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Aid Indians first, then world

At the G20 meet in June, Prime Minister Manmohan Singh pledged $10 billion for bailing out crisis-hit Eurozone.

Story: BV | Rao | 09th August 2012, 03:48 Hrs

From being a regular seeker of loans and grants from thedeveloped countries, we have now reached a stage where our prime minister canwrite a cheque for $10 billion in one stroke, on the face of it an admittedlysmall price to pay for an aspiring superpower. As Indians, that must make our chests swell in pride. It’s good that wehave excess cash that we can give away with such flourish. But before we patourselves on the back, here’s a grim reality check.

At around the time that Manmohan made the announcement inMexico, his then number two in the cabinet (now President of India), PranabMukherjee, was holding perhaps his last EGoM (empowered group of ministers) todecide on another kind of excess: too much food grains. Not for the first timein this decade, India’s food production and food procurement have brokenrecords. As a result there is nearly 82 million tonnes (MT) of food grain withthe Food Corporation of India (FCI) which does not know where to keep it. FCIhas covered food grains storage capacity of just 63 MT. That is to say thatnearly 19 MT are right now lying in the open.

The Rangarajan committee recommended to the government that13 MT should be released to the poor through PDS (10 MT) and the open market (3MT). That was expecting too much generosity of the government because back in2010 when a similar situation obtained, the government preferred to let theexcess food grains rot in the open than give it away free to the poor. It didnot even heed an order of the supreme court because, it said, to distribute thegrains free it would cost the government Rs 5,000 crore. A cost the countrycould ill-afford.

The government buys wheat at about Rs 12.85 from farmers.Storage, transportation and other costs add another Rs 5.35, taking it to Rs18.20 per kg. But at the PDS outlets, it sells wheat at an average of Rs 5 perkg. Hence for every kilogram of wheat sold, the government loses about Rs 13(very rough, back of envelope calculations). This is what is referred to assubsidy. Similarly for rice and other food grains which would take the totalsubsidy for releasing 13 MT to about Rs 17,000 crore. But, excess food grain,you see, is not as easy to give away as spare cash. It is cheaper for thegovernment and better for the economy to let the food grains rot than feed thehungry.

The Pranab Mukherjee EGoM was meeting to take a final callon this excess headache. It decided to pare down Rangarajan’s recommendationfor release of 13 MT to just 8 MT to bring the subsidy burden down from Rs17,000 crore to Rs 10,000 crore only, a saving of Rs 7,000 crore.

Back to Manmohan and his Mexico munificence. He gave away$10 billion, that is Rs 56,000 crore, in the blink of an eye. That is, he wroteoff eight times more money to save the world than his finance minister saved bysnatching away 5 MT of food from the plates of hungry Indians. This place atthe world’s high table sure costs a lot, a few million empty stomachs here inIndia. Suddenly, I’m not feeling so good about this superpower act. Are you?

PS: Of course, technically speaking, India has only pledgedthe money. It will be released only when badly needed. May be it won’t beneeded at all. But that does not take anything away from the fact that while weare willing to give Rs 56,000 to the world, we are cutting corners when itcomes to feeding our hungry millions.

BV Rao is the editor of Governance Now

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