There's no cure for sleepless Pranab's 'InSonia' disorder

When he rises to present this year's budget on 16 March, it's a fair bet that Pranab Mukherjee will have dark circles under his eyes from lack of sleep. Pranab-da himself admitted to this disorder, when he noted on Wednesday that he loses his sleep whenever he thinks of the enormity of the subsidies he has to provide for.

If that's what is keeping him awake at night, Mukherjee isn't about to find any relief from now until budget day - and even beyond. That's because a government that has been so palpably asleep at the wheel of economic management has blown a big hole in its budget, and is staring at a sharp spike in overshooting subsidies of the order of Rs 1 lakh crore.

There are many reasons to account for this bloated subsidy bill, but in large part this has come about because the UPA government has been pandering to various political constituencies and allowing them to feed gluttonously off the trough of the welfare state. In other cases, subsidies end up being directed at the supremely rich and others who don't need them in the first place, but even in such cases, the government is too feckless to cut back.

Some of the biggest additions to the subsidy burden this year have been inflicted by ill-conceptualised budget-busting schemes that UPA chairperson Sonia Gandhi has hustled through with an eye on cheap populism as a way of earning political goodwill ahead of the current round of Assembly elections. The monumental corruption scandals of recent years have eroded whatever little goodwill the UPA government had, and the Congress has resorted to cynical vote-buying through unaffordable welfare schemes - and passed on the burden to taxpayers.

In just the past year, for instance, on top of the already bloating subsidy burden and quite unheedful of an economy that was palpably slowing down, the government unveiled the food security scheme, one of the most supremely ill-conceived and prodigiously expensive welfare schemes.

 Theres no cure for sleepless Pranabs InSonia disorder

Despite lingering concerns from within the government - including from PM and agriculture minister - the Bill has been rammed through Cabinet without adequate public debate. Reuters

Even by the conservative estimates of the government, the scheme will cost Rs 1 lakh crore a year, but in fact, independent estimates by agriculture economists Ashok Gulati and Jyoti Gujral put it at closer to Rs 2 lakh crore a year for the first three years after factoring in the direct cost of subsidies and the investments required in higher food procurement prices, godowns, and so on.

Despite lingering concerns from within the government - including from Prime Minister Manmohan Singh and Agriculture Minister Sharad Pawar - over the high costs associated with the scheme and the impracticality of its implementation , the Bill has been rammed through Cabinet without adequate public debate.

As Firstpost has argued here, it's not that the poor don't deserve food security. The problem is that a scheme so complex and hairbrained as this will not deliver to the poor the food security they deserve. And in the meantime, our public finances, already precarious, would have been damaged beyond repair.

Coming on top of the untrammelled expenses in recent years on the rural employment guarantee scheme NREGA, which is leaking like a sieve, and the proposed universal healthcare provisions, the subsidy burden of the Food Security Bill is bound to keep Pranab-da sleepless for a lot longer.

Again, it's not that the subsidy burden cannot be lightened. The government could, for instance, have eliminated subsidies on diesel and cooking gas, and on tax concessions for the rich, but again, the political calculation of pandering to the urban middle class has inhibited the government from any meaningful effort at cutting subsidies.

And then there is the absolute perversion of subsidies that end up benefiting those who were never the intended beneficiaries. Like foreigners, for instance. As Firstpost had noted here, the government's fertiliser subsidy policy is "super-flawed". The finance ministry had budgeted about Rs 50,000 crore in last year's budget, but has since been revised to Rs 65,000 crore - and could eventually end up at Rs 90,000 crore if nothing is done. Worse, some Rs 35,000 crore of this subsidy goes to foreigners, because India imports 90 percent of its phosphatic fertilisers and all of its potassic fertilisers.

And West Bengal Chief Minister Mamata Banerjee, who has the UPA government wrapped around the pallu of her cotton sari wants the fertiliser subsidy extended even further. A government that is afraid of its own shadow and is kept on tenterhooks by recalcitrant allies may have no option but to yield ground.

In other words, much of the subsidy burden that keeps Pranab-da awake at night is a product of bad politics, but even a political Chanakya like him is effectively disempowered from addressing it in any meaningful way.

In that sense, much of Pranab-da's subsidies-induced sleeplessness isn't so much an insomnia disorder as an 'InSonia Disorder' - induced by Sonia Gandhi's reckless populism, her bad politics, and her willingness to bust the bank on ensuring the dynasty's political survival.

Sadly, there's no easy cure for that sleeping disorder.

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Updated Date: Dec 20, 2014 08:27:38 IST