Food security, a political weapon

The UPA’s lurch towards populism will entail persistent inflation, and ensure that the food sector remains entrapped in a subsidized low-level equilibrium

First Published: Thu, Jun 13 2013. 06 48 PM IST

 

 

 

The National Food Security Bill (NFSB) appears to have become the last populist refuge of the United Progressive Alliance (UPA) government. Tainted by controversies and maimed by internal contradictions, the UPA was tempted to issue a “right to food” ordinance, which was put on hold by the cabinet on Thursday, in an effort to win back the popular mandate in the next general election, less than a year away from now.

 

Nothing else explains the sudden urgency of the top leadership of the coalition, including UPA chairperson Sonia Gandhi and Prime Minister Manmohan Singh, in launching this crucial legislation, steam-rolling opposition from within and without the ruling coalition. Although the proponents of the Bill—which will now be taken up in a special Parliament session or in an early monsoon session—will project this as a victory of the have-nots over elitist concerns raised by the haves, nothing could be farther from the truth.

 

Over the past few months, farmer bodies across India, ranging from the Shetkari Sanghatana in Maharashtra to the Bharatiya Kisan Union in Punjab have emerged as the most vocal critics of NFSB. Farmers realize that the Bill will only worsen the mess Indian agriculture has become. They rightly fear that it will distort price signals in commodity markets and crimp farm margins by virtually nationalizing the food sector. Further, the exclusive focus of the Bill on cereals will be at the expense of fruits, vegetables and livestock, worsening soil degradation and reversing the recent strides towards high-value farming. Contrary to the myths propounded by proponents of NFSB, small farmers will be hurt more than others.

 

Indian food policy has been pursuing the conflicting goals of keeping retail foodgrain prices low to protect consumers and of keeping procurement prices high to incentivize farmers. Apart from a leaky distribution system, such a policy is self-defeating since the massive subsidy bill it entails stokes inflation. India’s fiscal trilemma of keeping farm prices high, retail prices low and overall inflation under control can only be solved if the food sector is radically reformed and public spending is directed towards investments rather than subsidies. This will boost farm growth, raising farm productivity and incomes without raising inflation. 

 

NFSB will take India in the opposite direction. Food subsidies have already ballooned during the term of the UPA government and will rise further once the food Bill is implemented. Food security will raise real incomes of farmhands and likely cause labour shortages, driving up labour costs for farmers. To compensate farmers adequately, procurement prices have to be raised generously, adding another burden on the fisc. Whether the government will be in a position to keep raising procurement prices is an open question, and farmers are canny enough to realize that the axe of fiscal discipline could finally fall on them. Even without taking into account the progressive increases in procurement prices, the food Bill will cost roughly Rs2 trillion annually, according to estimates by the chairman of the committee for agricultural costs and prices, Ashok Gulati.

 

The enormous costs and risks associated with the food Bill could well have been justified if it actually had a chance of delivering on its tall promises of removing hunger and malnutrition. Hunger affects barely 1% of India, according to the latest National Sample Survey and requires targeted interventions rather than a universal food scheme. And as this newspaper has pointed out earlier, the food Bill won’t improve nutritional outcomes. The focus on adults rather than the very young, and the emphasis on cereals and aggregate calories rather on nutrient-rich foods will only harm the fight against malnutrition. 

 

The public spending involved in the food Bill could easily have financed a rural revival. Investing in rural infrastructure would have 

 

raised rural productivity and driven sustained growth in farm incomes, without stoking inflation. Such a strategy would have removed poverty much faster than the schemes born out of the misguided efforts of the right to food campaign.

 

The UPA’s lurch towards populism will entail persistent inflation, and ensure that the food sector remains entrapped in a subsidized low-level equilibrium forever. 

 

Is NFSB the right solution to providing food security? Tell us at views@livemint.com 

 

 

Source: http://www.livemint.com/Opinion/7UcIRIJHMzC8rIomGec67J/Food-security-a-political-weapon.html