Sunday, March 31, 2013

Food security bill: Corruption by another name

On the same day as the central cabinet approved the food security bill two weeks ago, Delhi’s chief minister, Sheila Dixit, stood up courageously to defend the rising price of electric power in the Delhi assembly. She explained patiently to the legislators that you cannot have something for nothing--electricity costs money and those who use it should pay for it. In the end she succeeded. By not raising the power subsidy, Delhi’s chief minister was able to increase investment for roads, public transport, education and health care in Delhi state’s annual budget.

The contrast between the two actions of the centre and the Delhi state could not have been more dramatic. Sheila Dixit’s actions will lead to productive jobs, better skills and long term prosperity of the people. The food security bill, on the other hand, will condemn India’s poor to perpetual poverty.

The proposed food security law plans to distribute grain to two thirds of India’s population at a 90% subsidy, which will cost the nation over Rs 100,000 crores.  Giving people virtually free food will keep them dependent on a ‘mai baap party’, trapping them into a permanent vote bank. It is a brilliant strategy of the Congress Party at the centre—both the voters and the party will thus have a vested interest in keeping people poor and dependent.

If the same Rs 100,000 crores were to be spent in providing public goods--roads, schools, power, and law and order--it would opportunities. It would encourage entrepreneurs to start businesses, which would create sustainable jobs and raise the state’s tax revenues. These taxes, in turn, would make it possible to invest in more public goods. Thus, a virtuous circle would be created and lift the society’s standard of living. But the Congress Party would lose out for people would move out of poverty and the party would lose its vote bank. The party needs for people to remain poor.

There are other serious risks associated with the food security bill. The fact is India just cannot afford this colossal spending. The latest budget of the central government shows how vulnerable are the nation’s finances. This new spending will increase India’s fiscal deficit and could well lead to a downgrade of the country’s sovereign rating to junk status. A downgrade of the rating will raise the cost of money available to India from the world market and also discourage foreign investment at a time when it is much needed.
Moreover, past experience shows that less than half the food in such programs reaches the intended beneficiaries. Hence, half of the 50 million tonnes of grain are likely to get diverted to the black market by this bill, and this could result in another scam which this scam tainted government cannot afford.

Worse, this bill will tempt people to lie about their financial status and weaken public morality even further. For example, 83% of Karnataka’s people call themselves poor based on BPL cards issued. But government records show that less than a quarter of the people in the state are, in fact, poor. West Bengal also discovered last year that forty percent of its BPL cards were fake. In Uttar Pradesh, the situation is much worse. A law that turns people into liars would have horrified our founding fathers. They had a profoundly moral vision of the Indian republic--so much so that they placed the wheel of dharma, the Ashok Chakra, in the nation’s flag. When a government forces its people to become dishonest, it wounds public dharma and undermines the trust between the rulers and the ruled.

When we were young our parents taught us the importance of honest and  hard work. We learned that if you did not work you did not eat. But when the government starts giving people something for nothing, it weakens the work ethic. It undermines the ethic of responsibility and dharma taught to us by our parents. When the government starts giving away to people subsidized food, diesel, cooking gas, NREGA jobs, it sends the wrong message. It teaches them that they can get something without working for it. This is another form of adharma.
The reforms of 1991 were based on an unwritten social contract which created a new basis of trust. The contract was that the government would stop running businesses and focus instead on governance and public goods. Entrepreneurs and markets would do a more efficient job of managing businesses and this would lift the economy’s growth rate. This has, indeed, been happening. As a result of high growth, almost two hundred million people have risen out of poverty and another two hundred million have joined the middle class in the past two decades.

 Thus, the private sector has done its job. But the government has not lived to its side of the bargain. It has done a very poor job of providing infrastructure. Instead of investing in roads, electricity, and other public goods, it has focused on giving ‘bribes for votes’ to the people. These bribes are subsidies on food, electric power, diesel, cooking gas, NREGA jobs etc. Unlike investment, subsidies do not result in production. When spending is not backed by production, it leads to inflation. Thus, ‘bribes for votes’ policy has contributed to inflation in our county

 Giving away virtually free food and power, waiving loans to farmers, creating ‘make work’ jobs, as the UPA government has been doing, has undermined the social contract. Markets meanwhile have helped to accelerate social change and re-shaped public character. A new class of citizens has risen who are now demanding a corruption-free state. They are angry over poor governance and corruption, and this has widened the gap between people’s aspirations and government’s performance.

The UPA’s campaign managers for the 2014 elections may think that India’s vast majority is untouched by the new dharma, but the recent protests against corruption and violence against women have shown otherwise. This cynical food security bill, instead of winning votes, may thus only add to the woes of the UPA, which will discover to its peril in 2014 that voters will think of the food security bill as amounting to corruption by a different name.


HK Joshi said...

India is having so many corrupted people. India really requires a Hitler for once.

Shashikant Nishant Sharma said...

India has become the land of corruption in recent years. Good write up.

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Atul said...

Dear Mr Das,
I was listening to you on NDTV on the discussions for India's Food security bill. With due respect. I was shocked on your take.
I was touring in Melbourne Australia(2005) with a very senior former Minister from Punjab government and asked his opinion on how long India will take to come to the level of Melbourne? Pat come the candid reply, never!!! I was perplexed with the response and he clarified, we have not been able to provide food and water to the majority of the population, how can we aim to become or even come close to becoming Melbourne.
After living in one of the poorest regions of Madhya Pradesh in mining industry, I could understand the full meaning of the politician's statement, I am sorry you cannot relate to sitting in the five star culture of corporate world and book writing. I am in no way a communist in thoughts and am very much supporter of free market economy with a humane angle.
Apart from the social side this food security bill has, it is a good market which will eventually be created. It is the human nature, to look for food, once this is achieved the clothes are being aimed at and then house and then it goes on ....... Let us give the sense of security to our over 1 billion strong population that the food is assured, go out and achieve the other things for which you have potential. It may be Health, sports, arts, business, charity and improve your and your family lives. Humans have unlimited potential, it is the scare of feeding themselves and their families which put them in back foot. Take away this scare and see what this race can achieve for themselves and for the nation.
Once the above is achieved the society as a whole improves. There will be better schools, hospitals, and your favourite Malls will come in a more evolutionary and gradual way, rather than Businesses and politicians putting in their ill-gotten wealth into these things. From businessman of your stature, you be the one who should have pointed the huge markets this would create. It seems you are leaving this important aspect of market for a merchant banker of Goldman Sachs to consider, project to their company, make billions and in turn gets millions in commissions. He will surely be thankful to you sir.
We have enough of politicians in our country to fight on all the issues, trust me we don’t need you. Only way you can contribute is, stick to your basics. Turn around adversity into opportunity and guide people so that they can benefit from the changes happening around. This creates jobs, individuals and Nations flourish.
There will be problems in implementing this right to food, then don’t we as humans have problem in adapting to any change that come. A tax payer will be thinking of more taxes coming their way, an imperialist will be thinking how everyone is eating food without chanting their name and the corporate world may be thinking that the labour will not come to their factories once they have food in their house. This is a myopic vision and will not do good to our society. Let us appeal to everyone who lives a life of purpose to make this food bill happen. It is a chance for everyone to participate in charity and get the solace of leading a good life.
I agree with your apprehension of fractured PDS and other scam waiting to happen when so much of money is involved. It is a humble request of the nation to come up with the solution and present it to the government. You hold a position where you are being listened to. It is your chance to participate in this landmark bill, which is more important than all the fundamental rights put together, as this, gives right to the child well before she/he is born.
Atul Seth

Disclaimer:- I do not hold any biases against Mr Das and writing this note do not change my view that Mr. Das is a knowledgeable writer and a successful businessman.

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