Note To Siddu: As A Freebie, Cash Is Better Than A Free Bag Of Rice

The Siddaramaiah government in Karnataka, after pointlessly trying to blame the Centre for not giving it rice from the central pool for free distribution, has correctly decided to pay cash amounting to Rs 170 per head per month instead of the promised 5 kg of rice.

The Centre was right to refuse the Karnataka demand, given the possibility, even probability, of a weak monsoon this year.

Depleting existing stocks of rice (around 26 million tonnes currently), when kharif production could be lower than hoped for, would be foolish when food prices are anyway elevated. And it does not matter whether or not the current stocks are higher than the prescribed minimum buffer of 13.5 million tonnes.

In the event of a crop failure, it is not only Karnataka, but every other state, that will be drawing on central stocks to feed the poor. And market prices will surely rise if traders and growers suspect that a shortage looms.

So, no, Karnataka was not entitled to any special supply of rice from the central pool, and that too for free distribution.

However, the idea of giving cash instead of a bag of rice is good in itself. For three reasons.

First, cash in hand gives beneficiaries the choice of using it for other purposes, including education of children and healthcare. 

Second, payments in kind often end up distorting the market, as the recipient often sells the same rice for cash. So, it is far better to give the cash directly than to force the beneficiary to encash the freebie in the market.

Third, cash changes the nature of the benefactor-beneficiary relationship. It makes the beneficiary a consumer, while benefits given in kind reduce you to a supplicant. You can only consume the rice you are given or sell it; cash empowers you to do what you want with it.

Cash gives you more power and dignity than a free bag of rice handed over to you from a ration shop.

Sometimes, good solutions flow from the failure of bad ideas.