Food Bill: Lessons India should have learnt from Soviet Union

By throwing food at poverty that is result of faulty economics and lack of jobs, one is only trying to suicidal path says Colonel (retd) Anil Athale.

Right at the outset the author wishes to confess that he is no economist. But as a close relation (a Gold Medallist in economics) once told me that Economics is, basically mumbo-jumbo and common sense made difficult. 

In 2003, I mentioned this remark to late Prof JK Galbraith, who promptly replied that he himself was also not an Economist but an Agronomist. Galbraith was an admirer and friend of India.

He must be turning in his grave at the folly of Nehru dynasty in tuning agricultural economy on its head through the Food Security Bill.

Not many in the present generation remember how our first Prime Minister was fascinated by the Soviet style agriculture. In the late 50s and early 60s, farm collectivisation, co-operative farming and state farms were the buzz words in corridors of power in Delhi.

The origin of State Farms Corporation of India Limited (SFCI) goes back to 1956 when first mechanized farm was established in the Thar Desert of Rajasthan with the machinery gifted by erstwhile USSR. While inaugurating the first farm at Suratgarh in 1956, the first Prime Minister of India Late Pt. Jawahar Lal Nehru called it a ‘Symbol of Resurgent India’.

The initial idea of setting up these farms was to increase the food production. In 1969, to manage the affair of these farms, an autonomous organization under the Ministry of Agriculture was set up with the name of State Farms Corporation of India Limited.

Luckily for the country, thanks to the farmers lobby in the ruling party, the ‘nationalisation’ of agriculture was a stillborn project. In 1974, the aim of State farms was changed from the lofty goal to a more limited one of seed production. 

Prof Galbraith played a positive role in preventing the ‘socialist’ madness of nationalisation and collectivisation of agriculture.

If Nehru would have had his way, we would have followed the erstwhile Soviet Union in destroying our agriculture. The circle was indeed completed when in November 1991, after the collapse of Soviet Union and a major food crisis in Russia, it was India that ‘gifted’ 2 million tonnes of wheat to the Russian Federation.

Russian food crisis was not due to bad harvest but due to lack of infrastructure of storage/refrigeration and transportation close to 30 to 40 per cent harvest was lost. A situation similar to India.  

We seem to wish to follow the path trodden by the erstwhile USSR. The Soviet state had an implicit contract with the people that no matter what they could always get cheap bread.

This sounds noble, but it hastened the end of the Soviet Union: It caused the USSR, with some of the richest agricultural land in the world, to become a grain importer.

State agricultural subsidies became the second largest item next to defence in the budget. The commitment to make bread available to all at a dirt-cheap price meant that there had to be enough of it.
In terms of real economic costs, Soviet bread became among the most expensive in the world.

Like in case of India where the govt incurs cost of around Rs 15 per kg of wheat (includes transportation and storage) but intends to sell it at Rs 2, in Soviet Union retail price of bread was below the cost of production. 

There was no way Soviet agriculture was going to produce enough grain to satisfy the artificially-inflated domestic demand. Starting in 1972, the Soviet Union began to import large quantities of grain, which it paid for with foreign credits and exports.

Cheap bread, however, also meant waste. Throughout the Soviet period, there were accounts of peasants feeding it to the hogs. Major General (Retd) KS Pendse, as a young Major was in Soviet Union in early 1970.

He recalled the scene when while bread would be available in plenty, there would be long lines for everything else.

Before the sceptics and critics jump at the throat of this author by saying that example of Soviet Union is not relevant, let me quote an example nearer home. Our state of Jammu and Kashmir has been giving subsidised food to the bulk of its population for last several years.

While a small portion does pay a little higher price, but even they get food grains at subsidies rates. The food security bill that intends to cover nearly 67 per cent of population will be essentially replicating the J&K model.

It must be noted that the J&K model has been sustained by close to 80 per cent aid in grant from the Central government. Thus a dole that is paid to keep the J&K population happy and (hopefully) with India is at the cost of the Indian tax payer. 

In the case of Voodoo economics of UPA who is going to foot the bill? The same Indian tax payer! And if that is not enough then there is always the IMF and World Bank! Seems it is time we dust our begging bowl!

To return to Russia again, contemporary Russia has transformed itself from a grain importer to exporter not because it is producing more. It is consuming less grain domestically, leaving a “surplus” for export.

Skeptics may say that this is a sign of poverty that the Russian diet is deteriorating. It is the opposite: Russians no longer have to make do with just bread. They can buy what they want with the money they have.

Like in case of Russia, the answer to poverty and mal nutrition is jobs, jobs and more jobs.

Yes, there is need to help out the destitute with not just subsidised but free food.  Somewhere down the line, the economically illiterate leadership has confused two separate issues of poverty and hunger. Yes there is fairly large poverty in India but not so much hunger. 

By throwing food at poverty that is result of faulty economics and lack of jobs, one is only trying to suicidal path. How long can a country sustain the high procurement price and low issue price without going bankrupt like the Soviet Union?