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PLUG THE LEAKS

YB WEB DESK. Dated: 12/2/2020 12:34:13 PM

UTTAM GUPTA Since 2014, the Narendra Modi Government has weeded out close to 44 million bogus ration cards by using the Information Technology (IT) infrastructure viz. digitisation, seeding of Aadhaar on ration cards, electronic point of sale machines at retail shops and so on. However, this addresses only a small aspect of the problem and that, too, is unlikely to be rooted out completely with the use of technology alone. Besides, largescale diversion and black marketing of grain, inclusion of the privileged among beneficiaries, a ballooning subsidy bill and so on will persist so long as the extant system of routing food subsidy through State agencies continues. What then is the way forward? The Government should stop selling food at a subsidised price. Instead, it should limit its role to crediting subsidy directly to the accounts of beneficiaries. When foodgrains at Rs 1/2/3 per kg are not available, these maladies will be automatically nipped in the bud. Under the National Food Security Act (NFSA), the Union Government arranges for supply of wheat, rice and coarse cereals to the beneficiaries at Rs 2/3/1 per kg, which is a fraction of the cost of procurement, handling and distribution (eg. 1/15th in case of wheat). Every person whose name is mentioned on the ration card is eligible to receive five kg of rice or wheat per month. In addition, during April-June, to mitigate the impact of Covid-19, the PM Garib Kalyan Yojna added a “free” five kg of rice or wheat per person per month to all 815 million individual beneficiaries under the NFSA. Besides one kg of free pulses per month was provided to every family. These additional provisions were extended for a further five months till November. The supplies are made by the Food Corporation of India (FCI) and other State agencies on behalf of the Central Government, which reimburses to the former the excess of the cost of purchase, handling and distribution over the price charged from the beneficiaries i.e. Rs 2/3/1 per kg on additional supplies (during the eight months of the current year, this is zero). This reimbursement or food subsidy is paid from the Central Budget. In recent years, food subsidy has increased to frightening levels. During 2019-20, it was Rs 2,19,000 crore. For 2020-21, prior to Covid-19, the likely spend was estimated to be Rs 2,53,000 crore. Including the impact of free food during April- November or about Rs 1,50,000 crore, this will scale up to Rs 4,03,000 crore. In case the free food scheme is extended further, the spend will be much higher. The ballooning food subsidy is putting a huge stress on the Union Budget. Faced with a shortfall in tax collection in recent years and the overarching need to contain fiscal deficit, the Centre has been making short payments to the FCI, forcing the latter to borrow heavily to sustain its operations. The situation is so pathetic that since 2016- 17, the FCI has been drawing funds from the National Small Savings Fund (NSSF). As on March 31, the cumulative borrowings from the NSSF were to the tune of Rs 3,30,000 crore. The allocation for the current year being Rs 1,26,000 crore (Rs 1,16,000 crore provided in the Budget, plus Rs 10,000 crore in the first supplementary demands for grants) against the requirement of Rs 4,03,000 crore, the shortfall is Rs 2,77,000 crore. If no further supplementary authorisation comes, the FCI will have to borrow all of this from the NSSF, taking its borrowings to a gargantuan Rs 6,07,000 crore as of March 2021. Though staying on the FCI’s balance sheet, this mammoth debt is entirely the liability of the Union Government and will need to be serviced from the latter’s tax collections in the future. The core feature of this scheme, or supply of wheat or rice at a price almost close to zero, may be a boon for the beneficiaries but ends up being a bane for the economy. The availability of wheat at Rs 2 per kg through the Public Distribution System (PDS) under the NFSA, when the market price is a minimum Rs 30 per kg, is a huge allurement to all those involved in its implementation. No wonder, there is large-scale diversion of foodgrain from rake unloading points and godowns of the FCI. Trucks disappear on way to the retail sale points. Then there are millions of non-existent or fake beneficiaries. There is a clamour for becoming beneficiaries under the scheme even as there are numerous instances of people selling their subsidised quota of foodgrain, say wheat bought at Rs 2 per kg, to dubious traders at Rs 12 per kg or more. Clearly, there are millions availing subsidised food despite being above the poverty line. The official word on the number of poor in India is no more than 25-30 per cent; yet the beneficiaries under NFSA are nearly over 66 per cent. Further, since the handling and distribution cost, besides the Minimum Support Price (MSP) paid to farmers, is reimbursed to the FCI and other State agencies on “actual” as food subsidy, inefficiency and inflated cost claims (including bogus) are inevitable. The “loaders” getting away with monthly salary in lakhs easily pass muster under a cost-based mechanism. Reports of disappearance of food stocks in Punjab causing a loss of over Rs 20,000 crore to the exchequer in 2016 are still fresh in people’s memory. Such inefficiencies and irregularities have also been pointed out by the Comptroller and Auditor General (CAG) of India. Meanwhile, the most deserving (poorest of the poor) continue to be deprived of their full requirement. This is because supplies under the NFSA at five kg per person per month barely cover 50 per cent of the requirement of a person, which is 10 kg per month, as estimated by the National Sample Survey Organisation (NSSO). Having to buy the balance five kg at a very high price, say Rs 30 per kg in case of wheat, they are worse off. Weeding out of 44 million bogus beneficiaries in itself may appear to be a big accomplishment. But seen in the broader perspective, this addresses only a small aspect of the problem and that, too, is unlikely to be rooted out completely with use of technology alone. Besides, other problems will persist so long as the system of routing food subsidy through State agencies continues.