister Indira Gandhi so she could learn to imitate her mannerisms.” Other than imitating the mannerisms of Indira Gandhi, Sonia has also ended up imitating her politics and her economics. Now only if Lal Bahadur Shastri had lived a few years more… Vivek Kaul is a writer. He tweets @kaul_vivek

RTI to Food Security: Sonia’s five rights, India’s misery On the ground, all five legislations that Mrs. Gandhi trumpeted as achievements of the UPA have been deeply counter- productive. Dhiraj Nayyar Aug 27, 2013

he had just concluded her speech in Hindi in support of the Food Security Bill when Sonia Gandhi asked Lok Sabha speaker Meira Kumar for permission to ‘look back a little’. Switching to English, the Congress President made clear in no uncertain terms what she believes is the political USP of her party.

education for all or work for all. The problem is not the ultimate goal, but in the design that the Congress wants to use to achieve the goal. The BJP and other opposition parties should have criticised the ‘rights-based’ legislation on their implementation strategies. But they tied themselves in knots over the symbolism. On the ground, all five legislations that Mrs. Gandhi trumpeted as achievements of the UPA have been deeply counter- productive. Take the most unexceptionable one first: the Right to Information. It can be no one’s case that the functioning of Government should not be made transparent by enabling citizens to access details of the decision-making process. But if the end result of the law is that decision-making gets paralysed because the system doesn’t have safeguards to defend decisions taken in good faith, then the Act defeats its purpose.

She spoke of the five “rights” that the UPA had given the people of India over the last nine years: Information, Work, Forest Rights, Education and now Food. She wasn’t really looking back. She was looking forward to the next general election. Credit must be given where it is due. In terms of the phrasing of political rhetoric, the Congress President has won her battle. The ‘rights-based’ labelling of blatant populism has wrong-footed the opposition. The allegedly centre-right BJP ended up opposing the Food Security Bill from a CPI (M) point of view, arguing that it didn’t go far enough by not universalizing coverage. Opposition simply dissipates every time the UPA introduces a ‘right-to-something’. In principle, political parties of any persuasion find it impossible to argue against the goal of food for all, or

Needless to say, if the consequence of this act is the disappearance of files that relate to genuinely controversial decisions, then it is encouraging dishonesty of the worst kind, rather than promoting transparency. India must ponder whether the UPA ever wanted to make governance more transparent or was interested in mere tokenism. The MGNREGA, or the Right to Work, was allegedly an attempt to provide a social safety net for the poorest rural households. Plenty has been said about the leakages that have happened and the corruption that it has spawned. But what is more damaging is the consequence it has had on labour markets. By extending MGNREGA indiscriminately across India, the government has created or exCopyright © 2012 Firstpost

acerbated labour shortages in a labour-surplus country. A social safety net is counter-productive the moment it encourages people to stay at home rather than take up gainful employment. Look at how Europe has suffered because of this.

economically backward sections won’t work. It assumes that private schools across India are of the same quality as a select few in metropolitan cities. If the government was serious about public-private-partnership in school education it should have considered vouchers.

The Forests Right Acts sounds noble enough. It seeks to empower tribals and other communities which depend on forests for their livelihoods and sustenance.

Much has been written about the disastrous Food Security Act, which will do little to achieve the goal of ‘eliminating hunger and malnutrition.’ The PDS system is so leaky that most beneficiaries will be left out. Worse, they will be forced to buy cereals from the open market at higher prices because the government will now procure more rice and wheat directly from farmers, leaving fewer quantities to be traded in the open market. The agricultural market will end up more distorted than it is as present. In any case, just providing cheap rice and wheat doesn’t address the problem of malnutrition.

However, the design of the law has effectively meant that no modern industrialisation can take place in the most backward areas of the country. How can the UPA assume that tribals and forest dwellers do not have material aspirations beyond subsistence? Of course, the economy is also paying a high price for the halt on mining and other industrial activities in these areas. Universal education is a goal of every society and government in the world. The failure to educate its people is one of India’s greatest failures. But the Right to Education Act is not going to set things right. It may actually make things worse. Consider the provision in the Act which requires all private schools to pay teachers at least as much as government school teachers. It will simply put several schools in rural areas, which actually do a better job of imparting education than government schools with rampant teacher absenteeism, out of business. The government’s crude attempt to outsource its own responsibilities by making it mandatory or private schools to reserve 25 percent of seats for children from

One of Amartya Sen’s seminal contributions to the literature on famines was that starvation happens not because there isn’t enough supply of food, but because people don’t have the purchasing power to buy it. It’s a pity that both Sen and his disciples in the UPA ignore the second part of that proposition. The only sustainable way to increase the purchasing power of the poor is to find them gainful employment. That will come through sustained double-digit growth and an emphasis on manufacturing. It will never come through ‘rights-based’ legislation which if anything impede the trajectory of growth and disincentive industrialization. It’s a pity that neither the UPA nor the Opposition see any political capital in making that obvious point.

Fund outlay for food security

bound to hit fiscal deficit, says India Inc The massive outlay of funds required for rolling out the Food Security programme is bound to raise the fiscal deficit by putting an additional burden of thousands of crores on the exchequer, India Inc today said. PTI, Aug 27, 2013

ew Delhi: The massive outlay of funds required for rolling out the Food Security programme is bound to raise the fiscal deficit by putting an additional burden of thousands of crores on the exchequer, India Inc today said.

in terms of human capital will far outweigh the costs. The plan is seen as the biggest in the world with the government expected to spend about Rs 1,25,000 crore annually on supply of 62 million tonnes of rice, wheat and coarse cereals to 67 per cent of the population. Commenting on the passage of Food Security Bill, Gopalakrishnan said: “With a significant section of the population living below the poverty line, government intervention to provide nutritious food is essential”. However, he also raised concerns related to the effective implementation of such a high profile and critical social agenda of the Government.

“Such a large outlay at this point in time would definitely have a negative impact on the fiscal deficit. This needs to be managed,” CII President Kris Gopalakrishnan said. The UPA government’s ambitious food security programme, passed in the Lok Sabha yesterday, will give the country’s two-thirds population the right to five kg foodgrains every month at between Re 1 to Rs 3 per kg. “As far as the issue of additional burden is concerned, it would add to Rs 25,000 crore annually to the food subsidy, Assocham President Rana Kapoor said, adding, however, that with proper implementation the long term benefits

“The use of PDS (public distribution system) raises questions about the efficacy of the model. Targeting is another area that would need special attention,” Gopalakrishnan said. Raising similar concerns, Partner at KPMG India Rajat Wahi said: “The government should ensure that they have the checks and balances in place to ensure there is minimum leakage and wastage and severe penalties for people who abuse it”. The total food subsidy budgeted in the current fiscal is Rs 90,000 crore, of which Rs 10,000 crore is towards implementation of the Food Security Bill.

… and the good

Sonia’s food bill will bring great pain, bankruptcy… and reform The Food Security Bill will make government finances so bad and so quickly that no government can, in future, avoid serious reforms R Jagannathan Aug 27, 2013

ly high expenditures set off by her Food Security Bill will leave her with no other option. We will see costs rising, growth slowing further, serious job losses, and belt-tightening on all fronts.

It is difficult to see Sonia Gandhi as a key player in pushing reforms, but the chain of dangerous-

Politicians opt for reform when they exhaust all other options. The key prediction I would like to make is that 2014-19 will be a period of great reform and great pain, no matter who forms the next government. It may start in small doses, but the trend towards bankruptcy of the central and state governments will prompt greater reform. Without reform the state machinery will collapse over the next few years. One presumes

ometimes, it is worth looking at the bright side of things. Even as the Sonia Gandhiled UPA sinks the economy further in the short term with the passage of the Political Insecurity Bill – a.k.a. the Food Security Bill – it is worth making a few predictions about the next five to six years of the economy. These years will include not only the next nine months of this decrepit government, but possibly one or two more short-lived governments going all the way to 2018-19.

even a UPA-3 will not let that happen. We can already see change coming from the frenzied way in which Finance Minister P Chidambaram is making announcements about FDI in every possible area, apart from offering clearances for several lakh crores worth of stalled projects. The only FDI areas left untouched are possibly foreign investment in political parties. That these projects may not take off before the Congress government bows out of power is another matter, but they will start taking off once the next government is installed. We are seeing even the UPA embrace reform because, as Manmohan Singh famously reminded us, “money does not grow on trees.” In fact, it grows only in the RBI’s printing presses, but the cost of growing money there is unending inflation and falling growth – as everyone has rediscovered. This combo is what is prompting reform. Sonia Gandhi‘s NGOs, normally hyper-allergic to reform, are maintaining radio silence on this. The current account and fiscal deficits are two numbers that are prodding the government towards change. The CAD is forcing the government to open up the economy more to bring in dollars, and the fiscal deficit is pushing the government to start reducing subsidies. Over the next few years the Food Security Bill – under-funded and with costs grossly underestimated – will unleash so much subsidy bleed that reform will be the only way out. But deficits aren’t the only indicators suggesting future reforms. The truth is many, many government-owned corporations and undertakings are headed towards economic ruin without reform. Take banks. Or insurance companies. Or oil companies. Or power companies. Or Air India, BSNL and MTNL. Wherever you look, the UPA regime’s policies have reduced them to stretcher cases. According to outgoing RBI Governor D Subbarao, public sector banks will need at least Rs 90,000 crore (over and above their internally retained profits) to meet capital adequacy

norms under Basel-3 by 2018. This is without accounting for the additional capital needed to cover up their bad loans – caused largely by the UPA-induced slowdown and resultant corporate bankruptcies. Business Standard reports that public sector bank shares have fallen so hard on the market that their valuation is only half their net worth (book value). The newspaper says that the market value of 25 listed public sector banks is now Rs 2.3 lakh crore when their net worth is Rs 5.12 lakh crore. At this kind of valuation, they won’t be able to raise capital on decent terms, and the government will have to bail them out. The government simply does not have the money for it, so it can either print notes to recapitalise them – and increase the fiscal deficit, risking a rating downgrade – or dilute its stakes in these banks. Over the next five years, all soft options like dilution to 51 percent will be exhausted, and at least some banks will have to be willy-nilly privatised. Another soft option, asking the Life Insurance Corporation to subscribe to banks’ capital, was used to the hilt last year, and it could happen again this year as banks are desperate for capital. But even with its huge investible resources, the LIC cannot bail out all banks for years on end. As things stand, the LIC itself will need capital as its solvency ratio is among the lowest among life insurers. LIC’s solvency ratio, or solvency margin, is 1.54 – which means its assets are 1.54 times its liabilities to policyholders. Compare this to Bajaj Allianz’s 5.4 percent, Birla SunLife’s 2.99 and ICICI Pru’s 3.71. It’s obvious that if the LIC is asked to pump in more money into disinvestment and public sector banks, it will be slipping towards imprudence. It is a safe bet that LIC will be seeking more capital in 2014-19, and the government will again have two choices: print more money or start divesting shares in LIC itself. The story of the oil companies is too fresh to repeat: let’s be clear that all the oil marketing companies are humongous loss-makers, if not bankrupt, had it not been for the subsiCopyright © 2012 Firstpost

dies doled out by the UPA government. In two terms, the UPA government would have dished out nearly Rs 7,50,000 crore of taxpayer and investor funds to subsidise petrol, diesel, kerosene and LPG – and the losses even today amount to Rs 389 crore per day. The subsidy bill is shooting up by this amount daily despite the steady increases in diesel prices all through this year. Over the next five years, we should therefore see either full petroleum price deregulation (barring kerosene and LPG), or privatisation. Probably both. If petroleum prices are deregulated, it is difficult to see coal pricing remaining unaffected. The demand for coal will shoot through the roof as oil becomes costlier, raising prices both domestically and globally. This will call for slow deregulation of every possible energy source – from coal to gas. As this begins to happen, the companies left to suffer will be power and fertiliser – both heavily subsidised right now.

tolerance levels in the next three years. The accumulated losses of state power distribution companies currently exceed Rs 2,00,000 crore despite tariff increases in the last one year. The clean-up of the power sector done by the NDA has been completely nullified by the UPA. Food, power and fertiliser subsidies will drive both centre and states towards technical fiscal bankruptcy – forcing deregulation of urea prices and power tariffs. Higher power tariffs will make even solar power look competitive. We are now moving towards a high-cost economy, and deregulation and reform are the only ways out. Let’s also not forget bumbling public sector redink champions like Air India, BSNL and MTNL. None of them can survive without government cash and bailouts. But when government runs out of cash, what will they do? Privatisation again is the only way out. Otherwise, taxpayers will be paying for keeping comatose companies alive.

Over the next five years, India will be on sale. And it will bring serious reforms, good reforms. The procurement needs of the Food Security Bill The chain of events and bad economic managewill force more intensive cultivation using more ment will finally lead to a more efficient econfertiliser and power, which will push up central omy – but we have to go through years of pain subsidies on fertiliser and state subsidies on before that. A pity UPA blew the opportunities it power. Since food prices under the Food Secuhad over two terms. rity Bill will be frozen for three years, it means not only the food subsidy bill, but the fertiliser Sonia’s Food Bill may provide the tipping point and power subsidy bills will also bloat beyond to bankruptcy and then reform.

‘Food Security Bill is

a good opportunity to fix PDS’ While naysayers remain highly sceptical of the National Food Security Bill, economist Reetika Khera is among those who believe that the Bill has the potential to reform the PDS.

Pallavi Polanki Aug 29, 2013

ritics of the National Food Security Bill (NFSB), which was passed by the Lok Sabha after a nine-hour debate on 26 August, argue that one of its biggest flaws is that it depends on the extremely ‘leaky’ public distribution system (PDS).

However, Reetika Khera, an economist and assistant professor at the Department of Humanities and Social Sciences at the Indian Institute of Technology, Delhi, who has studied the PDS and its implementation, says the notion that PDS is ‘leaky’ is an outdated one. Khera, who in 2011 along with economist Jean Dreze conducted a survey on the state of the PDS in nine states, argues that contrary to public perception, many Indian states have made considerable progress since 2004 in plugging leakages in the PDS. While naysayers remain highly sceptical of the National Food Security Bill having any positive impact on the PDS, Khera is among those who believe that the Bill has the potential to reform the PDS. Firstpost asked Khera why and how the National Food Security Bill will fix the PDS and what

she made of the slide in the equity markets after the legislation getting the Lok Sabha nod. Excerpts from the interview: What is your assessment of the public distribution system in India today? The perception is that the PDS is beset with corruption, is inefficient and leaky. The PDS earned itself a deservedly bad reputation through the 2000s as a ‘leaky’ system. However, between 2004-5 and 2009-10, overall leakages declined by 15 percentage points to 40 per cent at the all India level, and in some states the improvement was rather impressive – 50 to 10 per cent in Chhattisgarh and 75 to 30 per cent in Odisha. The reforms that these states undertook will become compulsory under the food security bill in other states, so it can be expected that leakages in the bad states (Uttar Pradesh, Bihar, West Bengal) will also come down. These reforms include expansion of coverage, reduction in price, computerization of systems, de-privatization of shops (from private dealers to co-ops, Gram Panchayats and Self Help Groups). The Bill is a good opportunity to fix the PDS in those states where it needs fixing. What specific provisions in the Bill will make the PDS less prone to leaks and to corruption? When the PDS price is approximately Rs 6 per kg (as it is today for BPL wheat) and the market price was approximately Rs. 6-8 per kg, when I was cheated, I lost a maximum of Rs 2 per kg. But if the PDS price is Rs 2 per kg (as it will be Copyright © 2012 Firstpost

under the Act), I stand to lose Rs 6 per kg. In the latter situation, I am more likely to create a fuss, argue with the dealer etc. In fact, the difference between market price and PDS price today is between 15-20 rupees, and that creates a pressure from below in the system.

ment through the Food Corporation of India (FCI) as it enhances their choices—to sell in the private market or to FCI. Without FCI, farmers would have no option but to sell to private traders. Some argue that the bill will further strain Punjab and Haryana’s agricultural sector.

Is procurement of grains a cause for concern? Will our current grain production be able to meet the demand that will arise from the food security scheme?

Again, the facts tell a different story: procurement has become more decentralised since 2004-2005 and the combined share of nontraditional states (Andhra Pradesh, Chhattisgarh and Odisha) in paddy procurement has risen to 33-45 per cent. Others feel that if grain is provided at Rs 1-3 per kg, those farmers who produce for self-consumption will stop doing so. Chhattisgarh’s experience with decentralised procurement and an expanded PDS does not corroborate this.

The grain commitment under the National Food Security Bill is going to increase from approximately 58 million tonnes to 63 million tonnes, an increase of about five million tonnes. Increased requirement is very small. Procurement today is only 30 per cent of total production. I think the Bill will help the government draw down its ballooning stocks, which it has been finding difficult to store, and which has been adding to the economic costs of the government. Some political parties, the Samajwadi Party, for instance, have expressed concern over the impact of the scheme on farmers. The Party warned that the scheme could exacerbate farmer distress leading to more farmer suicides. Is the Bill anti-farmer? Does the scheme fall short with respect to safeguarding interests of farmers? No. Procurement operations are a form of support to farmers, and the bill is ensuring government presence in the procurement market, which gives more options to farmers. The government procures about 30 per cent of total production and only needs to continue doing so. The remaining 70 per cent of grain trade in wheat and paddy in the private market will remain unaffected even after the bill is implemented. The overall requirement of grain and the share of public procurement in total production will change only marginally as a consequence of the bill. Consequently, the claim that India will become dependent on imports and that the bill will lead to higher prices for nonbeneficiary households is baseless. Farmers have welcomed government procure-

Finally, the bill contains a provision for including millets and maize, so that there is scope for diversification of cropping patterns. That the agricultural sector needs urgent attention and reform is not in dispute, but National Food Security Bill the does not hinder that process. What would you say are some of the glaring flaws in the Bill? One big gap is the removal of all provisions for destitute (e.g. community kitchens) and also that the provisions for children are quite weak. Besides that, there is fear of over-centralization (e.g. forcing states that have a good PDS working on a ‘per household’ basis to move to a per capita approach). States should be allowed to decide within broad parameters whether they want per capita or per household. Do you agree with the analysts who blame the subsidy burden of food security scheme for the slide in the equity markets? It is hard to see the causal link between those two – the only probable reason is that the markets are not aware of the insubstantial increase in expenditure due to the food bill, and that because they have an inaccurate exaggerated cost in mind that they have created panic. I would look elsewhere for the causes behind the slide in the market (e.g., gold imports and current account deficit). Copyright © 2012 Firstpost

Food Security:

What’s so wrong about it? If you have heard it right, in Parliament and elsewhere, no party is against it in principle. Akshaya Mishra Aug 28, 2013

his is a wrong point to make in the times of the tanking rupee, low investment, flight of capital and the general climate of economic pessimism, and some economists are not going to love it at all, but what’s so wrong with the Food Security Act? Let’s ignore the furious political spin being given to it. If you have heard it right, in Parliament and elsewhere, no party is against it in principle. In fact, all want wider coverage of the poor than provided under the ordinance. Even Narendra Modi’s argument against the bill is not against its core idea per se. His issue is more about the Centre dictating terms to the states.

If one has been careful to notice, many states, including those controlled by the BJP, already have better and more expansive food security programmes. The only important addition in the ordinance is the legal guarantee it offers. Interestingly, no economist has complained about the finances of the states going to dogs because of their food security schemes. But let that rest. So it is safe to say the food security legislation is backed by political consensus. If some party claims that it was forced to back the bill because it could not be seen to be opposing a pro-poor bill, it is an exercise in hypocrisy, nothing beyond empty posturing. If you don’t have the Copyright © 2012 Firstpost

courage to speak out against what you believe is wrong, you should not be speaking at all.

middle class and the rich are the real beneficiaries most of the subsidies?

The expenditure argument put forth by many economists does not hold either. At around 1.7 percent of the GDP, India’s social sector spending is among the lowest in the world. Even China spends much higher, around 5.5 percent, and among developed countries it is even higher. The Food Security Act would push it up by a few notches, maybe to two percent or tad more. Contrary to the dominant perception around the cost implication of the bill, it won’t bleed the exchequer dry as the architecture for the major money-guzzling components of this legislation such as the PDS system, mid-day meals, ICDS already exists.

If the worry is about the disruption it would cause to the economy, then every interventionist programme is disruptive with both positive and negative consequences. NREGA, the argument goes, has distorted the wage structure in the rural areas and made agriculture expensive. Besides it has stoked inflationary tendencies in the economy. But it has also provided better purchasing power to rural households and improved their quality of life. It takes time for economies to shift to a fresh equilibrium. The Food Security Act, once implemented, would cause a similar shift. However, it need not be at the cost of growth or the wider economy as it is widely believed.

The government has been a gigantic failure in managing the economy but to pin down all its failings to the safety net schemes and pro-poor measures such as the NREGA is uncalled for. The arguments against it don’t take into account the fact that the subsidy for the rich accounts for more than 7 percent of the GDP. It comes in the form of special tax rates, exemptions, deductions, rebates, deferrals and credits. Aren’t the taxes foregone and the exemptions a burden on the economy? Why do we then grudge the poor so much – this is particularly when the

If it’s about the timing, then everyone, and his aunt, has been arguing that such schemes don’t deliver electorally, it’s only growth and the benefits thereof that count. Then what’s the fuss about? The new legislation would take long to roll-out and the chances of the Congress reaping political benefits out of it are limited. Now that the government is almost through with its pet project, it should shift focus to the other areas of the economy. There’s nothing too wrong about the Food Security Act.

Will Congress reap the benefits of the bill?

Why neither Congress nor Indian economy

may benefit from Food Security Bill Experts believe that the bill may not be a game changer for the Congress or the Indian economy. FP Staff Aug 28, 2013

ongress spokesperson Abhishek Manu Singhvi defended the landmark Food Security Bill, saying “the perfect can’t be the enemy of the good”, but plenty of questions still hung in the air over the impact the bill will have and whether it will turn out to be popular politics but poor economics.

be going through bad times, and might have to go through them for a little longer, but Singhvi said it was a mistake to blame it all on the Food Security Bill. Besides, almost every party had voted for it in the Lok Sabha, so they should not now be claming the bill was flawed. Gujral, the Akali Dal MP and Panda, the MP from Orissa, both claimed that the bill was an example of the government living beyond its means and in the process, threatening the financial well being of the country. Gujral called it “a brazen attempt to cheat the poor people of this country,” because the bill was just window dressing and would actually give BPL families less than they were already entitled to under existing schemes. But he also admitted his party did not vote against the bill because they could not take the risk of being seen as anti-poor.

Singhvi was speaking on CNN-IBN during a debate over the bill that also featured MPs BJ Panda and Naresh Gujral, author Shankkar Aiyar and professor Sandeep Shastri from Lokniti. For Singhvi, and therefore the Congress, the bill was simply an extension of the promises the party had made in its election manifesto. All parties, he argued, are naturally in the business of passing laws that are going to get it popularity and support. “We are prepared to take the hit, suffer the consequence or take the benefit of it,” Singhvi said. He also pointed out that the bill’s critics can’t have it both ways in claiming the bill is antinational and will hurt the country and yet it is a populist measure that will garner the party a groundswell of support. The country might

Panda’s party, the Biju Janata Dal, did vote against the bill said he thought it would do more harm than good. While he admitted that his state also had a food security bill that the party touted, the difference was one of degree. . “You have to balance some degree of populism with fiscal conservatism,” he said. The UPA government, he argued, had failed to find that balance with the Food Security Bill. Shankkar Aiyer, the author of Accidental India: A history of the nation’s passage through crisis and change, also opposed the bill on the grounds that the country was not financially healthy enough to absorb the expenditures it requires. While revenues have grown four times over the last nine years, he pointed out that the fiscal deficit has grown five times, borrowing has grown seven times and internal debt has Copyright © 2012 Firstpost

grown 10 times. In effect, he said, the bill was an example of the “public finance of private political ambitions”. Professor Shastri was not convinced the bill would be a political gamechanger either because it would still take months before the bill would start being implemented and so voters would not have enough time to evaluate it and therefore might be too little, too late. “Can the Food Security Bill arrest the general

sense of insecurity there is in the country?” he said. For Aiyar, it was simple – the UPA government had mismanaged the economy, with or without the bill. “The problem really is that the economy has been a train wreck much before the FSB arrived at the station,” he said. Singhvi, though, stuck to his guns. “This whole system is give and take,” he said. “[You] go to the people with a program and you come back with votes if the program is good enough.”

Why Congress won’t gain

in 2014 LS polls The food security legislation could bridge the disconnect between the Congress and the government on the one hand and the party’s top leadership and the organisation down the rungs on the other in the run-up to the polls. Akshaya Mishra Aug 27, 2013

he UPA II got its trophy bill passed. Now, let’s get straight into the important political question: Can the government come back to power for the third time riding on the Food Security Act? It is not an easy question to answer.

There’s no conclusive evidence that the MNREGA helped it win 2009. In fact, many economists have been arguing hard that it is the high growth during the period that ensured a repeat mandate for the coalition. The fact that close to 115 seats of the UPA’s 206 came from the metros and towns buttresses that argument. The Act, assuring legal guarantee for at least 100 days of work, is designed for rural areas, there’s no reason why urbanites would go ecstatic about it. Assuming that MNREGA was the game changer for the UPA, which many in the Congress believe it was, what is the guarantee that the Food

Security Act would play a similar role for it in 2014? To begin with, the former was launched in 2006. There was enough time for its rollout and the popular goodwill from it, if there was any, to consolidate in favour of the government. That is certainly not the case with the Food Security Act. With elections less than a year away, the Congress would be foolish to expect a mood of favourable positivity around it across the country. Even if there is some goodwill, it is not clear how it would translate into electoral gains. The party would not be unaware that the electoral impact of the Act would be limited. However, what it could be aiming at is providing its rank and file a potent talking point in the run-up to the polls. The food security legislation could bridge the disconnect between the party and the government on the one hand and the party’s top leadership and the organisation down the rungs on the other. One of the biggest problems for the Congress after it dumped socialism to embrace economic liberalism post 1990s has been communicating the reforms process to the members at the low rungs of the party hierarchy. This, in turn, crippled the communication between the latter and the rural voters. This reflected in the results of 2009. The BJP had a similar problem in 2004. The party is now making amends. It could be a case of good economics losing out to populist politics, but that is the last thing on the mind of the Congress now. Food security would touch an emotional chord among the rural masses and the party workers would find it easier to Copyright © 2012 Firstpost

communicate its virtues than those of economic reforms and their long-term implications. It might not yield rich electoral dividends – MNREGA had not – but there’s at least something the party and the government can talk about in unison without sounding confused. It can now claim that it never abandoned its aam-admi character or focus. There is a perceptible design to the Congress’ moves in recent times. On the back foot over charges of big ticket corruption, poor governance, mismanagement of the economy and crippling policy blunders, the party does not see much hope in the urban areas. As pre-poll surveys indicate, the party might lose a big chunk of the urban constituencies in 2014. It is seeking

redemption elsewhere. This explains party vicepresident Rahul Gandhi’s emphasis on rural and tribal areas and his reluctance to address the concerns of the urban India. Now coming back to the original question, would Food Security Act deliver the goods for the Congress and the UPA it heads? The answer is both yes and no. Political analysts generally overestimate the vote-pulling powers of such moves. They also tend to ignore the fact that given the fragmentation of the vote bases at the state level, there’s little scope of the benefits of such initiatives going exclusively to one party. The only gain for the Congress could be better internal cohesion, not much beyond that.

Land Acquisition Bill: Congress readies

to keep food bill momentum going Congress party’s spin-doctors keen to portray that party president is well, keen for passage of another populist measure with elections in mind Sanjay Singh Aug 28, 2013

EEN to portray to the country that Sonia Gandhi‘s brief visit to AIIMS on Monday night has not blunted her focus, the Congress party’s spin doctors are now busy suggesting that not only is the UPA chairperson in good health but she may also be back in Parliament on Thursday. What’s more, she may push for the passage of another promise made by her party, more specifically by her son and Congress vice-president Rahul Gandhi, the Land Acquisition Bill.

has not made her weak and that even when unwell and in hospital, she continued to have the common man and common good on top of her mind.

Congress party strategists and enthusiastic leaders seem to be guided by two things. The first is to tell anyone who will listen that the ailment

The second objective is to convey the message that after getting the food security bill passed, Sonia was in fact set to push through another

News reports in two leading dailies Times of India story (headlined “On way to AIIMS Sonia’s mind was on traffic rules”) and another one in Hindustan Times (headlined “Sonia recovers, set to unveil slew of schemes”), both quoting unnamed Congress sources, suggested as much.

populist measure, the land acquisition bill. The bill, which may offer benefits to land holding farmers and land sharks but will arguably have detrimental effects on growth, will come amid intense debate on the impact of the Food Security Bill, the sinking rupee and the economic slowdown. The Parliament session has already been extended to September 6 to ensure that the two potentially vote-winning laws — food security and land acquisition — are passed without any hiccups. The Congress would like to believe that pre-poll sops, coming in quick succession, have the potential of becoming talking points even in rural and semi-urban areas and will politically outweigh the more limited debate on the sinking rupee. This would serve the purpose of showcasing Sonia as sole benefactor of the aam admi. Notwithstanding the spin doctors’ efforts, there is concern that at a time when the UPA government is on a weak footing on various fronts ranging from corruption to rising prices to the economy, and while the party remains organizationally ill-prepared for elections, an all mighty Congress president could appear weak. Needless to say, had Parliament not been in session, and had it not been for the urgency to save time due to which she emerged from a front gate, there would have been no photographs of her missing a step and looking for a helping hand.

cies broke the news. A statement issued by party general secretary Janardan Dwivedi had then urged the media not to speculate and to respect the family’s privacy. “This is a personal matter that pertains to her health and medical treatment. Her family requests that her privacy be respected,” Dwivedi had said. It was in this backdrop that Narendra Modi’s tweet “a wheelchair or a stretcher should have been used” can hardly be viewed as innocent. Congress leaders are expectedly furious about the unsolicited advice from their most bitter political rival. And while several BJP leaders found Modi’s tweet amusing, something that adds to Modi’s rather unconventional style of public discourse, others said he should not have commented on the issue. The BJP at this moment is largely cooperating with the UPA in the passage of the bills. On Monday when Sonia Gandhi read from a written speech on food security as against the rules of procedure and conduct of business, the BJP did not raise objections. When Sonia finished speaking, a member raised this issue only to be told by Speaker Meira Kumar that a prior permission to read from a prepared speech was sought and had been given under rule 352. The rule was formulated with the rationale that a leader should speak from his or her own intellect than from borrowed or motivated insight.

A senior BJP leader told Firstpost, “We know that these bills will have disastrous effects on The rush to assuage any fear about her health our economy but then compulsions of electoral only serve to underline that Sonia has the repolitics is such that you can’t be seen to be opsponsibility of leading the Congress campaign posing any populist move, be it caste reservain five states in two month’ time, and then in the tion or food security or land acquisition. That’s soon-to-follow Parliamentary elections. a reality we have to live with particularly when we are just about to approach the elections.” Until now, any news on Sonia and Rahul Gandhi, their whereabouts and so on, have always During the four-and-a-half years of UPA 2, Sobeen closely guarded secrets. Her treatment nia Gandhi has spoken only once during regular abroad is still shrouded in mystery. In August business of Parliament, on Monday on the food 2011, the Congress party issued a brief statesecurity bill. Now, a re-charged party hopes to ment without disclosing her ailment and locaback that up with the other priority subject, the tion of treatment after some foreign news agen- land acquisition bill.

Scan or click to download our Android, iPad/ iPhone apps

iPad

Android

iPhone