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The questionable Food Security Bill

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Economy

The food security bill will condemn India’s poor to perpetual poverty. The bill plans to distribute grain to two thirds of India’s population at a 90 per cent subsidy costing over Rs 1,00,000 crores. The food security bill gives people something for nothing and thus weakens the work ethic. Giving people virtually free food will keep them dependent on a ‘mai baap party’, trapping them into a permanent vote bank. It is a brilliant strategy of the Congress party at the centre — both the voters and the party will thus have a vested interest in keeping people poor and dependent.

If the same Rs 1,00,000 crore were to be spent in providing public goods — roads, schools, power, and law and order — it would encourage entrepreneurs to start businesses, which would create sustainable jobs and raise the state’s tax revenues. These taxes, in turn, would make it possible to invest in more public goods. Thus, a virtuous circle would be created and lift the society’s standard of living. But the Congress would lose out for people would move out of poverty and out of its vote bank.


For the full text of a highly readable essay by Sri Gurcharan Das in the SToI, click here.

Can't agree with you more, Sir. While supporting the economically weaker sections is certainly a laudable objective, taking it beyond a limit is besides insulting and demoralising to those who earn their daily bread doing an honest day's work.

Muralidhar Rao

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murali772's picture

politically correct-ism

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Simultaneously, following are the excerpts from an essay by the Congress minister, Mr Shashi Tharoor (the full text may be accessed here).

Self-reliance” guaranteed both political freedom and freedom from economic exploitation. The result was that for most of the first five decades after independence, India, despite the best of intentions, pursued an economic policy of subsidizing unproductivity, regulating stagnation, and redistributing poverty. We called this socialism.

Indian-style socialism was a compound of nationalism and idealism. It embodied the conviction that goods and services vital to Indians’ economic well-being must remain in Indian hands – and not in the hands of Indians seeking to profit from producing and selling such goods and services, but rather in the disinterested hands of the state, the father and mother to all Indians.

Given this mindset, performance was not a relevant criterion for judging the utility of the public sector. Inefficiencies were masked by generous subsidies from the national treasury, and a combination of vested interests – socialist ideologues, bureaucratic managers, trade unions, and monopolies – kept it beyond political criticism.

The “permit-license-quota” culture of statist socialism allowed politicians and bureaucrats to use public service as a vehicle for private gratification, giving birth to a culture of corruption that still persists. India’s misfortune, in the economist Jagdish Bhagwati’s famous aphorism, was to be afflicted with brilliant economists. Add to that clamorous politicians and growing demands on a national economic pie that decades of protectionism prevented from growing.


Of course, Shashi Tharoor will say that it his personal opinion, and not the collective opinion of the UPA. What is essentially happening is that, while there are a whole bunch of right-thinking Congressmen, they just seem to be unable to carry their convictions to the electoral battle. And, this is not confined just to the Congress party alone. I wonder when we will start seeing an alignment of "politically correct-ism" and "correctly correct-ism".

Muralidhar Rao
kbsyed61's picture

Shades of GOP in our courtyard!

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Murali,

Your post reminds me of Republican Campaign manifesto against President Obama. The points of argument were more or less the same and at times went beyond actually painting the entire Afro-American community as lazy bums. In that argument they forgot that a large chunk of the 'Food Coupons' beneficiaries were Caucasian white conservative families, which formed the base of GOP.

Moral of the story is, instead of raising this selective bogey of criticizing the social welfare schemes irrespective of their merits, the discussion should be steered towards how to ensure that every penny of the govt is spend judiciously and spent on targeted objectives. How do we ensure that every body has fair chance to avenues of economic empowerment? A lofty aspiration to demand?

Your posts and Gurucharan's column doesn't offer any solution barring criticism of the proposed food security bill. In the enthusiasm of painting everything by govt as bad, you guys have just lost the balance of analyzing the merits of the program and its impact in short term and long term. The often repeated slogans of privatization will lead to prosperity, subsidies leads to corruption are also lofty ideals which are yet to be realized even in the 'Mecca Of Free Economy'. Let's discuss efficient ways of helping the needy not just the rich and wealthy. Let's not be selective critics.

The selective criticism, condemnation of wrongs is the worst damage we are inflicting on society and the nation.

Likes of Gurucharan doesn't have any issues when govt acquires farm lands and gift to Tata's and Ambanis. The CM is touted as symbol of growth and development. A hue & Cry is created around if govt for good or bad reasons plans to dole out welfare measures in kind or money. It is reforms when govt offers tax benefits to industrialists, but it is criminal waste if subsidized food is offered to the poor.

I am yet see like of Gurucharans coming out with any blue print to do away the fuel subsidies our industrialist friends enjoy for the their gas guzzlers, subsidized energy for their farms and industries?

I am yet to see likes of Gurucharan praising removal of tax benefits to the wealthy and rich.

In our own backyard, we have no grudge, no problem if the government goes ahead and funds projects to build signal free corridors worth 1.2 lakh crores , because it is suggested by likes of Corporate Honchos like Mr. Mohandas Pai. But a citizen demanded projects like pedestrian infrastructure in the city costing some pittance 300-500 crores, CRS costing 8000 crores raises eyebrows and every power in govt marches forward and shoots down the proposals citing pre-feasability and due diligence.

Likes of Gurucharn has no qualm with continuation of dens of corruption like DDAs, BDAs. I am yet to see one known name in the Bangalore city that has come forward to say, it is time BDA is shutdown, barring Prof. Ashwin Mahesh. How can they do that when they themselves are enjoying the fruits of BDA's corruption regime?

I am not for or against the proposed Food Bill. I am a supporter if the attempt is to deliver the benefit to the beneficiary. I am against if the existing PDS is not made efficient in the process. In the long run, all the welfare measures should be delivered in cash. Hope the Direct Cash Transfer becomes that tool and becomes a catalyst to remove the dead wood, corruption and inefficiencies in our delivery mechanisms.

In the parting, let me end my case with these. There is no evidence in the history that suggests that the state has no role in taking care of vulnerables. Even today the greatest welfare measures are given in the most developed countries like mecca of capitalism - USA. Food Stamps is the name of the welfare that are given to poor families in US.

We would be better off if we could get over this perpetual prosperity dreams and aspirations. When Sun sets, there is a dark night to pass before we see another dawn.

-Syed

murali772's picture

aamdani atdhanni; kharchao rupaiah

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@ Syed - When I ask for privatisation/ outsourcing, I am essentially asking for efficiency in delivery, which the public sector (particularly monopolies) has generally proved incapable of providing. Also, I have no issues against providing for subsidies for the "deserving", particularly if it is done efficiently through the cash transfer (Aadhaar) route. But here, "the bill plans to distribute grain to two thirds of India’s population at a 90 per cent subsidy costing over Rs 1,00,000 crores", which, on top of the mammoth allocations for the various schemes already in place, is going to starve funds required for the country's productive activity.

You need to generate wealth before you can get down to distributing it. If you do it the other way, and in addition stifle all economic activity, you are heading for plain trouble. That's in essence what Gurcharan Das is saying.

Muralidhar Rao
murali772's picture

three highly readable articles on similar lines

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1) Thatcher demolished the two conservative pillars of British society: the labour unions that held the parliamentary Labour Party in bondage, and the upper-class Tory leaders who resembled the benign but hapless relics of 'Downton Abbey'. It's hard to say which side was more hidebound and resistant to change, the unions or the aristocrats. They were unwitting partners in Britain's paralysis.

For the full text of the essay by Mr David Ignatius (who writes for the Washington Post), in the ToI, click here

2) It is time that the United Progressive Alliance did some serious soul-searching and reconsidered its approach to converting every social and economic goal into a right. I sometimes joke that the willingness with which the government has been obliging vocal NGOs might soon bring us a legal right to happiness. 

It is not an accident that the founding fathers placed economic and social goals such as those relating to education and health in the directive principles rather than fundamental rights. Rights such as the freedom of speech and religion and equality before law regardless of race, religion, caste and gender, originally recognised as fundamental rights, were "negative" rights that courts could enforce through "writs" when the state violated them. In contrast, economic and social rights require "positive" action by the state, which the courts cannot readily enforce. 

The founding fathers also understood that unlike what they classified as fundamental rights, economic and social rights were not absolute and would vary over time and space. The minimum acceptable healthcare today may turn unacceptable tomorrow and what is acceptable to Bihar may not be acceptable to Kerala. 

Creating fundamental rights that the government neither intends to enforce nor has wherewithal for undermines the respect for the original fundamental rights and makes a mockery of the Constitution. 

For the full text of the essay by Prof Arvind Panagariya in the ToI, click here

3) What Indians across the political and class spectrum need and deserve is empowerment, not crippling entitlement.

For the full text of the essay by noted columnist, Shankkar Aiyar, in the New Indian Express, click here

 
Muralidhar Rao
murali772's picture

need for a welfare re-think

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Nordic countries have become synonymous with the march of the welfare state. They also routinely top indices of both economic and social health. So from India and China to the US, policy documents justifying the expansion of the state's role in employment, education, health et al routinely quote examples from Sweden, Denmark, Norway and Finland. But it's been little noticed how the Nordics have been making a seismic shift away from tax-and-spend to leaner governments - trying to balance their books and encourage competitiveness.

Sweden, for example, has dramatically reduced its budget deficit to 0.3% of GDP and its corporate tax rate to a level far lower than that of the US. From spending bucketfuls on welfare, these governments have become focused on what they can afford and on the measurement of outcomes. Innovation and transparency have become big buzzwords. 
 
But all the above rings few bells in India.  - - - Just consider the food security bill cleared by the cabinet recently, even though existing subsidies already distort agriculture prices, and though a rising fiscal deficit keeps the rating agencies hanging a Damocles' sword over our sovereign rating. Or consider MGNREGA, which a new study by the Commission for Agricultural Costs and Prices categorically proves a much less effective driver of rural wages than GDP growth. Given that this growth rate has dropped from 9% to a stagflationary 5% now, India also needs a welfare rethink. 
 
For the full text of the editorial in the ToI, click here.
 
Quite desperately needed too.
 
Muralidhar Rao
abidpqa's picture

Welfare is a feature of

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Welfare is a feature of capitalist society. Without welfare capitalist system will be unstable.  There is no way to predict when anybody willneed help.  The government need to help those who fail which is inevitable in capitalism. Otherwise, there will not be risk taking. Ignoring welfare in capitalist society is dereliction of duty of government. Welfare need to be extended more in India to healthcare, education etc. and we need better personal bankruptcy protection laws. These laws in India are pre-independent.

murali772's picture

govt as the 'anna-daata'

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@ abidpqa  -  Exactly. The government should be promoting entrepreneurship so that the enterprises can then take care of the needs of the people. Protection against the drastic consequences of bankruptcy should also be a part of the government's promotion package.

As compared to that, in Socialism, the government takes on the role of the "anna-daata" for everyone, goes broke in the process, and makes the entire country broke too.
 
You couldn't have put it all better.
 
Muralidhar Rao
murali772's picture

learnings from the 'Saradha' ponzi racket in West Bengal

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In contrast to eastern India, the development of an equity culture in western and southern India has a long historical tradition. The anti-Brahmin movement long before Independence not only created regional identities but followed it up with a capitalist transformation and industrialisation. Apart from the ideology of social justice, a nascent capitalism thrived in native banking institutions and the stock exchange. 

Equity and industrial and capitalist culture have been in retreat for a long time in that region, with real estate and deposit organisations occupying economic space instead. Though real estate may have created value, deposit organisations have played financial havoc. If market economy has to succeed in the east, the culture of Weberian capitalism will have to be promoted. 
 
For the full essay by Mr Shaibal Gupta, in the ToI, click here.
 
Indeed an eye opener, I would say (The subject has a relevance to the discussions here, even if not totally direct).
 
Muralidhar Rao
murali772's picture

not just questionable, but disastrous

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While one part of the government wants to move away from traditional systems of delivering subsidies to Aadhar-based direct cash transfers to the bank/ post office accounts of beneficiaries, the food security bill has always been a bit of a curiosity. Given that the bill is to be implemented through the existing ration shop-based system, the leakage levels in it are expected to be roughly similar, with around 40-50 per cent of grain siphoned off along the way. If implementing the bill is to cost Rs 6 lakh crore over a three-year period, as the Commission for Agricultural Costs and Prices (CACP) reckons, that's a huge Rs 3 lakh crore to be siphoned off by various middlemen along the way. Nandan Nilekani, the man whose job is to clean up precisely this kind of loot, must be seething at the thought of a gargantuan new loot-in-the-name-of-the-poor scheme being promoted while he's struggling to contain the loot in other schemes — thanks to various public agencies refusing to cooperate, phase one of Aadhar-transfers has been such a miserable failure, only Rs 40 crore got transferred to beneficiary accounts in 43 districts.

For the full essay by Sunil Jain in the Indian Express, click here.

With even the main opposition party, the BJP, happy with its introduction for its own reasons, we are indeed headed for disaster.

Muralidhar Rao
kbsyed61's picture

Amartya Sen puts his weight behind FSB !

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We all can make cases depending upon which side of aisle we are. So goes with these so called columnist, experts. There is no dearth of opinion makers dissecting the same body but arriving at different conclusions.

If, Sunil Jain, a known Congress basher and BJP supporter, can write against FSB, there are others like Prof. Amartya Sen, Jean Dreze and Kavita Srivastava supporting it vehemently. Though the later 2 are terming the bill as too little, but agrees can be a start.

http://www.thehindu.com/news/national/pass-food-bill-even-without-amendments-sen/article4689314.ece

It would have been a better proposition, if we had made efforts to analyze the bills, its ramifications in short and long term to judge whether this is a good bill or not. Merely relying on these experts if we have to decide, I would lean on Prof. Amartya Sen.

Like leftist describe the government largesse, it is a welfare/subsidy if given to poor and it is a reform if given to rich. All in the name of help and depends upon who gets it.

Classic example is no body including corporates, complains about Fuel subsidy? No 'Free Economy' proponent ever criticizes BDA, DDAs? not even word is murmured? Reason, just drive down the streets of BDA/DDA localities and see who lives there? You get the answer.

 

murali772's picture

resting my case

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@ Syed - Do read the comments under Prof Sen's article, as also those under the article by Ms Madhavi Cherian (linked here, again from "The Hindu"), and draw your own conclusions. I don't think I want to change mine.

Muralidhar Rao
kbsyed61's picture

unanswered?

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One end we are questioning the idea of constitutional entitlement to food for poor, we have no qualms about subsidies that we are continuing to enjoy whether it is subsidized 'Residential Plots' or subsidized fuel for luxury cars.

All in all, my questions to BDA sites have remain answered? Not that I am looking for answers, but was trying to see how does our Free Market economy proponents visions the government largesse like Tax Breaks, Fuel subsidy, Land Subsidy etc viz-a-viz PDS, RTE, FSB etc.

Wish our Free Market economy proponents had looked at US model on helping the poorer sections to sustain the low cost labor market.

US govt provides subsidy in the form of Food Coupons, subsidized housing, Educational Aid, unemployment benefits and agriculture subsidies to farmers keeping the prices of Bread, Milk, Poultry cheap so that the daily/low wage earners can still sustain and live honorably.

This is not a socialist agenda of welfare system, but a smart way of providing a regime for low cost labor. Even a daily wage earner in McDonald or Gas station attendant or even a Cab driver can easily afford the living though earning the lowest wages. Who benefits it? Everybody. Both poor and rich. Low wages, means more room for entrepreneurial instincts. You just can't survive on Tatas and Ambanis. You need 1000 more new Tatas and Ambanis.

in all this confusion, there is something silently happening in the hinterlands that has not happened in last 60 years. Financial Inclusion. Until now, the banking had remained the exclusive right of elite and rich. Even the Public sector banks didn't had the hearts to expand in interiors of 'Bharat'.

http://www.business-standard.com/article/finance/banking-connectivity-surges-with-bc-mode-113041801146_1.html

Until 2010 only 67,000 villages out of 6 Lakh villages had banking facilities. Due to the new social programs like Aadhar, DCT etc, now the figure stands at 2 lakh villages connected with banking network. With the 'Business Correspondent' concept becoming popular, soon a majority of these hinterlands would have access to Banking through these newer models of banking.

No wonder we hear noises from all over now as the one of the last exclusive bastion has been raided and no longer remains the exclusive club of rich and elites.

murali772's picture

clarity needed

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@ Syed  - First and foremost, please understand that I would have been for Socialism if only it was workable. It is just not workable, and as such the ones who go about preaching Socialism today, are plainly pseudo's, who are largely pursuing their personal agenda in the name of the poor. And, being against Socialism does not automatically mean that I subscribe to total capitalism, or free market economics. I have repeatedly stressed the importance of government's role as a facilitator, and a regulator (where necessary, controller). And, in spite of it all, when your statements imply otherwise, I find it plainly perplexing.

Further, I don't quite understand this BDA talk. I had once applied for a BDA site, and gave up after a wait of a few years, since, as an ordinary citizen, I remained last in the queue. BDA has always been for government johnnies, and for those who can manage to jump the queue through 'G' category allocations, etc. So, what's the point you are making?

And, nobody is against subsidies for the needy. All that is being said is that when it is going to be handled by the same PDS paraphernalia, which none other than Ms Medha Patkar herself termed the "grand-mother of all scams", causing a loot of Rs 10,000 cr pa, even as far back in '09 (check this), with what confidence can anyone say it will work better now. Besides, when you can reach the full benefit of the subsidy (minus the massive leakages) to the beneficiary by way of cash transfer through Aadhaar (equivalent of your coupons, and of which you are a vocal proponent), why not use every resource available to strengthen that? And then quite like you say even the petrol bunk attendant will be able to buy the same quality of food that you and I buy (say from a Big Bazaar), as compared to the under-weight and rotten grains, and adulterated kerosene that he now gets from the ration shop.

And, as for Prof Amartya Sen's comments, read here (from last Sunday's ToI) as to what S A Aiyer has to say. Please don't ignore the readers' comments. Quite like one has said - "listening to him, the CPM caused the ruination of West Bengal; and the centre listening to him now is the sure recipe for ruination of the rest of the country too". Prof Sen is long past his 'sell-by' date.

Tax Breaks/ Land Subsidy: Let's take the instance of NANO plant in Gujarat. NaMo competed with Karnataka to offer incentives to TATA's to set up the plant in his state. One such industry then becomes an engine of economic growth of the entire area, and in fact the state. The benefits thereof to the state and its people eventually are far more than the value of the concessions afforded. It is quite in the same fashion that Siriperumbadur (near Chennai) has become an auto industry hub benefiting entire Tamilnadu's economic growth, as also the Electronic city in Bangalore becoming the engine of growth of the IT industry. These are basic economics, which surprises me to have to be spelt out even in forums like PRAJA. And, now with the new Land Acquisition Bill, even the few cases of improper compensation payment should get sorted out.

Fuel subsidy: The automobile industry lobby could be wanting it. But, who in PRAJA is supporting it?

All in all, one wishes there is a bit more clarity in thinking before provocative comments are aired.

Muralidhar Rao
kbsyed61's picture

Clarity !

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@murali - Chill, nothing personal here that should be construed as against you or any body else. You are not the only 'Free Economy' campaigner and same is true for any socialism fan. I am supporter of neither. I am against viewing things from ideological lenses. I am for all those policies which are good for common people and the nation.

Clarity, yes you are right clarity is needed. Wish the authors that you had quoted to buttress your argument against FSB, had presented more clarity to the readers. Since it is viewed from our prejudicial blinders, balanced view is hardly expected from all the authors that you listed against FSB.

The mention of BDA/DDA is in the context of Govt largesse that has only benefited very few and look around the BDA colonies reveals who benefited from this. Willingly or unwillingly we have allowed this regime to continue and have supported its conversion into a "Mecca of Corruption" in Bangalore. Nowhere I have attributed any personal claims against you with owning or personally benefiting from this govt largesse. I was only pointing to the intriguing silence on this during the discussion for removing govt's role in such entitlements. Do Bangalore still needs BDA?

Regarding NaMo's special consideration for TATA, isn't odd that again a state govt has to provide special provisions for certain special breaks, acquiring of land etc. Isn't that itself is the testimony that a select few is enjoying the fruits of govt largesse? Like you keep stressing, isn't time for all govts including NaMo to create such environment, where even ordinary folks like you or me can go and should be able to get the same incentives. Time to stop this special treatment to very few. Industry should be allowed to put up their operations without any unnecessary govt's help. Consideration should be universal not selective like given to Nano.

Lets come back to the FSB discussion. Here is the official version of the Food Security Bill - 2013.

In all your quotes 3 aspects come to the fore -

  • Acceptance that we should help the needy,
  • PDS is broken, needy are not benefited
  • FSB will make the poor more lethargic, in Indian slang "Kamchor"

Barring the first, other 2 are contradictory to each other. I do agree that PDS currently in most parts is broken, but doesn't mean there shouldn't be an attempt to correct that. If FSB could be a vehicle to that major re-haul, why not? Even you agree that the new attempts to use AADHAR like instruments to target via Direct Cash Transfer for the subsidies should be given a chance. You will be amazed that Section VII - Reforms in Public Distribution System, calls for exactly that.

In Chapter VII, the Bill states that central and state governments “shall endeavour to progressively undertake” various PDS reforms, including: doorstep delivery of foodgrains; ICT applications and end-to-end computerisation; leveraging “aadhaar” (UID) for unique identification of entitled beneficiaries; full transparency of records; preference to public institutions or bodies in licensing of fair price shops; management of fair price shops by women or their collectives; diversification of commodities distributed under the PDS; full transparency of records; and “introducing schemes such as cash transfer, food coupons or other schemes to the targeted beneficiaries in lieu of their foodgrain entitlements” as prescribed by the central government.

- See more at: http://tehelka.com/exclusive-summary-of-the-national-food-security-bill-2013/#sthash.xe9a35kW.dpuf

I am sure you will also do not want to junk something which could in long run can get rid of various inefficiencies in welfare delivery system, unless like many you are against the idea of AADHAR as tool for unique identification and its use in targeting beneficiaries of govt's help.

murali772's picture

here's even more clarity

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You are not the only 'Free Economy' campaigner and same is true for any socialism fan. I am supporter of neither.

Socialism is not practical, and therefore does not exist in its true form. And, I am totally against pseudo-Socialism which is passed off as Socialism.

Wish the authors that you had quoted to buttress your argument against FSB, had presented more clarity to the readers.

I find a lot more clarity in their arguments than those forwarded by the likes of Prof Amartya Sen, and that's why I back them.

Since it is viewed from our prejudicial blinders, balanced view is hardly expected from all the authors that you listed against FSB.

Please talk for yourself; I have no prejudicial blinders. And, I don't believe in imposing my views. If somebody does not agree, I back out saying ' I rest my case'.

BDA was supposed to address the housing needs of the citizens, and they were generally supposed to follow a certain criterion for allocation of the plots. And, I am certain the criterion would have been quite fair too, immaterial of the fact that people like me could never have become eligible even after achieving grand-father status. That it got corrupted is another matter. But then, which of the government organisations is not corrupted? Should we then tolerate that? Absolutely not.

I am familiar with the electrical industry; so, I am shouting from rooftops for reforms in that sector. Seeing the plight of my workers (when I was running my industry), I developed an interest in public bus transport services, and again I am shouting from rooftops for reforms there. Likewise, as the Secretary of the RWA in Domlur 2nd stage, when I was living there, and later as the President of the apartment owners' association where I am staying now, I got a clear understanding of the water supply scenario, and I have again been shouting from rooftops for reforms there too. Similarly with Apartment Ownership Act, policing, traffic issues, etc, etc. Now, if you feel strongly about BDA issues, start a blog, bring out the injustices, make representations, and campaign for reforms, quite like Sanjeev, you and others have done in the case of Commuter Rail. Instead, if you just keep airing some vague innuendo's, how do you expect anyone to even bother?

where even ordinary folks like you or me can go and should be able to get the same incentives. Time to stop this special treatment to very few. Industry should be allowed to put up their operations without any unnecessary govt's help. Consideration should be universal not selective like given to Nano.

What makes you say this? Have you even tried? Let me tell you my experience - I submitted a credible project report, way back in 1977, and got the KIADB to allot me a 1 acre plot in Whitefiled area, and I set up my industry, again with Rs 9 lakhs (a princely sum then) loan from KSFC. At that time, I was new to Bangalore, I didn't have any uncles to back me, and as such, the sanctions were based purely on merit. I never had to pay any bribes (only mamools - for the difference, click here). Later too, when I wanted to expand, both KIADB and KSFC were most helpful, going purely by my track record. You may say that was then, and things are different today. On the contrary, progressive governments are always for genuine entrepreneyrship, and if you can establish your credibility, they will lay out the red carpet for you - even now.

You'll then ask why did I pull out of industry? It is more or less explained here. The government wasn't progressive looking at the macro level, and it began to impact me badly (besides, I wasn't dependent on it totally, either).

unless like many you are against the idea of AADHAR

I have largely favoured Aadhaar. Yes, I have expressed concern over possible misuses. But I now tend to believe that the benefits far outweigh the negatives. But, unfortunately, the government, instead of strengthening the scheme, is clearly seen to be back-pedalling on it, since they see greater the voter appeal in schemes like FSB. And, all that is in fine-print in the bill is like what is in the fine-print in the case of BDA allocation guidelines too - it will remain just there, going again by PDS's track record of so many years, where even a Medha Patkar has more or less given up on it.

Muralidhar Rao
kbsyed61's picture

Fineprint!

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What makes you say this? Have you even tried?

Yes myself and my brother did tried in 1990 to 93. Couldn't secure a simple loan from any of the entities that you want to think. Had a family to support, finally in 93 I had to give up and took a job. My brother continue to struggle with small enterprise in absence of working capital. I agree we did not had the merit of "Money" or any asset for collateral. After struggling down for 7-8 years, my brother shutdown the shop in 98. I don't think anything has changed since than. You might be a lucky one, bot not us. It is past now and we have moved on, have no regrets or any heartburn.Only wish is if Almighty have his blessing, one day would like to promote entrepreneurial ventures among youths.

And, all that is in fine-print in the bill is like what is in the fine-print in the case of BDA allocation guidelines too

If that is the case every legislative bill is nothing but fine prints. Even the so called "Apartment Ownership Act" that Praja members are fighting for is also nothing but a bunch of fine prints. That is not the way I see them. I see them as starting points and recognize the work that is cut out for the implementation to the letter.

Regarding the FSB discussion, the same authors who are opposing have no issues with BJP's claim of 90% coverage in Chattisgarh. That only shows how far balanced their analysis or opinions are. If Chattisgrah can do better job with PDS, why not others?

 

murali772's picture

muddling along

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merit of "Money"

I don't know what you mean by this? Yes, I had to bring in the "margin money" required of about 25% of the total project cost, and my father helped me there. To that extent, I was fortunate. But, the whole sanction process was quite an evolved one, and the ability to bring in the margin money wasn't the only criterion for the award. Besides, both KSFC and SBI (my bankers) were dealing on commercial terms, and while affording re-financing and all such concessions available to SME's etc, they went about their tasks in a most professional way. It was essentially business, and not charity.

Today, of course, you have the venture capitalists, who could support you if your father is not in a position to do so. But, again, it calls for a lot of hard work to establish your credentials with them before they pump in the money.

As for 'fine print', in the case of PDS, it is the department alone that is concerned with the matter, and they find it convenient to ignore it. There are some cases of NGO's monitoring it successfully; but, even they tire out after some time. As compared to that, in the case of KAOA etc, it is the RWA, and Civil Society lot who are now going into the fine-print, and that can make for some significant difference.

Regarding the FSB discussion, the same authors who are opposing have no issues with BJP's claim of 90% coverage in Chattisgarh. You had earlier also stated: Sunil Jain, a known Congress basher and BJP supporter.

If you had read Sunil Jain's article fully, you would have noticed that he has been far more critical of BJP (including the Chattisgarh government) than the Congress - well, perhaps the 'prejudicial blinders' that you talked about, shows out clearly here. And, can anybody say that the Congress doesn't deserve all the bashings it has been getting?

Muralidhar Rao
kbsyed61's picture

No body asked for charity!

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Murali,

Who wants charity?

Regarding finance to start entrepreneurial venture, we didn't asked for charity and nor a give away was expected. Went to the entities like banks, KSFC and presented our case for a business loan. The only think we were lacking there was collateral which we didn't had. So have return empty handed. End of the story. We worked very hard for next 7-8 years to establish ourselves, but without working capital it is difficult to grow from day-to-day earnings. So we shutdown the shop. From there on we have not looked back and by grace of Almighty we have moved on and have been doing better since than. Taking care of ourselves, our families and our much felt passions of philanthropy in whatever way we can and however small it is. Same emotions brings me to Praja and other such forums.

Let me reiterate here, we did not go to the bank for a charity and nor we expected a handout from anybody like. So where is the question of charity here?

What we tried to do is to earn a honorable living like millions of Indians try to do every day. So what if we have failed as Entrepreneurs? At least we have tried and still wishes to help those who are denied by banks/KSFC for financing.

 

kbsyed61's picture

Any alternatives?

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Murali,

Fine, let for a moment agree that FSB, PDS, Subsidies are not the way to help people. Than what alternatives do you suggest?

-Syed

 

murali772's picture

I can't complain

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@ Syed - KSFC talked about the need for collateral security to us also, initially. But, later, they themselves classified us as 'professionals with required experience', which allowed for waiver of the collateral by the board. All that was required of us was to mortgage the factory property (land and buildings), and hypothecate the plant and machinery, apart from providing personal guarantees of the promoters. Our experience with KSFC and banks had generally been very good, almost althrough.

And, it's not just me. Two of my close friends followed my route, though starting off at much lower levels than me, due to initial financial constraints, but who went on to become multi-millionnaires in later life. So, I don't think there is much to complain on that score. Beyond that, on the why of KSFC/ banks not supporting you, I can't comment.

Well, if you want to set up a consultancy cell on entrepreneurship (in non-IT fields), I can perhaps contribute.

Muralidhar Rao
murali772's picture

target subsidies correctly

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@ Syed - Again, you are being careless with the choice of your words. I have never said that I am against "subsidies". All I am insisting on is targeting it right, and in the most efficient way. The lower margin level of 25% for SSI's, and the concessional interest rates at a few percentage point levels below the commercial lending rates, for both term loans as well as working capital loans (talked about in the earlier post), were subsidies that I myself enjoyed as an entrepreneur. Such subsidies are very much required. As compared to that, the subsidies that I am getting on LPG, and water supply today are not correct and need to be withdrawn, and I have stated that in the blogs that I have posted on the subjects too.

Alternativews? - Just do as I say in each of my blogs :))).

Muralidhar Rao
kbsyed61's picture

FSB can be tool for stable and sustainable labor market regime!

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Murali,

My apologies, I didn't mean you are against subsidies. I meant the subsidies regime that is currently in place.

As you said, different sections of the society needs subsidy for different sustenance levels. Therefore can't term these as 'Charity' and will make the recipients lazy and spoil them. I certainly take offense on that notion and characterization.

I see virtues in FSB not because I am supporter of UPA or dead against others. I am none of them. I am a supporter of those who deliver and run affairs honestly. Also I believe no party should get more than 2 chances in a row. That makes them arrogant and complacent.

Let me give you my reasons for seeing virtues in it, with a caveat that if it is implemented in honest and a right manner. I am only hoping :)

1. Sustainable / affordable labor market

Irrespective of how we do it, if we can somehow provide food grains and necessary things for daily consumption like milk, bread, sugar, tea/coffee, eggs at a price that is cheap (relative to a low wage earnings), there can be guarantee for labor force at cheaper rates. You know the benefits of cheap labor rate for businesses and industry. In US this is done by providing direct subsidies to farmers to keep the prices of essential items low. This low priced items are available for everybody.

Ex. A daily wage earner earning $5.75/hr earns about $300 a week. That is about $1200 per month. If another person also works, it is about $2000-2400. Expenses for  a family of 2+2,

Groceries for a month will cost  - $300-400

Subsidized rent  - $700-900

Gas/Daily Commute - $200

Electricity/Cooking Gas - $100

Phone/TV - $100

Miscellaneous - $ 200

Total per month - $1600 - $1900

Though very tight on earning Vs expenses, but can still survive on earning the minimum wages. The lower wages boosts businesses to compete with lower margins, newer ventures and can depend on power wage work force. Nobody better than you can appreciate the benefits of such regime.

2. Will help cut down the recipients

Though not intended but FSB will push the enrollment of AADHAR which we all agree is need of the hour. Once you have mechanism to identify the needy, there should be no problem to design the delivery mechanisms.

3. Widening the Banking Services

It is already been reported that with the lure for subsidy money linked to Aadhar enrollment, banking services are being extended to the hinterlands, which did not happened for last 60 years. Even the Public Sector banks had remained urban centric. Nothing to say about private banks. The concept of 'Business Correspondent' is slowly catching up and if it succeeds will increase the reach of Banks. Which means more scope for more employment and business opportunities.

4. Subsidy in Cash

Its only a matter of time but eventually our policy makers have to do this. Replace the existing subsidies in kind specially like food, fuel, agriculture etc with 'Cash'. It has already been tested in parts of Delhi and results are encouraging. That means death nail to 'PDS' and other subsidy regimes. Sooner we do it is the better.

These are some reasons why I would support the FSB and any such attempts. I would like to be on the side where we experiment new things and as you keep reminding, at least we will not have the old problems. The new problems will be dealt with more new experiments and getting replaced by new problems.

murali772's picture

the catch

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with a caveat that if it is implemented in honest and a right manner. I am only hoping

That's precisely where the problem lies - will leave it at that.

Muralidhar Rao
kbsyed61's picture

Inclusive politics and economics is suspect?

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A nice write up by Harish Khare on recent election results of Karanatak state assembly and the obsession of the middle class.

Source - The Hindu

"..The recent Karnataka Assembly vote has apparently disappointed the self-styled ideologues of the Indian middle class. These baffled theologians are wondering aloud how voters in Karnataka could opt for the very political party against whom the entire middle class had risen to its last MBA. How could the electorate not be influenced by the two-year-old high-pitched campaign against the “corrupt Congress,” launched by the upper middle-class dominated media, both electronic and print? Was not Bangalore one of the epicentres of the anti-corruption dharmayudha, led by the very venerable Santosh Hegde? How could the voters be so indifferent to the corporate-endorsed “good” candidates? There must be something terribly wrong with the poor if they are not buying into the upper middle class quest for the nobility of an honest society..."

 

"..The disappointment with the Karnataka vote reveals another charming vanity: the media is an honest conveyer of society’s anxieties and anger. Increasingly this claim no longer stands a close scrutiny. Sensitive and vigilant observers of the Indian media are worried about the emerging pattern of media ownership. It is a matter of deep democratic disappointment that none of the self-appointed mullahs of the anti-corruption jihad has ever gathered the personal courage or summoned the intellectual honesty to talk about the unhealthy convergence of media ownership and corporate houses. Nor, for that matter, has anyone dared to point out how judicial indulgence has become readily available to almost every crooked fund collector..."

 

Vasanthkumar Mysoremath's picture

Give FSB-2013, a chance on trial for one year

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Any social welfare measure aimed at a section of people is invariably viewed with suspecion on grounds of non-delivery and corruption. If a safe system with connectivity to Aadhaar can ensure proper delivery to the end user, why not let the Bill be allowed to be implemented on a trial basis for one year? 

 Even if a sum of 1,00,000 crore is spent for one year, it would be worth the experience since we can always appropriate that sum (if it is a failure) from the black money/scam moneys, estimated to be more than 73,00,000 crores and also from our scheduled bank NPA accounts. This massive experiment would be worth it.

India's biggest known scams

1, Ramalinga Raju,   Rs. 50.4 billion

2, Harshad Mehta,   Rs. 40 billion

3, Ketan Parekh,   Rs. 10 billion

4, C R Bhansali,   Rs. 12 billion

5, Cobbler scam  NA

6, IPO Scam  NA

7, Dinesh Dalmia,   Rs. 5.95 billion

8, Abdul Karim Telgi,   Rs. 1.71 billion

9, Virendra Rastogi,  Rs. 430 million

10, The UTI Scam,   Rs. 320 million

11, Uday Goyal,   Rs. 2.1 billion

12, Sanjay Agarwal,   Rs. 6 billion

13, Dinesh Singhania,   Rs. 1.2 billion

14. 2G Spectrum scam:    (Rs 60,000 crore)?

Rough total: 73,00,000 crores 

PLUS +Bofors, +Fodder, +CWG, +Mining, +PDS/LPG, +Air India

final figures of which are yet to be made public. 

    Even if we could recover some of these, India's entire budgetary deficit can be wiped out and also BPL card holders can be given highly subsidised ration and APL card holders can be given rations at a marginal subsidy, provided these cards are attached to Aadhaar bio-metric proofs, for dispelling manipulations at all levels - right from procuring from Mills with trucks fitted with GIS/GPS and PDS shops equipped with IT enabled stock management systems.

    Remember 36 Indian families own more than 50 of wealth.  Society is stratified and there is an urgent need for an online course correction for a moderate equitable distribution of country's wealth, with conditions attached.  There is cause of action towards these poor and needy.  Being born to a poor family need not be a curse; it could be any of us tomorrow?!!

 

 

 

   

murali772's picture

old-world socialism

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@ Syed - I can't see how the Harish Khare article fits into the discussions here. The right place for it would perhaps have been the B-PAC debate (here).

Whatever, my view on the same is reflected in the following lines posted by a common friend in a Yahoo-group:

For a person of the  experience and background of a harish khare,i expected more depth,But the  article finally reduced to one of non rigorous generalizations,  typical and blatant typecasting, but importantly and sadly just a tirade from a frustrated and  disillusioned old world socialist.

No evolution with the changing times , just a cling on of some old and best forgotten "analysis" of society  and probably fully out of touch with the aspirations and hopes of a young India.

Hinging on a still yet to be  defined terms like "elite" ,"elitism "

And a  strange thot struck me when i read  this article , how would we actually define the British educated, English speaking,founders of ours and our neighbor's nations, ie Nehru  ,jinnah even gandhi( and others)....

By  one yardstick they are as the "elite" of our society as one possibly can get !!

If choosing to respond, I suggest that you first shift the entire discussion to the "B-PAC blog".

Muralidhar Rao
murali772's picture

refreshing approach from Namma Ministru

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Even as the Congress flagship scheme of rice at Rs 1 per kg is set to roll out in 15 days, party Young Turk and Rahul Gandhi acolyte Krishna Byregowda has suggested a rethink on whether such doles and subsidies are necessary.

The government is also in the midst of preparing the state budget, which is likely to be full of populist schemes as a run-up to the 2014 Lok Sabha polls.

But Gowda told Express: “I don't see why we need to keep on giving doles. They do not serve any purpose in the contemporary situation and only give us political mileage. I would much rather empower the farmer and create required infrastructure to ensure that farming is viable.”


For the full report in the New Indian Express, click here.

Finally, somebody has chosen to bell the cat. All strength to Krishna Byregowda.

Muralidhar Rao
murali772's picture

painting "lala" as the villain

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With all their faults (and who, except our great sultanate in Delhi does not have faults?), the fact of the matter is that the various Vaishya castes and sub-castes of India have kept alive traditions of trade, entrepreneurship and wealth creation. In difficult terrains, in parts of the country where the writ of terrorists and extortionists, rather than that of the Indian state prevails, small shopkeepers keep their establishments open, stocking inventories of slow and fast-moving goods. They create genuine value.

R Vaidyanathan of the Indian Institute of Management, Bangalore, has written at length that if India wants to become prosperous what we need is a conscious "vaishya-isation" of our society, most certainly not a vindictive and vituperative campaign against trade and traders. But the government of India, our government, the one that we pay taxes to, has now officially informed us that these shopkeepers are responsible for sabotaging the government's largesse.


For the full text of the column by Jerry Rao, in the ET, click here.

The government wants that people see it as the "anna-daata", and use it as a means to get votes.

Muralidhar Rao
murali772's picture

very telling

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The government spends Rs 3.65 to deliver Re 1 of food while 57% of subsidized foodgrains do not reach the intended beneficiaries. These startling findings by the Independent Evaluation Office that point to massive corruption and pilferages in the existing public distribution system.

The agency's initial findings reveals that close to 36% of foodgrains are siphoned off in the supply chain, raising a serious question mark over effective implementation of UPA government's "game-changer" food security scheme which heavily depend on existing PDS network.

- - - Chhibber (
Director General of IEO) found that the incentive structure of social sector schemes, including PDS, needs to be looked at as it is ill-thought-out.

He has said in the existing PDS, it has been seen that as the ration shop owners fail to make enough money by selling grains to beneficiaries they are tempted to sell outside.


For the full report in the ToI, click here.

And, following are some excerpts from ToI editorial (for the full text, click here):

Aggregate central subsidies in 2012-13 on items as varied as food and bank loans to farmers totaled to Rs 2.57 trillion. After adding to this subsidies bill the spending on many of the Manmohan Singh government`s pet projects such as those concerning education and sanitation, final tally runs into more than another trillion rupees. Despite this scale of spending there has been little effort to measure its impact. It's only recently that an attempt has been made to measure the effectiveness of all this immoderate outlay by establishing an Independent Evaluation Office (IEO).

- - -There is however hope that the advent of IEO would be a first step towards systematic reform of the government's gargantuan and profligate expenditure programme.

IEO's studies also serve as a timely pointer to a root cause of some of the uncertainty which chokes potential investment. Following the financial crisis in 2008, government spending has expanded rapidly even as the economy has slowed down. Resultant pressure on tax administration to raise more and more revenue has led to a rise in litigation and also to negative perceptions about India's business climate. IEO's study hints at the price India's economy has paid for its government's unaccountable spending spree.


Very telling, is all one needs to add.

Muralidhar Rao

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