One question Jagannathan has not asked: Why is BJP playing chamcha to SoniaG insecurity?
Kalyanaraman
Food security, Sonia insecurity, and an approaching train-wreck
by R Jagannathan 6 mins ago
What price is the Congress willing to pay for winning the next election? The answer seems to be: any price. Even if that price means ruining whatever little chance there is of an economic revival; even if that price means destroying whatever fiscal improvement P Chidambaram has managed to bring about, thanks to falling oil prices and cutting government expenditure drastically (even if means killing growth).
News reports suggest that the UPA government, despite sluggish growth and the parlous state of public finances, is being pressured by Sonia Gandhi to somehow roll out the Food Security Bill, which promises seven kg of super-subsidised foodgrain at Rs 3 a kg for rice, Rs 2 for wheat, and Re 1 for coarse grains, never mind the economics of it. (Read about why the Bill is a bad idea here)
The political calculation is simple: Sonia Gandhi believes that it is a vote-winner, and is also gambling that no party would want to be seen opposing any plan to give away food in the name of the poor to the bulk of the population at throwaway prices. This is why there is talk of an ordinance on Food Security, even though the BJP says it wants to discuss the idea in parliament.
Sonia Gandhi believes that it is a vote-winner, and is also gambling that no party would want to be seen opposing any plan to give away food in the name of the poor to the bulk of the population at throwaway prices. PTI
At such prices, one can also be sure that the poor will sell the food priced in the 1-2-3 range in the open market, thus supplementing the so-called direct cash transfers scheme with another indirect cash transfers scheme. Corruption will get a new leg up.
Barring a lone voice here or there – former Finance Minister Yashwant Sinha is one of them – there is no politician ready to challenge the Food Security Bill with substantive reasoning. Sinha was clear that the Bill “will be a complete disaster,” not only because of the cost – which the Commission on Agricultural Costs and Prices has put at Rs 600,000 crore over three years – but because of the basic stupidity of trying to procure more grain than has ever been procured in the past.
Said Sinha told BusinessLine that the Bill would necessitate a “total procurement of 76.3 million tonnes of foodgrains every year” when the country has managed to procure an average of only 45 million tonnes over the 2001-11 decade. The only exception was 2011-12, when 73 million tonnes were procured. Even this fell marginally short of the level needed.
Sinha’s conclusion is stark: “The requirement is much more than our best procurement. This is when agriculture production is rising year after year. This clearly indicates India will become a perennial food importer. Now if you exhaust the entire 85 million tonnes of stored foodgrain (currently in stock) then we will need to acquire from the open market. This will fuel inflation.”
In fact, rabi procurement trends show that the dangers are surfacing even before the bill is anywhere near passing. Thanks to pests and adverse weather conditions in December 2012 and March 2013, the rabi wheat crop has been hit, and procurement may now be just around 25 million tonnes – far below the expected 44 million tonnes, and even lower than last year’s 38 million tonnes.
Grain stocks, originally expected to bulge out of every godown at 95 million tonnes, may now not exceed 80 million tonnes, Business Line estimates. The wheat earmarked for exports is not moving since global prices are below domestic ones. If we do export, we will be subsidising the world and not only our population.
The problem will not be about finding enough grain for the Food Security Bill this year and the next, but after that, when the stocks fall.
As things stand, we can’t take the next agricultural crop for granted. Even though the India Meteorological Department (IMD) has predicted a normal monsoon – it has got its predictions wrong more often than not – other monsoon forecasters believe we could have lower precipitation this year.
The Japanese Research Institute for Global Climate has warned that the Indian monsoon could be below normal this year due to a wayward warming pattern in the Indian Ocean. This causes a lot of the rain to fall into the ocean instead of land, resulting in an agricultural deficit.
Said the institute using technicalese: “A negative Indian Ocean Dipole mode will develop soon and reach its peak in early autumn. Because of this, the Indian summer monsoon rainfall is expected to be below normal; a weak La Nina condition in the equatorial Pacific might reduce the negative impact to some extent.”
Even assuming the Japanese have got it wrong, the problem is more basic. As we noted even two years ago, India’s problem is not that the monsoons fail once in a while, but that there is a long-term trends towards declining precipitation.
“For nearly half a century since the early 1960s, the long-period average (LPA) of rainfall that India receives has been continuously dropping. From a figure of over 935 mm during the June-September monsoon period, it is now just about 880 mm.”
So, it’s not about this year’s forecasts.
For the UPA’s bosses, the question is this: given the sharp fall in production and procurement in the last rabi season, and given the possibility of a weak monsoon this year and the falling long-term trend in rainfall, should any sensible government be planning an extravagant Food Security Bill?
The only answer is this: Sonia Gandhi’s political insecurity is trumping any thoughts about fiscal security and monsoon risks.
In 2008-09, rising social spending, farm loan waivers and an unaffordable economic stimulus post-Lehman led to rising prices and a slowdown. Will the Food Security Bill convert a stumbling econimy into a full-fledged train-wreck?
One shudders to think about the mess the next government will inherit.