From Plate to Plough: A win-win deal -Ashok Gulati
--The Indian Express
Replacing subsidies with direct cash transfers to farmers’ accounts will empower them as well as consumers.
In her budget speech, the Union finance minister (FM) said: “At the centre of everything that we do, we keep gaon, garib aur kisan in mind.” Here then is a small mantra for her to transform the lives of the kisan and the poor in rural areas. Just streamline the food and fertiliser subsidies by converting them to direct cash transfers to identified beneficiaries. This can be done through the JAM trinity (Jan Dhan, Aadhaar and Mobile). Such a measure would not only empower the poor and farmers but also usher in a policy shift that can save the exchequer least Rs 50,000 crore every year. The government can invest this in agri-R&D and better water management, in measures to ensure the country’s food security for the next 25 years and to augment farmers’ incomes.
Let us first talk about the food subsidy. The food subsidy allocation in the budget is Rs 1,84, 220 crore — let us say Rs 1.84 lakh crore. How many are aware that the pending dues of the Food Corporation of India (FCI) stand at Rs 1.86 lakh crore? Year after year, there is under-provisioning of the food subsidy in the budget and the FCI is being asked to borrow from the banks so that the fiscal deficit can be shown under control. The FCI’s loans from the banks have now crossed Rs 2.48 lakh crore (see figure).
Two things stand out. One, the under-provisioning of the food subsidy — including overdues — in the budget. There is more under the carpet (Rs 1.86 lakh crore) than in the budget (Rs 1.84 lakh crore). Two, the real deficit in the budget is much more than what is claimed.
But here I am more concerned about the efficiency, equity and sustainability of the food subsidy regime under the National Food Security Act (NFSA) — a legacy of UPA-2. Does the FM really think that 67 per cent of the population covered under the NFSA cannot afford basic food? There is more than 90 per cent subsidy on rice and wheat under the PDS — the economic cost of rice hovers around Rs 35 per kg and that of wheat is about Rs 25 per kg, while rice is being sold via the PDS at Rs 3 per kg and wheat at Rs 2 per kg.
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The Indian Express, 22 July, 2019, https://indianexpress.com/article/opinion/columns/food-safety-farmers-fertilisers-rural-distress-from-plate-to-plough-a-win-win-deal-5840746/