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LATEST NEWS UPDATES | The politics of cheap rice in Karnataka -ND Shiva Kumar & Narayanan Krishnaswami

The politics of cheap rice in Karnataka -ND Shiva Kumar & Narayanan Krishnaswami

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published Published on Jul 5, 2013   modified Modified on Jul 5, 2013
-The Times of India


Withthe state budget all set to be presented on July 12, TOI takes a hard look at the government's cheap rice scheme and its impact on politics and employment.

Will cheap rice boil? Let's look at the math. Reducing the price from Rs 3 to Re 1 per kg will help a family save Rs 60 per month. Till now, poor families got rice from the Public Distribution System (PDS) at Rs 3 per kg or Rs 90 for 30 kg. Under the new scheme, they will pay Rs 30. Significantly, the scheme will cost the state exchequer Rs 430 crore a month.

Already,the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)provides Rs 174 for non-skilled and Rs 185 for skilled labour per day for at least 100 days of employment for each rural household. What add-on political leverage will the rice scheme provide? Or, along with MGNREGS, will it hurt employment?

Experts agree the scheme will have political benefits; few believe it can be sustainedin the long term. It would adversely impact the labour market and have acascading impact on various labour-intensive sectors, pushing prices upwards. Conversely, the welfare measure could help the needy and bring down foodgrain prices.

Political impact

Thepolitics of rice has had its origins in CN Annadurai's DMK government. Over the years, using rice to push a party has become a standard operating procedure. Now, rice is distributed free of cost in Tamil Nadu. When assembly elections were announced in the state earlier this year, no political party dared ignore rice populism. The BJP government gave every BPL family 20 kg of rice at Rs 3 per kilo. The Congress has continued the game of one-upmanship. "It's difficult to say if these things help boost electoral prospects; they do help politically," says ANarayana, faculty member, Azim Premji University, Bangalore.

"It'stime political parties moved towards sustainable politics instead of making people dependent. These gimmicks won't yield much. Welfare politics has failed in Spain. As Prime Minister Manmohan Singh said, money does not grow on trees and, hence, politicians need to be pragmatic. After the polls, they are in the business of governance, not in the politics of governance," says Prof Harish Ramaswamy, Karnatak University, Dharwad.

Exchequer impact

In2011-12, the cost of subsidizing food was Rs 790 crore. This year, it'sexpected to be close to a staggering Rs 5,000 crore. To mop up revenue,the state government mooted the idea of introducing cheap liquor and licensing more liquor outlets, but gave the idea a silent burial following widespread criticism. Chief minister Siddaramaiah says he willcut wasteful expenditure, including handouts to religious institutions and community organizations, plug loopholes in revenue collection, and widen the tax net.

RS Deshpande, director, Institute for Social and Economic Change, Bangalore, provides a welfare perspective: "It (cheap rice) makes a difference to the psyche of the poor, as it acts as insurance. Although it may not run for long, it's a good scheme with quite a few positive spin-offs. It will bring down the prices of foodgrains in the market. It won't cost so much. The estimatedexpenditure of Rs 430 crore per month is a computed figure; the real figures won't be that much."

Social impact

Somecommentators argue that the populist scheme will adversely impact the labour market and agricultural productivity. Although there are no studies to link decreased production to subsidies, in 2011-12, the growth of agriculture and allied sectors in the state was negative (-2.2%) and in 2012-13, it was a mere 1.8%. The agriculture sector's contribution to GSDP, which was just 16.1% in 2011-12, declined to 15.3%in 2012-13.

"Our studies and analyses have provedthat consumption-based subsidies are cornered by the affordable more than the poor. The rice scheme didn't succeed in Andhra Pradesh. This cannot be sustained for long. At best, it may stay for a year. Monetary and administrative constraints will pull it down," says Amarnath HK of the National Institute of Public Finance and Policy, New Delhi.

Therice scheme may have overlooked food habits which vary across the state. "There is a non-rice standardization happening. People, especially in urban areas, prefer jowar, wheat and ragi. Jowar, which was once restricted to North Karnataka, has penetrated the south now," says GK Karanth, a sociologist at ISEC.

A note of caution comes from within the Congress. "Subsidies are necessary but won't solve the problem in the long term. I believe in long-term and sustainable solutions which empower people," says agriculture minister Krishna Byregowda.

Politics blooms, economics withers

View

Narendar Pani, professor, school of social sciences, National Institute of Advanced Studies, says it satisfies basic needs

* Isn't cheap rice a bad idea?

No.The purpose of all economics must be to provide citizens with the basicneeds of life. Food is so fundamental a requirement that any humane society should provide it at a price that is guaranteed not to leave even one poor person out. This is the reason why food is very heavily subsidized in the advanced countries. We are, unfortunately, in a moral crisis where we think nothing of subsidizing global investors to build anew airport but get extremely righteous when politicians do the right thing to ensure absolutely no one goes hungry.

* Will it actually make a difference to an individual or his family?

Itwill make a difference to the poorest. The reduction in price from Rs 3per kg to Re 1 will provide families with Rs 60 extra per month. Those who think everybody in Karnataka can scoff at Rs 60 extra a month do notunderstand the magnitude of poverty in some parts of the state.

* Should the government have spent the subsidy on other priority areas?

Itdepends on the other priority areas. If it's to be spent on water projects, there may be a case to consider it. But there is nothing in the expenditure patterns of governments in recent years to suggest that is their priority. If the trade-off is between elevated roads and food, I'm afraid I am on the side of food.

* Will cheap rice create labour problems? Won't this make people more lazy?

Idon't think laziness is the result of having access to food. If that was the case, the poorest starving nations in the world would've had thehighest productivity! Subsidized rice will provide a safety net at a time when the economy is slowing down. It's possible there will be political benefit for the ruling party. But that should not stop us fromsupporting the right decision.

Counterview

Gopal Naik, professor of economics and social sciences, IIMB, says it's bad economics

* Isn't cheap rice a story of political leverage?

Whenimplemented, it certainly will come at a very high cost without substantial gain on the ground. This is an example of how competition inpopulist measures between political parties will lead to a race to the bottom. The reduction from Rs 3 per kg of rice to Re 1 will not make a large difference at the household level, but the cost is high to the exchequer.

* Will it actually make a difference to an individual or his family?

Evenif we assume the benefit is substantial for an individual, do we have an effective delivery mechanism to reach a well-targeted group? First ofall, we don't have a good mechanism in place to identify who should be in the BPL list.

* Will cheap rice create more labour problems? Won't this make people more lazy?

Thescheme has other ill-effects. The MGNREGS seems to have been adversely affecting the agricultural sector. There is a backward-bending supply curve operating for labour. The scheme does not have effective work measurements and has been implemented haphazardly in many places. This has led to many intermediaries in the chain, making the scheme ineffective. It seems to have created an easy money route, making agricultural work look hard and unattractive. The wages for agriculturallabour have gone up substantially, making agriculture less remunerative. Agriculture production is likely to be hit, which, in turn, will increase prices. This will again have an adverse impact on the poor as they spend a large proportion of their income on food products. It may also have an impact on long-term labour employment in agriculture.

* Should the government have spent the subsidy on other priority areas?

Goodgovernance would deliver a lot more to the poor than many of the schemes designed to help them. Without good governance, the schemes hardly reach the targeted people and encourage corruption. We need to improve the service delivery mechanism in rural areas so many of the current schemes can be effectively implemented.

The Times of India, 5 July, 2013, http://timesofindia.indiatimes.com/city/bangalore/The-politics-of-cheap-rice-in-Karnataka/articleshow/20920958.cms


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