Food Security : On Verge of Collapse

The time has come to look for an alternative to the present     buffer-stocking system of food security. The present system is not merely wasteful, expensive and therefore fiscally stressful, but terminally ill – the government had to recently slap a 50 per cent import duty on the ground that otherwise the food subsidy bill would go through the roof. In other words, unless the price of food was jacked up in this country of 37 crore abysmally poor people, their food security would be jeopardised. If this sounds perverse, the problem is not lack of logical consistency on the government’s part. The Food Corporation of India’s so-called economic cost is more than 50 per cent higher than the landed cost of imported wheat, so that, at least in the southern region, it is far cheaper to import wheat than to lift it from the FCI’s bulging stocks. But any reduction in offtake would mean addition to the FCI’s carrying costs and, therefore, to the food subsidy bill.

Finance minister Yashwant Sinha is once again under pressure from the BJP’s allies in the National Democratic Alliance to live up to his reputation as ‘roll-back’ Sinha. In his budget, Sinha has proposed to reduce food and fertiliser subsidies by Rs 2,892 crore. He proposes to raise the central issue price of foodgrain for all classes of consumers. State governments like those of Tamil Nadu and Andhra Pradesh, ruled by the BJP’s allies, besides opposition-run governments in Kerala and West Bengal, operate extensive public distribution systems. The budget proposal to hike both the issue price and the per capita quantity of food from the PDS creates a huge problem for these governments. They would have to either reduce the consumption base of their PDS or bear hefty additional subsidy bills. And after creating so much consternation among the BJP’s allies, the finance minister’s proposed subsidy cuts would still leave Rs 22,800 crore of subsidies on account of food and fertiliser. Clearly, tinkering with issue prices while keeping the present system of food security intact will not ease the fiscal problem even while setting off political storms.