Forget about the middleman, embrace the middle-ground

Seeking to make basic food provision a legal right, the law (which now must be ratified by parliament) will allocate 5kg of subsidised grain per person per month to two-thirds of the country’s people.

It will also provide free meals for the poorest groups most in need, among them pregnant mothers, children up to 14 years and the homeless.

A great move, it would seem, in a country that ranks sixty-fifth out of 79 countries in the International Food Policy Research Institute’s Global Hunger Index, where almost half of children under five are chronically undernourished.

Indeed, parents in the country ranked second-to-last out of 129 – even behind its economically weaker neighbours Nepal and Bangladesh – in terms of underweight children, should be grateful of this massive-scale hand-out.

But the bill has not passed smoothly as it reaches within inches of the finishing line, even though it is a sweetheart – and no doubt a wide scale vote-winner in the nearing elections – of a weak Congress-led coalition government.

How can that be? Surely an economically powerful India could afford to look after the most vulnerable in its society, even if that comes at a cost?

But with echoes of the famous Dubya dichotomy “you’re either with us or against us​”, those opposed to the Food Security Bill have repeatedly labelled it the choice between fiscal responsibility and hungry people. One or the other, black and white – even a zero-sum game in politico-fashionable parlance these days.

The trouble with seeing choices as polar opposites is that it makes one blind to the middle-ground, which is usually where the real benefits are to be found. That’s called compromise, something a weak government is loath to do – likewise a strong opposition – less than a year away from a national poll.

There’s no doubt the scheme will cost money – lots of it. Critics claim that doubling food subsidies to an enormous Rs1.4 lakh crore (US$23bn) would upset the budget of a country that is looking to lower its fiscal deficit from their current uncomfortable levels.

Moreover, much of this money, say critics, will line the pockets of India’s notoriously corrupt middlemen and ration shop managers.

Indeed, many studies have looked at the amount of subsidised rice and wheat currently reaching the poor, and estimates of 37% to 55% are widely accepted – the rest being illegally diverted and sold on the market.

With the scheme estimated to require 60m tonnes of grain stocks, it is expected that India will have stockpiled over 90m tonnes this year, so the country is well in credit. But not when you factor in the rickety nature of warehousing and distribution that allows an enormous quantity of these stocks to rot away, it will be difficult to service the plan.

The government is clearly winging it for votes by ignoring these vital consequences, thereby adding grist to the mill for the Bill’s opponents.

But here is where it would be worthwhile for allcomers to consider the middle-ground, where everyone can win over time. For a start, this massive policy could be implemented in tandem with an overhaul of the hated Food Corporation of India and placing a heavyweight bureaucracy into private hands.

As we reported earlier this week​, the FCI has set out to hire 11,000 new employees in a bid to service the scheme. The problem is this: the corporation is seen as a joke through its widespread corruption and anticompetitive practices, something that even the Food Ministry recognised in January when KV Thomas, the minister, called it “a white elephant​” and promised to “revamp it from top to bottom​”.

Although he vowed action within two weeks, more than six months have passed with still no news, apart from even more corrupt FCI functionaries and officials being caught red-handed again and again.

Such a bureaucratic dinosaur should never be allowed to survive in modern India, especially now that public-private partnerships – beloved of both sides of parliament – are increasingly being implemented across all areas of Indian infrastructure.

While it is difficult to end such an antiquated monolith with one stroke, the phase-in of market forces would over time both benefit the storage and distribution process and shoulder a great deal of the cost of the scheme.

On top of this, India is in dire need of improvement to its storage and distribution network. The agriculture industry, from field to food store, has barely developed since Independence – why would it need to when the greedy will always make money from the status quo?

For this reason, it must be dragged kicking and screaming into a new era through private partnerships that will at least free some of India’s most embarrassing elephants in the room.

And this is also where corporate food suppliers can benefit by integrating a modernised value chain that everyone knows has been lacking, and for which there has so far been little co-operation or resolve.

Organised food manufacture – and with it retail, logistics, foreign investment and many other positives – is a high-growth area in India in spite of bureaucratic logjams and unfavourable central policy. Through investment in one area of public food distribution, as the government has pledged with the Food Security Bill, the knock-on effect across a wide area of commerce and infrastructure will add impetus to what is currently the country’s flagging economic boom.

All of the factors above feature in the grey area between feeding the poor and fiscal responsibility – the dilemma the critics point to. 

The government has pledged to fund the money for greater food security, so at the same time it should also look at ways to maximise the returns on this spending. To do so is in India’s best interest.

Have your say: Are you for feeding the poor, fiscal responsibility or the middle-ground? Let us know in the box below.​