The Hindu Business Line : Why were subsidies for poor not vetted?

FARM SECTOR subsidies will not come up for serious in discussion this Budget. This is a pity. Not because this huge `waste' will remain an off-Budget item, probably for a long time to come.

This would have happened anyway (2005 is not 1991; there is no longer anyone breathing down on you), and had it applied only to the Budget insofar as it relates to explicit food and fertiliser subsidies (Rs 25,800 crore and Rs 12,662 crore respectively, according to the Budgetary Estimates for 2004-05), it would have been easy to understand. After all, successful politics is all about coming to understandings. Pity is it also applies to the approximately Rs 20,000 crore spent each year about equally by banking and non-banking programmes for the poor.

In the banking category fall the implicit and explicit subsidies on the Finance Minister, Mr P. Chidambaram's famous `scheme' of getting banks to double agricultural credit in three years. In the non-banking category come the money spent, on works and equipment as well as wages, for the Sampoorna Grameen Rozgar Yojana (SGRY), the Swaranjayanti Gram Swarozgar Yojana (SGSY) and the Pradhan Mantri Gram Sadak Yojana (PMGSY), which taken together can be called Rural Works Programmes (RWP).

In theory the former sort of schemes, that is, the credit-based ones are screened by banks and the RWP are self-screening, thanks to the way they impose costs and/or hardships on the poor to keep out the rich.

It was on the basis of this logic that Prof Jean Dreze, who many still mistakenly believe to be the author of Dr Manmohan Singh's Employment Guarantee Scheme, protested so vehemently against the scheme (that he had many other problems with its unauthorised revision is another matter) — namely that it sought to target only the poor; thereby raising the horrific possibility of them getting screened twice over. Or once, if we take bogus muster rolls on board. But that again is another matter. Leaving aside this niggling, the larger question is how anybody, politician, bureaucrat, journalist or academic, can think of this expenditure as wasteful?

The answer simply is that there are better ways of doing it. One of the best being what one financial newspaper chose to go out of its way to make look absurd, even while endorsing it, by suggesting that Mr Chidambaram drop Rs 5 coins by helicopter in poor districts and let poor people pick up the money. Even if some coins are lost, more will get through to the poor:

Anyway only 10-40 per cent gets through to them in employment guarantee schemes. The source of 10 per cent is not clear, but 40 per cent is about what is left after meeting administrative costs, and raw material and equipment hire charges.

So why not indeed have, say, Rs 5000 delivered once a year to the pensionable poor (selected more surely by past Censuses than by a helicopter) by money-order, courtesy the village postman. Won't there be problems? Certainly not so far as the identification of worthy beneficiaries are concerned; nor insofar as delivery `by money order' is concerned, once the beneficiaries have been separately notified that the benefits have been `addressed' to them.

The only real problem is that the Censuses would identify the proper beneficiaries only too properly. There will be no room left for a lottery among the poor as a group, which is one of the important points about the nature of the political process made by the helicopter analogy. But this surely can be got around by evolving some sort of an 1 by 5 or 1 in 6 income-signalling tax mechanism, this time specifically designed for income subsidies to the poor.

The question newspapers should be addressing to Mr Chidambaram, then, is not why food and fertiliser subsidies were not tackled, but, rather why subsidies for poverty alleviation were not carefully vetted so as to give the government back half the money that would otherwise simply go down the drain, and let the poor have the other half.

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