In her recent address to Parliament, President Pratibha Patil proclaimed that her government would enact an Act that “assures food security for all”. Unfortunately, the United Progressive Alliance’s (UPA) statement is little more than stale, leftover campaign rhetoric.
The crux of the UPA’s programme is providing 25kg of subsidized rice or wheat monthly to the poor at Rs3 per kg. Providing sustenance to the impoverished, especially the hungry, is the task of any government.
But the UPA’s food subsidy programme will continue a legacy of perverting market incentives, encouraging corruption and facilitating undue leakage.
Subsidies are tremendously inefficient ways of delivering food to the poor. They require stockpiling grain, shipping it over long distances and distributing the goods. These delivery systems have a well-documented history of corruption, as bureaucrats pilfer from the system, or politicians dole out lucrative contracts to their cronies. The astonishing leakage in such systems—as grain is collected at the local level, transferred to state bureaucrats, siphoned off to the federal level, and continues back down the chain again—is hardly surprising.
Subsidies also distort markets tremendously: Middlemen have an incentive to sell grain on the black market, and subsidies drive down grain prices, putting unnecessary stress on impoverished farmers—whose grain the government does not purchase.
Instead of a food subsidy programme, the government could pursue targeted cash transfers or a food voucher system. Such systems skip the web of middlemen, and put the cash directly in the hands of the poor. Low-cost modern cash-delivery services—debit cards, for example—could bring grain to the poor at a fraction of the costs lost on inefficient subsidy systems.
The UPA’s food subsidy programme is indicative of the shortcomings of India’s cumbersome bureaucracy. Similar leakages and distortions are seen in public education and health and in infrastructure projects and housing programmes. The greater problem is that no government has the political incentive to dismantle inefficient systems when political insiders and party cronies accrue massive gains. If only rhetoric actually translated into reality.
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