Ruchi
Gupta
Mr Bhalla has written an alarming
piece in the Indian Expressestimating
that the Food Security Bill in the first year alone will cost 3% of
the GDP. His assertion is based on using the NSS consumption figures
from 2011-12, and then calculating the factor by which the subsidy
will increase with increased coverage, offtake and reduced price
under the NFSB. He thus calculates that the subsidy will increase by
a factor of 4.36. He then multiples the current food subsidy
expenditure of Rs 72K crore by this factor of 4.36 to arrive at the
alarming figure of Rs 314K crore!
Mr Bhalla, in his inimitably irate style writes,
Before proceeding further, I want to set up
some ground rules for discussion of the FSB and the poor. In a recent
panel discussion on CNN-IBN, noted food security expert and principal
advisor to the commissioners of the Supreme Court, Biraj Patnaik,
alleged that I “molested” poverty data. For long, I have held the
belief that policy discussion should be centred on evidence, not
ideology, and especially not, “you have to believe me because I am
arguing for the benefit of the poor”. Hence the title of my column,
“No Proof Required”. So when you look at the evidence presented
in this article (above, below and in the table) please inform me
which piece of data, or estimate, or conclusion, is incorrect, and
whose evidence is proof of molestation
Here goes.
The basic premise of this calculation is
wrong. NSS data for PDS access reflects effective coverage, and
includes estimated PDS leakage (~40%). In essence, Mr Bhalla is
calculating the increase in subsidy under the NFSB by dividing the
proposed coverage (67%; 5 kgs) by effective coverage (44.5%; 2.1
kgs)! This is completely incorrect because the government outlay does
not account for leakages (that is additional allocation is not made
for leakage). Mr Bhalla is effectively calculating the cost of a food
security bill which covers 112% of the population and not 67%.
Since when have budgetary outlays been
calculated this way? Mr Bhalla could have used the current stated
coverage as a baseline to calculate the increase in subsidy. Or he
could have done what everyone else is doing – calculated ground up
using population estimates, proposed coverage, admin costs etc. Why
Mr Bhalla chose to use this unconventional method is clear, and has
to do with his ideological predilections and not to undertake a real
investigation into the cost of the FSB. Mr Bhalla may argue that this
is the cost if the bill was “honestly implemented” – but that’s
really an absurd argument completely divorced from both political
reality and the ABCs of budgeting. In any case, can the estimated
cost of any targeted welfare program be more than that of a universal
program however much leakage? Even in a universal PDS, it is
likely that offtake will not be more than 70%-80% since the upper
income groups opt-out of the PDS given the inferior quality of grain.
Mr Bhalla concludes,
This is an open challenge to Sonia Gandhi,
Manmohan Singh and P. Chidambaram. Your minions are stating that the
ordinance-induced food subsidy bill will only increase by about 25
per cent and will amount to 1 per cent of the GDP. I get a
conservative increase of 336 per cent, or a total subsidy level of 3
per cent of GDP with an honest implementation of the bill, sorry
ordinance. One of us is massively wrong. I believe it is not me. But
prove it otherwise
Who is “massively wrong”? I believe it is Mr Bhalla
