PART 5
Tejinder Narang
Sonia
Gandhi with her five minute of parliamentary intervention on 27th Aug 12013 in
Lok Sabha overruled the entire political and economic establishment of India,
while MPs watched in silence her firm articulation for supporting Food Security Bill (FSB). The entire cacophony
of last five years on FSB was nullified in less than a day when she stressed “we
have no option but have to manage to do it”. She proved her emotional
mettle for the poor. Others proved their incompetence –economic consequences
notwithstanding. None effectively responded.
Rating
agencies like S&P indicated their intent to downgrade India’s rating. Eminent
economist approximates annual cost to exchequer of Rs 3 lakh crores ($46
billion) vs official estimates of Rs.1.25 lakh crores ($20 billion) with Indian
GDP of 1.5 trillion. There is a definite apprehension of back channel
understanding of political collusion amongst all parties for reasons mentioned
at the end of this blog.
Though Government is to be blamed for poor governance, Courts have also acted as blockers of reforms by indulging into judicial activism and CAG raised its own pitch of righteousness which de-incentivized proactive policy decisions.
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Though Government is to be blamed for poor governance, Courts have also acted as blockers of reforms by indulging into judicial activism and CAG raised its own pitch of righteousness which de-incentivized proactive policy decisions.
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On 4th
September 2013, two eminent economists Surjit Bhalla ( hereafter Bhalla) and
Ashok Gulati (hereafter Gulati), Chairman CACP (Commission on Agricultural
Costs and Prices of Government of India) made combo presentations of identical
nature literally in Financial Express (page 6-7), bemoaning financial rot
and havoc of the Food Security Bill(FSB)
Ref (http://epaper.financialexpress.com/c/1585352 and http://epaper.financialexpress.com/c/1585375).
BHALLA’S APPROACH
Bhalla
has amplified his earlier calculations on 3% plus burden on GDP (which is
plunging below 4%) by detailing losses of FSB and collateral wastages in hoarding/leakages
of grains on eligible and non-eligible beneficiaries or Rs 3 lakh crores plus ($46 billion) vs official estimates of Rs.1.25
lakh crores ($20 billion) with Indian GDP of 1.5 trillion in 2012-13. He assumes that if one has to reach 67% population in reality,
then the bucket will have to have grains much more than that, i.e., what is
needed for 67% population PLUS the
leaked amount which is about 45-50% higher-- than what Government has presumed.
That is how he gets this humungous estimate.
Minimum Support Price (MSP) is
raised by 8-10% annually by Government of India, while release price of Rs
3-2-1 /per kg to targeted beneficiary of Rice/wheat/coarse cereal like
corn is fixed for three years. Expenses calculated by Bhalla will ascend by
8-10% annually in shrinking GDP.
GULATI’S VIEW
Gulati
is endorsing the same in a simplified and quantitative manner. He says that poor man is shown the
compassionate carrot of grains of 5kg/month while actual delivery is 2.5 kg.
Per capita requirement in India is 10.7 kg/month. Balance 8.2 kg he has to buy
from open market at much higher prices with cereal inflation of 17-18%. CACP numbers don't adjust for leakages. It highlights additional
investments of Rs 1, 10, 000 crores or $17 billion needed to stabilize agro-production,
create storage infrastructure at state/district level; and railways to carry
the grain in time and quickly, and some expenses for modernization of PDS, and
setting up of food commissions and grievances cells, etc.
Bhalla
and Gulati are both right. It is very rare these days that
someone speaks with bare facts.
STATE OF WAREHOUSING
How
can Government continue to blindly support open ended procurement- when storage
capacity does not exist and leakages galore. New Chairman of FCI has stated “Wheat stocks are
stored in cover and plinth (CAP), which is a proven and time-tested method” (Financial Express
on 21 st Aug 2013 http://epaper.financialexpress.com/c/1585710). To call CAP storage—sacks covered with plastic sheets a
“proven and time tested” demeans basic intelligence of any common man. About 11
million tons of new crop wheat is threatened by destructions in CAP storages by
rain and weather in Punjab and Haryana (Business Line 14th July 2013.) http://www.thehindubusinessline.com/industry-and-economy/agri-biz/huge-wheat-stocks-at-risk-in-punjab-haryana/article4914943.ece
FCI
website captures 38million tons of storage capacity including that of States
warehouses, including 3.5 million tons of CAP. Officially FCI/State agencies have
been carrying maximum 75-80 million tons of grains for last two years. An
erroneous picture indeed it is!!
PAPER
ENTITLEMENT
FSB is a doctrine of “paper
entitlements” without committed obligation in the real sense, except for the
Government to perform on best efforts basis. It does not empower people for
food—it simply raises their expectation from the Government to deliver food. “Entitlement”
does not mean commitment of “delivery or availability” to the beneficiary. It
merely ensures a legal right to a “hungry”
person for enforcement of his claim in a Magisterial Court, after following an
elaborate procedure of lodging the complaint/ enquiry against Food and Civil
supplies unit through State Food Commission.
It may then be followed up at High court and Supreme Court for final
adjudication. Who incurs the cost of litigation is ambiguous. Are we promoting
intent to litigate on 5kg of grains by a hungry person –theory of absurdity?
PRIVATE SECTOR
CROWDED OUT
Contrary to the market reforms initiated in
1990-91, FSB restores the system of socialistic economy of 1960-70’s in the
grain chain. Government monopoly of grain trade extends from 30%-35% as of now
to potentially 95% under open procurement system (keeping 5% for seed). Private
sector is crowded out all the more. The world is witness to Thai Government
intervention and mismanagement of paddy/rice policy. India is drifting to similar
state of affairs.
POSTS FOR RETIRED
BUREAUCRATS
It burdens the state for setting up additional/doubling
the official machinery with financial implications and creates additional jobs
for retired bureaucrats for warming the chairs.
ECONOMY BEGGERED
Three lakhs crore of yearly burden inclusive of Rs.68000
crores of leakages is an annual scam at the cost of taxpayers. Why the Courts
are silent on this?? None cares for catastrophic consequences while Government
becomes immune to any accountability with approval of Parliament. Otherwise CBI
hounds for a loss one lakh rupee. Is there no SIT (Special Investigation Team)
of Supreme Court for those who have depressed the entire economic growth of the
country and made it a beggar of FDI/FII and rupee is becoming worthless
currency with each passing day-- depreciated by 20% in three months from May to
Aug 2013? Will the people not crave for savings in Gold whose local value is
jumping up disproportionate to metal’s international value? This is yet another
sign of economic sickness.
FOOD VS FUEL SUBSIDY AND DEFENSE
SPENDING
After
“carrot” comes the “stick” of fuel prices hike to adjust the subsidy bill.
Massive defence outlay of billions of dollars remains untouched in the name of
“necessity” for National Security. Why
defence spending cannot be reviewed and pruned?? There
is no reprieve from squeezing the sweat and blood of the poor man in the name of
illusive reality of 5kg of cereals.
POLITICAL COLLUSION
Congress
and opposition (including BJP) have incredibly colluded in the passage of FSB
by late night sittings in lower house and upper house to demonstrate that
parliament is functioning. In the open
debate entire opposition expressed serious reservations on the bill. But voting was done amicably to pass the bill
at the cost of gravest threat to the National economy. For last five
years, at the hint of any scam or financial controversy—be it Vodfone tax case,
2G, Coalgate , CWG etc opposition disrupted the parliament to have its say. Entire
opposition openly acknowledged that FSB is recurring liability of unsustainable
financial nature, especially at this critical juncture of economic crisis when
fiscal and current account deficits are leaping to 5% of GDP and need to be
checked. Yet, ruling elite and opposition
worked in perfect harmony for perversity of Indian economy. This is ripping and
robbing the Nation for winning brownies point for electoral support. Arun
Jaitley, BJP leader in his speech in Rajya Sabha made a mere mumbling mention “what
was the need to issue the Ordinance for FSB, when they (BJP) was ready for
(passing) it any way”. Chhattisgarh
model of BJP is working well was an additional endorsement. BJP has in fact worked against Narendra Modi
who wanted a fresh debate on FSB amongst all states.
COMPULSION OF
COLLUSION
a. The discreet agenda
of mutual cooperation amongst all political parties appears to have been
prompted by recent Supreme Court’s ruling that once a politician is convicted
in any criminal case by any (lower) Indian court, he stands debarred from
elections. Politicians view that their “right to appeal” is diminished.
Supreme Court is to be approached afresh to review of their ruling by the
Government. UPA and Opposition need to cooperate.
b. Secondly no
political party intends to furnish details of its financial accounts under RTI
(Right To information Act) including left parties. Amendment to RTI act is
another “hand in glove” approach.
c. CBI cases of
Samajwadi Party (SP) , Bahujan Samaj Party (BSP) and DMK are manipulated by UPA.This is in the public domain.
d. There could be perhaps
numerous other cases of backdoor understanding of political patronage to the detriment
of financial security of the country.
Blaming Bernanke of
US Federal Reserve for tapering the QE for sharp depreciation of rupee (about
20%) is the only excuse given by the PM. No attempt is being made to push
export to earn FX when about 20 million tons of excess wheat is languishing
with Government. PM did mention about good Monsoon as a hope of recovery—an act
of nature. Government has nothing else to offer. Speech writers of PM have also
lost sense of optimism.
All recent economic
reforms stand deformed with psyche of socialism, defying the economic rationale
in the name of poverty. Though Government is to be blamed for poor governance,
Courts have also acted as blockers of reforms by indulging into judicial
activism and CAG raised its own pitch of righteousness which de-incentivized
proactive policy decisions.
Pray that some one hears this call of rescue
in wilderness.
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Earlier blogs on the progressive
developments of Food security Bill can be accessed from the following links,
published earlier.
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