Can the food security law change Congress’ electoral fortune?
The UPA government’s bid to use the Food Security Law to create positive impact for Congress in the forthcoming general elections may not happen.
On the contrary, the proposed law may create more problems for the party.
There are two aspects to the food security law. First its implementation and second its fiscal implications.
Let’s first talk about its implementation. No way, the government would be able to identify the beneficiaries in the next six months for having a positive impact before elections. It is not humanly possible.
Around 75% of rural Indians have to be provided the benefit under the proposed law, as compared to about 6.5 crore families covered under the Public Distribution Scheme, which is about 30% of the rural population.
Adding another 45% without a clear methodology for identification would be a daunting task which the slow Indian administrative system cannot perform. An issue raised by Gujarat chief minister Narendra Modi in his letter to Prime Minister Manmohan Singh this week.
Another major problem with the implementation would be setting up enough fair price shops at the village level to ensure that every beneficiary get his or her quota of food grains on time. The present fair price shops would not be able to deliver.
Most of the state government, except Chhattisgarh, Madhya Pradesh and Gujarat, has not expanded their network of the fair price shops to meet the new demand.
A big challenge the Central government would face will be to ensure that the food grains in such huge quantity reaches rural fair price shops on time. The Food Corporation of India does not have wherewithal to store such a huge quantity of food grains.
And there are not many private silos available with FCI to store the food-grains. How the last mile connectivity will happen is still a question the Food ministry needs to answer.
Now, let’s discuss how the food security law can play havoc with fiscal discipline, key for bringing economy back on track.
If the law is implemented by January, the food subsidy bill will increase to Rs 1,30,000 crore as prices of food grains available under the PDS will have to be scaled down to Rs 3, Rs 2 and Rs 1 for rice, wheat and coarse grains respectively.
From 2014-15, the annual food subsidy would cross over Rs two lakh crore, the biggest bleeder for the Indian economy. High fiscal deficit shows the state of economy in bad light for the foreign investors.
What worries most economists is the inability of the government to ensure that all beneficiaries receive their allocated quota of five kilogram of food grains every month. Instead, they fear that the food would get diverted to the black market.
As per Planning Commission study of 2005 only 54% of the beneficiaries get their quota of ration under the PDS system. As food grain allocation will increase by 60-70% under the law, the diversion would also be higher.
It would tantamount to government subsidizing the food grains to increase profits of the black market, which will then virtually control the food chain jacking up prices for people who opt out of the PDS system.
In that scenario, the food security law will prove to be double whammy for the UPA. It will show the government in bad light among voters and business leaders will also lose hope of economic revival. A move in hurry mostly boomerangs.