Food Security Ordinance: Good politics, bad economics

The ambitious food for all scheme as envisaged under the Food Security Bill is well on the course of becoming a reality by force of a law. The President has promulgated the ordinance to the same effect. Now, it has to be passed by both the houses of Parliament during the monsoon session, scheduled to commence of July 26. Else, the ordinance will lapse. Politically, it is the best shot fired by corruption stung United Progressive Alliance government aiming the next general election. But, financially, the tax payers shall have to cough up between 1.25-1.90 lakh crores of rupees annually to meet the cost.

The Constitution says that the President can promulgate an ordinance if circumstances require taking immediate action on a certain issue. Except politics, nothing can explain the urgency for promulgamation of food ordinance. Now, that it is more than obvious that ordinance is constitutional in letter but essentially political in spirit, let's examine the circumstances which forced government (or, constitutionally speaking satisfied the President) take by-pass route. 

The food security bill has been making enough noises since 2011 when the National Advisory Council approved the proposed law. The politics over the bill has been intense popularizing the contents of the bill thereby helping the UPA's objective of dissemination of information that the bill is aimed at the largest constituency of voters-- the poor. All the UPA constituents are in favour of the bill becoming law with minor differences of opinion vis-a-vis modality and strategy. The BJP led NDA has spoken in different voices but importantly venting out their opposition to the bill. The Left and the fringe or life support players for the UPA are not in favour of the bill in its present form. 

The revised version, the Food Security Bill, 2013 was introduced in Parliament on March 22 earlier this year during the budget session. Nothing meaningful happened amid chaos and pandemonium over various issues of corruption and resultant mud slinging. This seems to be a regular dose of politics in India. Such circumstances do not create problem of immediacy in Indian politics. So, what were those circumstances that 'satisfied the President' to invoke Article 123 of the Constitution? 123 of politics? Perhaps yes.

The lok sabha election is just a stone's throw away and the Congress-led government has become a synonym of corruption in public and popular perception, to say the least. And, perception decides the fate of electoral politics. Over four years of policy paralysis at the centre, duly reflected in most of the states, has demolished India's growth theory, which has, anyways, been jobless growth adjusted to population growth.

Scams after scams, scandals involving union ministers and ruling dispensation's flip-flops at dealing with corruption and opposition to corruption have given the BJP-led opposition a realistic chance to staging a come-back. To cash in on the favourable wave, the RSS-BJP combine has brought a leader, who suits them the most, to the forefront. Gujarat chief minister Narendra Modi is controversial and perceived as Hindu hardliner, although he does not talk about Hindutva, the Ram Temple and Uniform Civil Code ever. His image is that of a development oriented man and politician. He is also capable of tiding over the infighting in party. And, above all, the Congress fears that he could be divisive when it comes to electioneering and voting denting its chances further. Now, it is expedient for the Congress to counter all the counter-UPA perception and moves. The food for all law is one weapon that can repair the dents in Congress's body politic.

Save some breath for economics of food for all scheme. There is a genuine concern among informed masses and experts alike that food security scheme will push fiscal deficit further. According to some agencies, this scheme can widen the gap by 0.5% this financial year itself. However, the government does not believe. (Obviously, it can not in the election year.) The finance ministry has earmarked 77, 740 crores of rupees for food subsidy with an additional allocation of 10, 000 crores of rupees towards incremental cost due to food bill. Thus, by managing over 87, 000 crores of rupees for food scheme, the finance ministry hopes to keep the fiscal deficit within the targetted range of 4.8% of the gross domestic product.

Interestingly, there are other figures suggesting that the UPA government is either mistaken or has become an Ostrich. According to government's own estimate the food security scheme would cost the national exchequer around 1.25 lakh crore rupees annually. Other estimates put this cost between 1.75-1.90 lakh crore rupees. This entails a darker financial future of the nation. It simply means that the earning population will have to pay this much of money in the form of additional taxes as the government is already in huge deficit. Now, see this in a double window screen, wherein the second window shows that the food for all scheme will be routed through the Public Distribution System, which is, at its best, just 45% efficient. This means, the earning population will have to cover up for this 65% leakage as well. This can not be good economics.

But, we are in the election year, when populist politics prevails over all kinds of prudence. So, the food security ordinance becomes an exigency especially when information is oozing out that the election commission may notify the lok sabha polls on September 22. The UPA government does not have much time left to correct the distorting perception among the voters. It could not have waited for the Monsoon session, which would otherwise not see any debate and passage of the food bill. Obviously, the Constitution has remedial provisions for such circumstances. 

Now, the Congress can proudly tell the nation (read voters) that it has implemented the education for all scheme, job for all scheme, information for all scheme, housing for all scheme and the most importantly food for all scheme. So, the people are secure on all the fronts. Let the opposition indulge in communal, developmental, dalit and other divisive politics, the UPA can go ahead with its poll preparation. If it damages economic health of the nation, only the next government will have to answer.