Agriculture Reference
In-Depth Information
The other example comes from the deficit state of Bihar, where political
interests lie on the distribution side. The level of poverty in Bihar is staggering
and hence it receives a large allocation of food to be distributed through its so-
cial safety net programs. However, the allocated public food rarely gets to the
intended beneficiaries. Available studies suggest that more than 85 percent of
the allocated food is diverted to the black market, which offers lucrative rents
for the Bihari politicians (Mooij 2001; Dev et al. 2004). These studies also sug-
gest that the politicians derive rents from public distribution by (1) appointing
fellow caste members or political followers to the system (for example, when
granting licenses to run PDS shops), (2) receiving payments from the officials
working within the food bureaucracy (for example, transfer to high-rent areas),
and (3) collecting rents from food dealers and officials involved in diverting
public food to the markets.
A simple calculation can illustrate the magnitudes of rents that can be col-
lected from the public food distribution system. In 2005/06, the state of Bihar
distributed about 146,000 tons of rice and 526,500 tons of wheat under the be-
low poverty line (BPL) public distribution program. The differences between
BPL and market prices are Rs 2.63 and Rs 2.07 per kilogram, respectively. If
85 percent of the grain is diverted, the net rent from this program alone is about
Rs 1.26 billion, equivalent to roughly US$29 million at 2004 exchange rates.
This is a very large number—no doubt the groups that collect this rent will re-
sist reforms!
Delinking Social Safety Net Programs
Providing the poor access to food through SSN programs is a valid policy inter-
vention, irrespective of liberalization, functioning of markets, or even the level
of development of a given country. In India, market liberalization or price pol-
icy reforms have special implications for the SSN programs, as they are closely
linked and serve as the outlet for offloading the food stock that the government
procures under its price support programs. Furthermore, India's Right to Food
campaign is perhaps one of the most proactive in the developing world and has
drawn widespread respect and attention in recent years, particularly when its ac-
tions resulted in several interim orders by the Supreme Court of India to expand
and strengthen various SSN programs (Right to Food Campaign 2005).
For delinking SSNs from the price policies two considerations are
important—the efficiency (cost effectiveness) of the current programs and the
feasibility of the alternatives. There are several studies on the cost effectiveness
of SSN programs. A summary of results from three different types of programs
—representing universal food-based programs, conditional transfer (employ-
ment schemes), and nutrition intervention—are presented in Table 3.8, which
shows the cost of transferring Rs 1 of benefits to the intended beneficiaries.
17
17. See Dev et al. (2004) for details on methodology and assumptions.
