Given how FCI and its associated agencies have 49 million tonnes of wheat and rice stocks against a buffer norm of 25 million tonnes, just selling off the excess will fetch finance minister Arun Jaitley over R42,000 crore for his chronically deficit budget. Of course, the problem here is that despite the government announcing some months ago that—for purposes of keeping food inflation under control—15 million tonnes of foodgrains were to be offloaded by the Centre, barely 2 million have been sold. A new ICRIER paper by Ashok Gulati and Shweta Saini has even more interesting points for Jaitley and prime minister Narendra Modi, both in terms of fixing the budget deficit as well as stopping the generation of over R48,000 crore of black money each year—that’s roughly equal to the CAG’s median estimate of the A Raja telecom scam, with a big difference in that this one is taking place with unfailing regularity each year.
While most know leakage levels in most government subsidy schemes are high, Gulati-Saini use the latest National Sample Survey (NSS) data to show the situation is rapidly worsening, and things aren’t much better in the states that are supposedly doing better by way of having universal food subsidy coverage. From a high 24% in 1999-2000, the level of theft—the difference between what FCI says it is distributing to the amount the NSS data show people are actually receiving—has risen rapidly, to around 47% in 2011-12. While this methodology shows a negative number in Chhattisgarh (which means the statistical impossibility of people consuming more grain than the government gives out) and very low theft levels in states like Andhra Pradesh and Tamil Nadu, this is due to a problem in calculations. While the NSS data gives information on foodgrains consumed, there is no regular official data on how much ‘top-up’ of the FCI supplies is done by these states whose policy is to give more subsidised grain than the Centre allocates—once you add the ‘top-up’, the theft levels in Chhattisgarh, for instance, aren’t too different from those in the rest of the country. Since, not surprising, the highest levels of theft, are in the country’s poorest states, what is ironic is that the poor end up buying over 80% of their foodgrain requirements in the open market—and since FCI’s operations leave little marketable surplus in many states, it is possible the market price also gets raised due to this, leaving the poor actually worse off as compared to a no-FCI situation.
With Gulati-Saini pointing out that R33,000 crore can be saved annually by moving to cash transfers while meeting the Food Security Act’s requirements, as FE has consistently held, the finance minister simply has to take a larger interest in the goings on in the agriculture and food ministries. Apart from the losses caused to the budget, just losing the opportunity due to bungling bureaucrats taking their time to clear the sale of FCI’s stocks over the last few months has cost India $3-4 billion in terms of lost exports. After having lost several opportunities to fix policies in the oil and telecom sectors—by not fixing remunerative gas prices and by not auctioning enough spectrum —the last thing the Modi government wants to do is to get this one wrong as well.