Wrong number: Ficci trashes Amartya Sen on Food Bill

For any bleeding heart liberal, the solution to poverty is simple: take it from the rich and give it to the poor.

The logic of pressing ahead with the enormously expensive Food Security Bill (FSB) is the same, whether it is the justification offered by the worthies of Sonia Gandhi’s National Advisory Council or Nobel laureate Amartya Sen: The poor must be fed at any cost - and in any case the costs aren’t too much.

The costs vary from as little as an additional Rs 27,000 crore over the current food subsidy bill to an annual Rs 2,00,000 crore. No prizes for guessing who made the lower estimates (the food ministry). The higher estimates came from Ashok Gulati, Chairman of the Commission on Agricultural Costs and Prices. Industry apex body Ficci estimates the annual costs at Rs 1,43,000 crore - taking both subsidy and related logistics and wastage costs involved.

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[caption id=“attachment_215830” align=“alignleft” width=“380” caption=“Sen’s glib solutions have been questioned by Ficci - the industry lobby. AFP”]  [/caption]

Amartya Sen, latching on to the lowest figure, went a step further and said that the costs are pale compared to the concessions offered to taxpayers of various kinds. In an article in The Hindu last month, he wrote:

“Fiscal responsibility is certainly a serious issue and the financing of food subsidies, like other social programmes, demands critical examination. But it is worth asking why there is hardly any media discussion about other revenue-involving problems, such as the exemption of diamond and gold from customs duty, which, according to the ministry of finance, involves a loss of a much larger amount of revenue (Rs 50,000 crore per year) than the additional cost involved in the Food Security Bill (Rs 27,000 crore). The total “revenue forgone” under different headings, presented in the ministry document, an annual publication, is placed at the staggering figure of Rs 5,11,000 crore per year.”

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Sen’s unstated solution is that this revenue forgone should be used to fund the FSB.

Well, Sen’s glib solutions have been questioned by Ficci - the industry lobby.

According to Rajiv Kumar and Soumya Kanti Ghosh, Secretary-General and Director (Economics and Research) at Ficci, the revenue forgone figure is not exactly money for jam. In a two-part analysis of the FSB in The Indian Express(read this and this), they conclude that “the additional expenditure for implementing the FSB is far greater than any actual revenue forgone for promoting economic activity in the country.”

What they mean is if this revenue is taxed, the edifice of growth could well come down several notches, and we can then forget all about food security.

According to the duo, this is what accounts for the bulk of the revenue forgone:

Rs 1,98,291 crore comprises duty concessions for mass consumption goods like medicine, toothpowder, candles, kerosene, etc - withdrawing these will directly hit the poor that Sonia and Sen want to serve.

Rs 1,74,418 crore comprises import duty concessions for items meant to be re-exported. If these go, our export story also collapses.

Rs 50,658 crore of exemptions relate to concessions on insurance premia, contributions to charities, interest payments on loans for higher education, etc. This is, admittedly, not going to the poor, but the salaried. But is any political party willing to risk this class’ ire?

Sonia and Sen need to rework their glib solutions.