COMMENTS

The government spends Rs 3.65 to deliver Re 1 of food while 57% of subsidized foodgrains do not reach the intended beneficiaries. These startling findings by the Independent Evaluation Office that point to massive corruption and pilferages in the existing public distribution system.

The agency's initial findings reveals that close to 36% of foodgrains are siphoned off in the supply chain, raising a serious question mark over effective implementation of UPA government's "game-changer" food security scheme which heavily depend on existing PDS network.

- - - Chhibber (Director General of IEO) found that the incentive structure of social sector schemes, including PDS, needs to be looked at as it is ill-thought-out.

He has said in the existing PDS, it has been seen that as the ration shop owners fail to make enough money by selling grains to beneficiaries they are tempted to sell outside.

For the full report in the ToI, click here.

And, following are some excerpts from ToI editorial (for the full text, click here):

Aggregate central subsidies in 2012-13 on items as varied as food and bank loans to farmers totaled to Rs 2.57 trillion. After adding to this subsidies bill the spending on many of the Manmohan Singh government`s pet projects such as those concerning education and sanitation, final tally runs into more than another trillion rupees. Despite this scale of spending there has been little effort to measure its impact. It's only recently that an attempt has been made to measure the effectiveness of all this immoderate outlay by establishing an Independent Evaluation Office (IEO).

- - -There is however hope that the advent of IEO would be a first step towards systematic reform of the government's gargantuan and profligate expenditure programme.

IEO's studies also serve as a timely pointer to a root cause of some of the uncertainty which chokes potential investment. Following the financial crisis in 2008, government spending has expanded rapidly even as the economy has slowed down. Resultant pressure on tax administration to raise more and more revenue has led to a rise in litigation and also to negative perceptions about India's business climate. IEO's study hints at the price India's economy has paid for its government's unaccountable spending spree.

Very telling, is all one needs to add.

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@murali - Chill, nothing personal here that should be construed as against you or any body else. You are not the only 'Free Economy' campaigner and same is true for any socialism fan. I am supporter of neither. I am against viewing things from ideological lenses. I am for all those policies which are good for common people and the nation.

Clarity, yes you are right clarity is needed. Wish the authors that you had quoted to buttress your argument against FSB, had presented more clarity to the readers. Since it is viewed from our prejudicial blinders, balanced view is hardly expected from all the authors that you listed against FSB.

The mention of BDA/DDA is in the context of Govt largesse that has only benefited very few and look around the BDA colonies reveals who benefited from this. Willingly or unwillingly we have allowed this regime to continue and have supported its conversion into a "Mecca of Corruption" in Bangalore. Nowhere I have attributed any personal claims against you with owning or personally benefiting from this govt largesse. I was only pointing to the intriguing silence on this during the discussion for removing govt's role in such entitlements. Do Bangalore still needs BDA?

Regarding NaMo's special consideration for TATA, isn't odd that again a state govt has to provide special provisions for certain special breaks, acquiring of land etc. Isn't that itself is the testimony that a select few is enjoying the fruits of govt largesse? Like you keep stressing, isn't time for all govts including NaMo to create such environment, where even ordinary folks like you or me can go and should be able to get the same incentives. Time to stop this special treatment to very few. Industry should be allowed to put up their operations without any unnecessary govt's help. Consideration should be universal not selective like given to Nano.

Lets come back to the FSB discussion. Here is the official version of the Food Security Bill - 2013.

In all your quotes 3 aspects come to the fore -

• Acceptance that we should help the needy,
• PDS is broken, needy are not benefited
• FSB will make the poor more lethargic, in Indian slang "Kamchor"

Barring the first, other 2 are contradictory to each other. I do agree that PDS currently in most parts is broken, but doesn't mean there shouldn't be an attempt to correct that. If FSB could be a vehicle to that major re-haul, why not? Even you agree that the new attempts to use AADHAR like instruments to target via Direct Cash Transfer for the subsidies should be given a chance. You will be amazed that Section VII - Reforms in Public Distribution System, calls for exactly that.

In Chapter VII, the Bill states that central and state governments “shall endeavour to progressively undertake” various PDS reforms, including: doorstep delivery of foodgrains; ICT applications and end-to-end computerisation; leveraging “aadhaar” (UID) for unique identification of entitled beneficiaries; full transparency of records; preference to public institutions or bodies in licensing of fair price shops; management of fair price shops by women or their collectives; diversification of commodities distributed under the PDS; full transparency of records; and “introducing schemes such as cash transfer, food coupons or other schemes to the targeted beneficiaries in lieu of their foodgrain entitlements” as prescribed by the central government.

- See more at: http://tehelka.com/exclusive-summary-of-the-national-food-security-bill-2013/#sthash.xe9a35kW.dpuf

I am sure you will also do not want to junk something which could in long run can get rid of various inefficiencies in welfare delivery system, unless like many you are against the idea of AADHAR as tool for unique identification and its use in targeting beneficiaries of govt's help.

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You are not the only 'Free Economy' campaigner and same is true for any socialism fan. I am supporter of neither.

Socialism is not practical, and therefore does not exist in its true form. And, I am totally against pseudo-Socialism which is passed off as Socialism.

Wish the authors that you had quoted to buttress your argument against FSB, had presented more clarity to the readers.

I find a lot more clarity in their arguments than those forwarded by the likes of Prof Amartya Sen, and that's why I back them.

Since it is viewed from our prejudicial blinders, balanced view is hardly expected from all the authors that you listed against FSB.

Please talk for yourself; I have no prejudicial blinders. And, I don't believe in imposing my views. If somebody does not agree, I back out saying ' I rest my case'.

BDA was supposed to address the housing needs of the citizens, and they were generally supposed to follow a certain criterion for allocation of the plots. And, I am certain the criterion would have been quite fair too, immaterial of the fact that people like me could never have become eligible even after achieving grand-father status. That it got corrupted is another matter. But then, which of the government organisations is not corrupted? Should we then tolerate that? Absolutely not.

I am familiar with the electrical industry; so, I am shouting from rooftops for reforms in that sector. Seeing the plight of my workers (when I was running my industry), I developed an interest in public bus transport services, and again I am shouting from rooftops for reforms there. Likewise, as the Secretary of the RWA in Domlur 2nd stage, when I was living there, and later as the President of the apartment owners' association where I am staying now, I got a clear understanding of the water supply scenario, and I have again been shouting from rooftops for reforms there too. Similarly with Apartment Ownership Act, policing, traffic issues, etc, etc. Now, if you feel strongly about BDA issues, start a blog, bring out the injustices, make representations, and campaign for reforms, quite like Sanjeev, you and others have done in the case of Commuter Rail. Instead, if you just keep airing some vague innuendo's, how do you expect anyone to even bother?

where even ordinary folks like you or me can go and should be able to get the same incentives. Time to stop this special treatment to very few. Industry should be allowed to put up their operations without any unnecessary govt's help. Consideration should be universal not selective like given to Nano.

What makes you say this? Have you even tried? Let me tell you my experience - I submitted a credible project report, way back in 1977, and got the KIADB to allot me a 1 acre plot in Whitefiled area, and I set up my industry, again with Rs 9 lakhs (a princely sum then) loan from KSFC. At that time, I was new to Bangalore, I didn't have any uncles to back me, and as such, the sanctions were based purely on merit. I never had to pay any bribes (only mamools - for the difference, click here). Later too, when I wanted to expand, both KIADB and KSFC were most helpful, going purely by my track record. You may say that was then, and things are different today. On the contrary, progressive governments are always for genuine entrepreneyrship, and if you can establish your credibility, they will lay out the red carpet for you - even now.

You'll then ask why did I pull out of industry? It is more or less explained here. The government wasn't progressive looking at the macro level, and it began to impact me badly (besides, I wasn't dependent on it totally, either).

unless like many you are against the idea of AADHAR

I have largely favoured Aadhaar. Yes, I have expressed concern over possible misuses. But I now tend to believe that the benefits far outweigh the negatives. But, unfortunately, the government, instead of strengthening the scheme, is clearly seen to be back-pedalling on it, since they see greater the voter appeal in schemes like FSB. And, all that is in fine-print in the bill is like what is in the fine-print in the case of BDA allocation guidelines too - it will remain just there, going again by PDS's track record of so many years, where even a Medha Patkar has more or less given up on it.

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Simultaneously, following are the excerpts from an essay by the Congress minister, Mr Shashi Tharoor (the full text may be accessed here).

Self-reliance” guaranteed both political freedom and freedom from economic exploitation. The result was that for most of the first five decades after independence, India, despite the best of intentions, pursued an economic policy of subsidizing unproductivity, regulating stagnation, and redistributing poverty. We called this socialism.

Indian-style socialism was a compound of nationalism and idealism. It embodied the conviction that goods and services vital to Indians’ economic well-being must remain in Indian hands – and not in the hands of Indians seeking to profit from producing and selling such goods and services, but rather in the disinterested hands of the state, the father and mother to all Indians.

Given this mindset, performance was not a relevant criterion for judging the utility of the public sector. Inefficiencies were masked by generous subsidies from the national treasury, and a combination of vested interests – socialist ideologues, bureaucratic managers, trade unions, and monopolies – kept it beyond political criticism.

The “permit-license-quota” culture of statist socialism allowed politicians and bureaucrats to use public service as a vehicle for private gratification, giving birth to a culture of corruption that still persists. India’s misfortune, in the economist Jagdish Bhagwati’s famous aphorism, was to be afflicted with brilliant economists. Add to that clamorous politicians and growing demands on a national economic pie that decades of protectionism prevented from growing.

Of course, Shashi Tharoor will say that it his personal opinion, and not the collective opinion of the UPA. What is essentially happening is that, while there are a whole bunch of right-thinking Congressmen, they just seem to be unable to carry their convictions to the electoral battle. And, this is not confined just to the Congress party alone. I wonder when we will start seeing an alignment of "politically correct-ism" and "correctly correct-ism".

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Murali,

My apologies, I didn't mean you are against subsidies. I meant the subsidies regime that is currently in place.

As you said, different sections of the society needs subsidy for different sustenance levels. Therefore can't term these as 'Charity' and will make the recipients lazy and spoil them. I certainly take offense on that notion and characterization.

I see virtues in FSB not because I am supporter of UPA or dead against others. I am none of them. I am a supporter of those who deliver and run affairs honestly. Also I believe no party should get more than 2 chances in a row. That makes them arrogant and complacent.

Let me give you my reasons for seeing virtues in it, with a caveat that if it is implemented in honest and a right manner. I am only hoping :)

1. Sustainable / affordable labor market

Irrespective of how we do it, if we can somehow provide food grains and necessary things for daily consumption like milk, bread, sugar, tea/coffee, eggs at a price that is cheap (relative to a low wage earnings), there can be guarantee for labor force at cheaper rates. You know the benefits of cheap labor rate for businesses and industry. In US this is done by providing direct subsidies to farmers to keep the prices of essential items low. This low priced items are available for everybody.

Ex. A daily wage earner earning $5.75/hr earns about $300 a week. That is about $1200 per month. If another person also works, it is about $2000-2400. Expenses for  a family of 2+2,

Groceries for a month will cost  - $300-400

Subsidized rent  - $700-900

Gas/Daily Commute - $200

Electricity/Cooking Gas - $100

Phone/TV - $100

Miscellaneous - $ 200

Total per month - $1600 - $1900

Though very tight on earning Vs expenses, but can still survive on earning the minimum wages. The lower wages boosts businesses to compete with lower margins, newer ventures and can depend on power wage work force. Nobody better than you can appreciate the benefits of such regime.

2. Will help cut down the recipients

Though not intended but FSB will push the enrollment of AADHAR which we all agree is need of the hour. Once you have mechanism to identify the needy, there should be no problem to design the delivery mechanisms.

3. Widening the Banking Services

It is already been reported that with the lure for subsidy money linked to Aadhar enrollment, banking services are being extended to the hinterlands, which did not happened for last 60 years. Even the Public Sector banks had remained urban centric. Nothing to say about private banks. The concept of 'Business Correspondent' is slowly catching up and if it succeeds will increase the reach of Banks. Which means more scope for more employment and business opportunities.

4. Subsidy in Cash

Its only a matter of time but eventually our policy makers have to do this. Replace the existing subsidies in kind specially like food, fuel, agriculture etc with 'Cash'. It has already been tested in parts of Delhi and results are encouraging. That means death nail to 'PDS' and other subsidy regimes. Sooner we do it is the better.

These are some reasons why I would support the FSB and any such attempts. I would like to be on the side where we experiment new things and as you keep reminding, at least we will not have the old problems. The new problems will be dealt with more new experiments and getting replaced by new problems.

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