Food Security: Will it impact the economy?

CHENNAI: Economists and political class are divided on the “additional burden” to the exchequer once the Food Security Act comes into existence with one section questioning the need to incur extra financial burden at this stage when TN Government is set to lose its revenue due to various reasons. While political leaders argue that implementing the FSA would amount to “surrendering the food rights of the state” to the Centre, economists also suggest that the government could always come out with schemes like give up subsidy to ensure that the financial assistance is given only to the needy and not those who can afford without it.

 The announcement comes with its own pros and cons. While it removes the upper ceiling of 20 kg of rice per card per month benefiting several lakh families, it also puts an additional burden of nearly '2,000 crore on the exchequer.  “Additional burden of Rs 2,000 crore may not create much problem for the state though the government submitted a revenue deficit budget last year. If everybody is covered it is good for the society. Since the state government's budget is around 1.5 lakh crore, the additional amount of '2,000 crore will work out to just a fraction,” Dr K.R. Shanmugam, director, Madras School of Economics, told Deccan Chronicle.

 Since Tamil Nadu is one of the fastest growing states, spending of Rs 2,000 crore on a programme that benefits people should not be a problem, Mr Shanmugam said.  However, economist Soma Valliappan says there will be financial implications and questions the need for subsidy to the sector when other sectors need attention. “Why subsidy now? There are other sectors which need subsidy. People keep on complaining about rising petrol and diesel price,” he said, adding that since the government has committed itself to prohibition in the state, the revenue is set to fall in the coming years.

 “When the revenue is expected to fall, why give subsidy? And several methods like give up subsidy can be announced and implemented,” Mr Valliappan said.  In the 2014-2015 financial year, TASMAC, which sells liquor in the state, had generated revenue of Rs 28,000 crore and the state is likely to lose a similar amount if the prohibition policy comes into force.