Business, Finance & Economics

India tables massive food subsidy bill


An Indian street child sells chewing gum outside a shopping plaza in Kolkata. In a bid to fight hunger, the worst evil of such poverty, the government on Friday introduced a bill to provide subsidized food grain to two-thirds of the population. Critics say the plan will cause distortions in the commodities market and result in a disastrous increase in the deficit. But proponents say no cost is too great.

The Indian government introduced a long-promised food security bill to the parliament on Friday, aiming to provide subsidized food grain to two-thirds of the population, the Indian Express reports.

Critics on the right have expressed fears that the measure will result in a disastrous increase in the deficit and cause distortions in the commodities market.  However, the bill's proponents say that there is not only a moral imperative to eliminate hunger, but also that the food subsidy will have positive effects on the economy such as increased productivity.  In addition, they point out that the estimated $5 billion cost of the bill will not hit the treasurer immediately, as the plan would be implemented in several phases.

The National Food Security Bill was promised by the Congress party in its manifesto for the 2009 general election.  It aims to provide subsidized food to 75 percent of the rural population and 50percent of the urban population, which amounts to around two-thirds of the total citizenry.  

It would make these citizens -- identified based on their income levels -- legally eligible for seven kilograms of foodgrain apiece at fixed rates of as little as one rupee per kilogram (about 2 U.S. cents).

Apart from the high cost of implementation, the program is likely to face problems due to the inefficiency of the present public distribution system -- which the bill also seeks to reform. 

Corruption within the present system is so rife that it's common to hear complaints that only one rupee out of every 100 spent by the government actually reaches its intended target. 

However, the debate over whether cash distributions or other changes to the system will be help or hindrance rages on among economists, social activists and government bureaucrats. 

Some critics also suggest that the timing of the bill is inappropriate. It was introduced before the completion of a major scheduled survey of the population intended to identify the poor (the presumable target of the subsidies).  Therefore, critics say, the decision to target 75 percent of the rural population and 50 percent of the urban population is purely arbitrary.

What's the rush?  The Uttar Pradesh state elections are around the corner.