Something rotten in Punjab

The Badal & Family Managing Agency in Punjab has done better than many of our industrialists in fraudulently extracting funds from our public sector undertaking (PSU) banks by borrowing for its food purchase scheme against non-existent stocks or by disposing off hypothecated stocks. The Reserve Bank of India has now ordered the lending banks to declare the advances as non-performing assets (NPAs). It is learnt that about '20,000 crore worth food stocks are not in stock — they were either never there or hypothecated stocks were disposed or both. The hole is huge and the banks will be unable to lend the Punjab government more money to further perpetrate the fraud.

So who comes to its rescue The friendly Central government is going to give it cash credit of '20,000 crore so that “food purchases” can go on as usual. It was only last week that the Supreme Court had to tersely order the Central government to immediately release budgeted Mahatma Gandhi National Rural Employment Guarantee Scheme funds for famine relief work in acutely drought-hit regions like Marathwada, Maharashtra. Consequently '12,000 crore was reluctantly released. Maharashtra has a Bharatiya Janata Party-led government, but unlike Punjab it doesn’t have elections soon. So Maharashtra’s revenue and rehabilitation minister Eknath Khadse can use scarce water to bind the dust down at helipads and Maharashtra’s guardian minister for Latur and Beed districts, Pankaja Munde, streaked hair, bejewelled hands and all, can take selfies at drought relief work in Latur. But in Punjab, the viability of the Badals’ business is seriously challenged and that’s why the rejected MP-aspirant from Amritsar, who is now the country’s finance minister, responded with alacrity to help his friends.

Despite this the Punjab minister of food civil supplies and consumer affairs, Adarsh Prakash Singh Kairon, a man with a prominent and known lineage, has the temerity to say: “The food purchase scheme is not a profitable proposition. Punjab is mainly doing it in national interest.” The notion that Punjab feeds India is quite absurd. India has for a few decades now produced much more food grains than it needs. The production has been in the vicinity of 260 million tonnes during the past three years, despite the droughts. India has food reserves of 49 million tonnes worth Rs 50,000 crore and twice more than that is needed. India exported an average of Rs 6,000 crore worth of food grains per annum since 1991 and last year the exports touched Rs 27,000 crore.

So it is actually the other way round. The rest of India supports Punjab with this absurd minimum support price (MSP) scheme, which is actually an above the market price scheme. This combined with the public distribution system (PDS) of low-priced cereals is actually a gigantic subsidy scheme. The total subsidies allocation in Budget 2016 is Rs 2,50,433 crore, of which more than half goes towards food subsidy and quarter goes for fertiliser subsidy. The bulk of the procurement accrues in the states of Punjab, Haryana, Andhra Pradesh and Madhya Pradesh, including the MSP subsidy.

There is no doubt that Punjab is a major food grains production centre, but the notion that it feeds India is quite exaggerated. In 2015, the total national food grains production was 264 million tonnes, of which Punjab produced 27.4 million tonnes or about 10 per cent. Yet most of us have internalised the long-gone story of Punjab standing between India and starvation, and Punjab being the most prosperous state in the country.

The claims of the Punjab government too foster this fiction. Its website claims that Punjab “contributes nearly two-thirds to the total production of food grains and a third of milk production in the country. It is the leading producer of wheat, thereby contributing to the national food security. Even though Punjabis account for less than 2.5 per cent of the Indian population, they are one of the most prosperous races in India. Their per capita income is twice the national average.” The national per capita income at current prices is '74,000 and Punjab’s is '92,000.

Admittedly Punjab’s productivity is much higher than the rest of the country’s as it accounts for only about five per cent of the 54 million hectares of irrigated farmland.

But god and this country have both been good to Punjab. Today 85.15 per cent of all land in Punjab is arable and 89.72 per cent of it has perennial irrigation. More than half of this is due to huge Central government projects, Bhakra Nangal being the most notable among them. The British in their quest for land revenue rightly chose Punjab for special attention. They invested in its irrigation. And after 1947, this trend accelerated. In 1955, the total national outlay for irrigation was Rs 29,106.30 lakh. Of this Punjab got Rs 10,952.10 lakh or 37.62 per cent. In contrast, Bihar got Rs 1,323.30 lakh, only 4.54 per cent of the irrigation outlay. The Bhakra Nangal dam, one of Jawaharlal Nehru’s grandest temples of modern India, planned with an outlay of Rs 7,750 lakh, alone irrigates 1.44 million hectares or about 40 per cent of Punjab’s net irrigated area. The consequences of this bounty are manifold.

The spectrum of regional inequalities in India is a very wide one. Punjab and Bihar represent the two ends of the spectrum.

Though this might even have been the case historically, a study of state GDPs in the decades after Independence reveals that the width of the spectrum has only widened. In 1965, Punjab’s per capita income was Rs 562, 1.7 times that of Bihar’s Rs 332. Punjab now has a per capita income of Rs 92,000 and Bihar Rs 31,000, i.e. a ratio of about 3:1. But other changes have also set in. Once India’s most prosperous state, Punjab now lags behind Haryana, Maharashtra, Gujarat, Kerala and Telangana, and is about at par with the neighbouring hill state of Himachal Pradesh.

Punjab has all the bounties nature can give and it has had more than its rightful share of Central government assistance, not just in terms of food procurement and subsidies but also employment. Punjab has benefited from a disproportionately higher recruitment into the armed and paramilitary forces, giving most rural families a second stream of income.

Each year about 60,000 Punjabi officers and men retire from the armed forces and over a million draw pensions. Yet Punjab is afflicted with a severe blight. A study by the department of social security and development of women and children found that 67 per cent households in Punjab have at least one person addicted to drugs. Yet another study by the Narcotics Control Bureau discovered that almost 40 per cent men in Punjab are addicted to drugs.

So what has brought Punjab to this situation One reason is that Punjab has been reeling under bad governments. Its politicians and their bureaucratic fellow conspirators, irrespective of party affiliations, have been among the country’s most venal and corrupt. According to a former Punjab DGP, a few years ago the intelligence department had compiled a list of drug barons. This list had names of powerful politicians from every political party and police officials at every level. Salwinder Singh, the SP alleged to have facilitated the attack on the Pathankot airbase, is only the tip of the iceberg. Unless Punjab gets a better government the downfall will continue.

The writer, a policy analyst studying economic and security issues, held senior positions in government and industry. He also specialises in the Chinese economy.