There is a terrible paradox at the heart of the Congress party. On the one hand, it professes the protection of the interests of India’s poor as its main political rationale. On the other, it thinks nothing of destroying the livelihood of the very same people. For Congress, the I of self-interest, comes before them.
Just two weeks ago, the Government rushed through an ordinance which will guarantee the supply of cheap rice and wheat to poor households. Today comes the news that the Government is seriously considering — and not for the first time in its tenure — a ban on onion exports.
Ostensibly, an export ban will curb the rising prices of onion and protect millions from the effects of inflation. In reality, it will impoverish thousands of poor farmers, whether in Maharashtra or Karnataka, while doing little to curb onion prices in the long term.
The logic of the Congress is apparent. India’s farmers and farm workers, also the overwhelming majority of India’s poorest citizens, are to be denied a well-earned livelihood. Exporting agricultural commodities is a major source of farmer income.
And higher prices, while not in consumer interest, are in the interest of farmers. Instead, farmers must live off the support of the Government, whether through dole or price subsidy.
Indeed, if the Government was so concerned about the rising prices of food why would it hike the minimum support prices of wheat and rice by 5 percent each in the last year and by an average of around 20 percent since 2009 – a period of high food inflation? Unlike the price of onion, which goes up and down, depending on demand and supply factors, the Government-mandated prices of rice and wheat go in only one direction: up. There is a clear inconsistency. There is also supreme political cynicism: farmers must see gain only from Government action, and not from market forces.
Needless to say, it is supremely stupid economics. Minimum support prices for a select few commodities like rice and wheat distort the entire agricultural economy. It skews incentives in a manner that forces farmers to grow wheat and rice (which will earn a guaranteed price) in preference to vegetables (which don’t have a fixed price, are perishable and susceptible to export bans). Unsurprisingly, because of supply shortages thus created, most of the food inflation is concentrated in vegetables and not in cereals. To make matters worse, much of the wheat and rice that the Government procures from farmers simply rots in the custody of the Government-owned Food Corporation of India (FCI) which doesn’t have the warehouses to store it.
The Congress is pulling off a massive confidence trick on the hundreds of millions of Indians still dependent on agriculture for livelihood. It keeps denying them access to market forces, which ultimately are the only sustainable way to raise farm incomes. It then compensates them by offering them MNREGA and cheap cereal through a costly Food Security Bill. The Bill will destroy the non-cereal economy, giving an extra fillip to food inflation.
The poor are still poor, living of minimum wages and minimum profits. They certainly can’t afford expensive vegetables. Only the richest farmers growing wheat and rice (a minority but influential in places like Punjab, Haryana and West Uttar Pradesh) and countless middlemen (cutting across geography) ultimately gain from the Government’s warped policies. Food Security, Congress-style, is an unsustainable farce. The rural poor need livelihoods, not cheap food and dole.
