Cash transfers: Food for thought

The ‘Direct Cash Transfer’ (DCT) of funds into bank accounts of beneficiaries began this month in 20 districts. It will cover the entire country by April 2014. But food and fertiliser have been kept out of its ambit. There are complex issues to be sorted out, the Finance Minister has said, without really giving an indication as to when the rollout in these critical areas will actually take place.

Payments are estimated to be Rs 3,20,000 crore annually. The scheme is being bandied as a revolutionary reform that will bring transparency, enhance reach, empower poor, improve fiscal deficit and reduce corruption.

The implementation if done in a manner as contemplated — correct identification of beneficiaries, inclusion of all deserving persons, timely reach — shall unambiguously yield the intended results.

The raison d’etre of DCT is to reach subsidy only to the ‘poor’. Under the existing dispensation for disbursing food, fertiliser and oil subsidy, the non-poor too get ‘unintended’ benefit, and on an unprecedented scale.

A major slice of these subsidies is also filling the coffers of manufacturers/traders/input suppliers. DCT is intended to stop this, too.

FERTILISER SUBSIDY REFORM

The existing scheme for giving fertiliser subsidy viz., control on MRP at low level and compensating producers for excess of cost over this has led to serious distortions in prices and imbalance in nutrient use ratio.

The Government is well aware of the deleterious consequences for crop yield, soil health and environment. Punjab, Haryana, hitherto grain bowls of the country, could soon turn into ‘dry patches’ if these trends are not checked.

Therefore, the extant subsidy dispensation must be dismantled. The Expenditure Reforms Commission (ERC) had recommended this way back in 2000. What is preventing us from doing it even now?

Then, lack of technology to reach out benefits directly to millions of poor could be an argument for not moving forward. But, in today’s context, this does not hold water as the Unique Identification Authority of India (UIDAI) is giving all that is needed.

SUBSIDY BURDEN

FCI et al hold double the stocks required for PDS and strategic reserves. This colossal waste/inefficiencies result in proliferating food subsidy under a protective regime that ‘fully’ reimburses excess of cost incurred over its collection from selling at low price.

This regime is also a major stumbling block in the way of reforms viz., putting a ‘cap’ on how much FCI should procure; permitting private sector in procurement; dismantling of APMC; and removal of State-level taxes.

Charge must be given to DCT. This will enable the poor to buy their food at market price. They need not have to go to a Government authorised/ration shop. They can buy from any outlet of their choice.

We should aspire for all stakeholders from public, private, and cooperatives sectors freely getting into buying and selling of food grains, optimising cost and making these available to consumers at best prices.

The benefits will be phenomenal. Wastages will be drastically reduced. Government will save hugely on food subsidy. Farmers will get better prices. Consumers will get quality food. And, exports will be boosted.

But, the Government’s decision to keep ‘food subsidy’ out of the DCT ambit has dashed these hopes. Reacting to reports as to what would happen to PDS under DCT dispensation, it says ‘PDS will stay’.

What does this connote? Tens of thousands of ration shops spread all over are the bedrock of the food supply chain to meet food needs of millions. No one will disagree that these shall stay.

But, Government’s intention goes much beyond that! Under Food Security Bill (FSB), it seeks to entitle 75 per cent of rural populace and 50 per cent of urban population to specified quantities of food grains at ‘throwaway’ price. This is illogical and untenable.

You cannot have direct cash transfer and yet, give food at subsidised price. The Delhi Government has begun DCT for those not covered by the PDS/BPL and the very poor under ‘Antyodaya’. This will ruin the exchequer.

FSB is the ‘flagship’ programme of UPA II. Having gone ahead, it would be embarrassing to retreat. But, it is better to face it upfront rather than making the country pay a huge price.

What Government seeks to achieve through FSB can be suitably enmeshed into DCT. It may seek to make food available to the poor in every nook and corner of the country. But, ration shops will have to ‘stand on their own’ without any subsidy support.

AADHAAR MISUSE

The number of Aadhaar cards issued thus far is around 20 crore., The penetration varies widely among States viz., above 50 per cent in Andhra Pradesh, Karnataka and a low of 5 per cent in UP.

The Government should put its machinery into a proactive mode to ensure that all persons are issued Aadhaar cards. The card should have ‘credible’ information on income and other relevant details. Without this, the scheme will be a flop show.

Since ownership of a card ‘automatically’ entitles a person to flow of funds into his account, vested interests are bound to proliferate. Those deserving may be left out and undeserving (or even fictitious) may get cards.

The State must have safeguards to prevent all this.

There are millions (mostly poor) who do not have a bank account. In vast stretches, there are no bank branches. Filling this void is going to be a mammoth task. All relevant players viz., banking correspondent (BC), self-help groups (SHGs) etc., will have to be mobilised for this.

The hurried launch (only 16 per cent coverage and less than 5 per cent in some States makes a mockery of the scheme). Exclusion of ‘food and fertilisers’, most critical areas craving for reforms, shows that ‘political expediency’ has overpowered economic logic.

A ‘half-baked’ attempt on reform such as DCT that is intended to be a game-changer and put Indian economy on a trajectory of healthy and inclusive growth can boomerang. The Government should put this in place only after it has made ‘fool proof’ arrangements.

(The author is Executive Director, CropLife India, New Delhi. Views are personal.)

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