It usually takes a crisis to concentrate minds and bring about radical and necessary changes in government policy. True to form and under pressure to control the fiscal deficit, the government has announced dramatic cuts in the food subsidy. Such a move has been long overdue. However, the 30 per cent hike in below-the-poverty-line (BPL) prices is unconscionable and should be removed.Political timidity over the years has resulted in a burgeoning subsidy bill and distorted delivery system. In the face of the clamour from the chattering classes, governments have resisted targeting the benefits effectively. So the costs of the public distribution system have ballooned with the demand for subsidised rice and wheat from urban middle class households and internal inefficiencies.When prices have been hiked it has usually been moderately and spurred by regular increases in procurement prices for wheat and rice. Thus the focus has been on the interests of the urban middle classes and of farmers to the exclusionof other concerns. Even as people living below the poverty line, the real intended beneficiaries of the PDS, are largely cut out of the loop, the food subsidy has risen to an estimated Rs 10,500 crore in the current year.The sudden and steep hikes in the central issue prices of rice and wheat for the non-poor are an essential first step in the rationalisation of the PDS. When state-level handling costs are added on, the prices of ration wheat and rice for non-poor categories of consumers will be close to market prices. It is likely that purchases from ration shops will fall off and the subsidy bill come down further.Besides savings on storage and transport costs, the huge levels of waste in the Food Corporation of India and the diversion of ration shop cereals to the black market can be reduced. The full impact on the Union budget will be felt in the next fiscal year. All this is as yet in the realm of what could be. Between now and reaping the gains there lies the uproar of political parties and middleclass disgruntlement. The government must find ways of coping with all this without having to backtrack substantially.Most importantly, it still remains to ensure that the poor get cards and get the food they need at prices they can afford. By no stretch of the imagination can it be said that those whose daily calorie intake is already below normal can adjust to a one-third rise in food prices. The government can only be working on the assumption that the poor do not buy at ration shops anyway. The government must see that the essential purpose of the PDS is met. A few states like Andhra Pradesh and Maharashtra have begun or will soon begin to issue separate cards for non-poor and BPL categories.Others must be goaded to follow suit. Second, foodgrain prices for BPL cards must be kept low. Third, the production of bajra, jowar and pulses must be improved and these foods make available at low prices to BPL card-holders. The food intake of people below the poverty line needs to be raised dramatically.Therefore, they have the first claim on the savings achieved by cutting subsidies to the non-poor.
