As the government aims to cut subsidies to less than two per cent of the gross domestic product (GDP) in 2012-13 and 1.75 per cent over the next three years, several analysts believe the subsidy amount on the proposed food security law may not allow it to come into effect or be contained. Planning Commission member Abhijit Sen tells Dilasha Seth various subsidy figures on food security quoted by the media are exaggerated. He adds it is possible to roll out the proposed Act. Edited excerpts:
Various subsidy figures on food security are doing the rounds. Do you think it is possible to roll out the food security law, especially since the focus of the government is to contain subsidies?
Think of it this way. Obviously, the food security law will cost something more than what the current public distribution system (PDS) costs. The current PDS system is not cheap. This (the food security law) would come at a higher cost. When the NREGA (National Rural Employment Guarantee Act) came in, it wasn’t as if there weren’t employment schemes. But it was somewhat larger, and cost a little bit more. If you simply compare, the employment programmes or government programmes before the United Progressive Alliance came to power in 2004, were 0.4 per cent of the GDP. Today, NREGA costs about 0.5 per cent of the GDP. This is roughly the same sort of change that would happen with the Food Security Bill. However, it would cost the government more. To say its impossible is like saying the NREGA was impossible then.
But with the government committed to cutting subsidies, how should the burden be borne?
If there is a fiscal issue, you have to raise taxes or cut some expenditure. Reduce petrol subsidies and other subsidies. The argument that it is not affordable is not an economic argument. The argument on what other adjustments are needed elsewhere to do to this and yet maintain a fiscal deficit of a certain order is an economic one.
Do you think the subsidy figures by various analysts are close to reality?
A large part of the Food Security Bill is to do with PDS. Most of the costs are to do with that. Many of the costs are inflated. And, what you get in the press is certainly hugely inflated. It won’t cost anything like that. The Bill has a lot of components, and not all of these have costs. On the PDS side, a number crops up every now and then. This number assumes whoever has a right to have something, would go out and exercise that right. If they don’t exercise that right, the cost would be a lot less. The fact is most people do not exercise their right to the current PDS. So, the number that you use for the purpose of calculation would be very different from the final number. Actually, the government also bears a cost on the amount of stocks stored. For the past four-five years, we have simply been building stocks, procuring it and stocking it. But we are not releasing it. The food security law would ensure this is released. You would not have to bear the amount spent on holding the stock
There is an argument that this system of above-poverty-line (APL) families and below-poverty-line (BPL) families should be done away with, and the proposed law should be universally implemented. What do you think?
I feel the current APL and BPL distinction has led to inefficiencies. It has made stabilisation of the markets more difficult and has led to inequalities. We should return to a universal PDS. This APL-BPL issue started in 1997. We had recommended to ministry of food in 2002 to return to a universal PDS. There should be a certain minimum support price for all. If you universalise it, it has to be at one price.
Why should there be a single price for both the rich and the poor?
At the moment, various ideas are doing the rounds. One is excluding the rich. So, let 75 per cent of the population get food security at a single price. However, would there be enough grain to go around? So, instead of seven kg per head, make it five kg per head.
