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With eye on election, India launches huge cheap food scheme

India's Prime Minister Manmohan Singh speaks during a news conference at the Government House in Bangkok May 30, 2013. Singh is on a two-day
India's Prime Minister Manmohan Singh speaks during a news conference at the Government House in Bangkok May 30, 2013. Singh is on a two-day

By Anurag Kotoky and Frank Jack Daniel

NEW DELHI (Reuters) - The Indian government launched a $22 billion welfare scheme on Wednesday to give cheap food to hundreds of millions of people, a centerpiece of the ruling Congress party's plan to win a third term in elections due by May 2014.

The minority government sidestepped India's unruly parliament and resorted to an executive order to implement the program, hoping to take the credit for a vote-winning plan.

"The union cabinet has approved the food security ordinance unanimously," Food Minister K.V. Thomas told reporters after the cabinet meeting. The measure would be sent to the president on Wednesday for his signature, he said.

Under the plan, the government will sell subsidized wheat and rice to 67 percent of its 1.2 billion people.

India is home to a quarter of the world's hungry poor, according to U.N. figures, despite being one of the world's biggest food producers and experiencing years of rapid economic growth.

The decree expands an existing program that provides cheap food to 218 million people and has high-profile backers including Nobel economics laureate Amartya Sen, but critics call it a waste of public money at a time when growth has been steadily slowing.

The expanded subsidy is a pet project of Congress party chief Sonia Gandhi, who led the party to victory in the last two elections on the back of populist programs such as a rural jobs plan and a $12.5 billion farmer loan waiver passed just before the 2009 general election.

The decision not to wait until parliament reopens in the next few weeks shows the government is in a rush to implement the latest scheme and may fuel the rumor mill in New Delhi about the possibility of the government calling a snap election.

CLAIMING THE CREDIT

By using an executive order, the Congress-led government hopes to claim sole credit for the scheme, analysts said. Prime Minister Manmohan Singh's government has been dogged by a series of high-profile corruption scandals during its second term.

"Congress clearly thinks that it can draw political advantage and that is why they are doing it," said political analyst Subhash Agrawal of the India Focus think tank.

Providing rice and wheat at a fraction of cost will strain government finances.

It estimates that its food subsidy bill will rise by 45 percent to $22 billion in the first full year of the scheme, and that it will have to buy about 30 percent of India's grain output to cover the program.

India is one of the world's largest producers and consumers of grains. Bumper harvests in recent years mean silos are overflowing, with some stocks exposed to rot and rodents.

The expanded program would need about 61 million metric tons of grain, an extra 3 million metric tons a year - still leaving plenty of rice and wheat for the open market and continuing exports.

The government sells food through a rationing system or through "fair price" shops where corruption is rife, with some ration shop owners selling grain earmarked for the poor into the open market at higher prices.

Experts say more than 40 percent of food meant for the poor is siphoned off.

The World Food Programme says more than a third of Indian children under five are malnourished, and critics say the focus on rice and wheat rather than more nutritious foods does not properly address the problem.

Most political parties, including the opposition Bharatiya Janata Party (BJP) as well as allies of the government, support the bill in principle, but would prefer to hold parliamentary discussions to enable some changes to be made.

The government now needs to get the bill approved by parliament within six weeks of its resumption. The Monsoon session of parliament does not usually begin before late July. Dates for the session have not yet been announced.

(Additional reporting by Nigam Prusty, Ratnajyoti Dutta, Manoj Kumar; Editing by Ross Colvin and Kevin Liffey)

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