A terrible idea in the name of the poor that also showcases official bias against farmers
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That venerable bastion of the control raj, the committee of economic secretaries, has approved that dual pricing in pulses, edible oil and perhaps sugar 8212; if the agricultural minister winks 8212; be reintroduced in the PDS. The idea, reported in this newspaper on Tuesday, is terrible. Let us take political economy as politicians understand it. A Rs 1,500 crore subsidy to imports of edible oil and pulses will transfer market income from swadeshi kisans working largely in poor dryland areas to videshi agriculturists. This means approximately an annual reduction of 1.5 million man days of employment for small farmers and landless labourers. Isn8217;t there a moral hazard, given how politicians define morality, in the government subsidising foreign farmers and urban ration card holders at the expense of farmers? Plus, the committee of wise men hasn8217;t told us how consumers will benefit, given the PDS8217;s leakages.
Second, when governments commandeer resources for welfare purposes producers are reassured by opportunities in domestic markets and through adequate financial support from the government. But now the minimum support price is way below the import price. Isn8217;t it fascinating that while the domestic organised industry is encouraged to engage with the world, the agricultural sector is protected from the good times by subsidising imports and banning exports? How is this pro-farmer?
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Third, since it is extremely unlikely that the new PDS innovations will really transfer the subsidy to the rural poor, the most likely consequences of this policy will be a rise in prices. The perversion of India8217;s official policies is known to trade at home and abroad. So, knowing demand preferences and the nature of markets, foreign exporters and the domestic trade will take the policy as a signal of official determination to arrange supplies and therefore hike prices. How will that help the poor? We need to anticipate also that opportunists with political connections will take this policy as a departure point for rent-seeking. It won8217;t be the first scam in the name of the poor. Basically, the logic of intervention can8217;t work in an economy aspiring to open up. Of course, the committee of secretaries won8217;t agree. Perhaps, the cabinet won8217;t approve the proposal. But who will argue against 8216;subsidies for the poor8217; in the UPA cabinet?
