Delivering Food Subsidy - The Oxford Topic of Food, Politics, and Society - page 318

through bilateral bargaining between the central government and the state govern-
ments. Given the nature of parliamentary democracy in India, the ruling party cannot
ignore the votes in these surplus states, and consequently the outcome of the bargaining
game is a price that is higher than it would otherwise be (i.e., cash transfers). Hence,
there could be a great deal of opposition to a cash transfer system from the procurement
granaries of Punjab and Haryana. Though what we have described is specific to India,
such a situation may occur wherever price is determined through the political process.
The power of the farm lobby to dictate prices does vary with circumstances. Shortage
in the world market reduces the threat of imports and increases their power, but their
power diminishes if government stocks are far in excess of need.
Government intervention could also impact storage and distribution margins.
Near-universal food subsidies could leave the government as the overwhelming domi-
nant player in grain trade. The monopoly of government agencies could leave their costs
unchecked by competition.
Lessons from Social Assistance Programs across the World
The accumulated record of social assistance programs across the world over the last four
decades offers some clues on what works and what does not in developing countries.
Some of these programs were designed explicitly to enhance the access of the poor to
food. Others were designed broadly as social assistance programs for the poor but were
assessed in terms of their impact on the access of the poor to food. It is safe to say that
many of these programs did have a beneficial impact on the nutritional intake of the
poor. What is missing is a careful comparative assessment of their effectiveness in terms
of their costs, and this is what would give us a better idea of whether they are worth
emulating. All the same, some of these programs earned a reputation as successful and
others not so. In either case, we would like to probe why that might be so.
Some of the earlier programs that have been subjected to academic analysis date to
the 1970s and 1980s. An interesting case study is Sri Lanka, a country that gained a repu-
tation for being able to raise its human development index despite having a relatively
low per capita income (Edirisinghe 1987). During Sri Lanka's post-Independence period
through 1979, they had a system of ration shops through which subsidized rice was dis-
tributed to about half the population. The price subsidy to rice was extremely beneficial
to the Sri Lankan poor. Sri Lanka had, however, maintained an overvalued exchange
rate, and that, along with other macro policies, generated severe balance of payments
difficulties, which brought on International Monetary Fund (IMF) intervention. The
IMF sponsored structural adjustments, as was common under the circumstances, and
had as their first priority a severe cut in the government expenditure. The structural
adjustment included a replacement of the rationing system with food stamps. The food
subsidy share in total government expenditure fell from 15% during the mid-1970s to 3%
in 1984. The benefits of food subsidy fell immediately to 83% of what they were before
the structural adjustments. Food prices rose under the restructuring, and since the food