PDS

What are the objectives of the PDS system?

1) The main objective of the PDS is to provide foodgrain at low prices. 2) Make goods available to consumers, especially the disadvantaged /vulnerable sections of society at fair prices. 3) Ensure social justice in distribution of basic necessities of life. 4) Even out fluctuations in prices and availability of mass consumption goods

Unsuccessful cash transfer experiments

1. Delhi Annashree Yojana It was a monthly cash subsidy of Rs. 600 under the cash-for-food programme for one lakh beneficiaries that were not covered by PDS With National Food Security Act, these beneficiaries were to be included in it. Came under criticism as it was avoiding the responsibility of cleaning up the system and ensuring regular supply of subsidised ration 2. Puducherry It had a pilot project to replace 10 kilos of free rice per family with ₹300 in 3 lakh Aadhaar-seeded bank accounts each month. The beneficiaries have to go to bank to withdraw money and then buy ration The fear of inflation and non-transfer of it to cash subsidy is a worry for many. For them, atleast food was available.

Background

A recent survey by the National Council of Applied Economic Research (NCAER) found that more than 90% ration card-holders in Below Poverty Line (BPL) / Priority Households (PHH) and the Antyodaya Anna Yojna category purchase foodgrain at subsidised prices from the PDS in selected States. An evaluation study of PDS was conducted in 24 districts in the six States of Assam, Bihar, Chhattisgarh, Uttar Pradesh, Karnataka and West Bengal. Of these, Bihar, Chhattisgarh and Karnataka had implemented the National Food Security ACT (NFSA) or its variant at the time of the survey. The other three States were following the Targeted Public Distribution System (TPDS).

What does recent survey reveal on grain entitlement?

BPL families in Assam, Chhattisgarh and Uttar Pradesh are entitled to receive 35 kilos of foodgrain a household a month from PDS. Bihar, following the NFSA regime, allocates 5 kg foodgrain per person per month. Karnataka, after adopting a modified version of the NFSA, called the Anna Bhagya Yojna, allocated grain based on household size. Grain entitlement for a single-person family, two-person family and families with three or more people was 10 kg, 20 kg and 30 kg, respectively. The proportion of beneficiaries receiving less than their full quota varies widely. Among BPL/PHH households, it ranges between 2% in Chhattisgarh and 91% in Assam. Lack of awareness regarding appropriate entitlement along with a weak monitoring system are the primary reasons for this.

*Subsidised Goods for Cash transfer- Look before you dismantle*

Government and some activists want to replace provision of subsidised goods and services with cash transfer Reason: to reduce government expenditure and minimise leakages in the social welfare programmes PDS: it is one of the welfare programmes that is wrought with leakages and non-reaching the targeted beneficiaries. The government plans to send the freed subsidy directly to every household

Macroeconomic repercussions

If the PDS will be dismantled, the economy will suffer 1) Government will have little control over food security as it will not be directly in touch with food needs/demands of people 2) PDS ensures higher food consumption and increase in food sufficiency. Thus, food demand will be higher. Under-compensation through cash transfers will negatively impact the consumption levels and affect poverty alleviation. 3) Expose agricultural sector to clutches of oligopolistic agricultural market. In such a situation, neither farmer nor the consumer will benefit. 4) Serves as an escape route for the existing less efficient PDS platform. The need is to strengthen institutions and systems that will effectively allocate public resources according to need. 5) Poor families who cannot navigate complicated cash systems invariably get left out (revealed by Kotkasim Direct Benefit Transfer (DBT) kerosene experiment, 2011)

Ground experiments Successful cash transfer experiments include

In 2011, UNDP-Delhi government compensated BPL households, which were barred from PDS, with Rs. 1000 monthly in cash or Rs. 2400 per head annually (5 member family. The cash transfer was four times the amount that can distributed per head to everybody from the central food subsidy of 2011-12 In 2011-12, a UNICEF-SEWA experiment in Madhya Pradesh did not see any replacement of cash with existing social welfare programme The cash transfer was revised for inflation after an year by 50% (from Rs 1,920 to Rs 2,880 per head annually) Thus, there is a necessity to for regular upward revision of cash transfers

Cash transfer for MGNREGS

Minimum wages and wages for public work are slow in inflation indexation When there is upward revision of welfare allowance (cash transfer), there will be a considerable time lag Also, mere consumer prices (CPI) indexation of cash does not mean secured food consumption. The calorie intake reduction over time at poverty line expenditure despite being updated by CPI is the proof Thus, cash transfer will require constant revision of data for subsidy as it will assume the role of basic income provider for basic necessities

Cash transfer for PDS- A good idea?

NSS data (2011-12): 47% of the household buy food from PDS shops. The central food subsidy was less than Rs.600 per head in 2011-12 If these households don't get food from PDS shops, they will incur extra expenditure to buy from the market. The revised estimates show that more than 63% of PDS beneficiary households' annual extra expenditure will be more than Rs. 600 per head Among them, more than 25% of the PDS household will have extra expenditure of over Rs. 1200 Thus, if central food subsidy is distributed through cash transfer, the 63% PDS beneficiaries are slated to be under-compensated. If the cash transfer is restricted to the bottom 50% of the population, 25% of them will still be under-compensated Yet, the problems of targeted PDS beneficiaries will persist Increased funding is the only option: even combining state government's food subsidies with central food subsidy won't be sufficient to compensate all the current PDS beneficiaries. Expansion of public outlay should occur is cash transfer replaces PDS

What is Public distribution system (PDS) all about?

Public distribution system (PDS) is an Indian food security system. PDS means distribution of essential commodities to larger section of the society, mostly vulnerable people, through a network of fair Price Shops on a recurring basis. It was introduced during WW-II as a war time rationing measure Established by the Government of India under Ministry of Consumer Affairs, Food, and Public Distribution and managed jointly with state governments in India, it distributes subsidized food and non-food items to India's poor. This scheme was launched in India on June 1997. Major commodities distributed include staple food grains, such as wheat, rice,sugar, and kerosene, through a network of fair price shops (also known as ration shops) established in several states across the country. Food Corporation of India(FCI), a Government-owned corporation, procures and maintains the PDS. The PDS seeks to provide to the beneficiaries two cereals, rice and wheat and four essential commodities viz. sugar, edible oil, soft coke and kerosene oil. The state governments can provide subsidies to over and above these items too

PDS is getting popular :

The India Human Development Survey conducted jointly by the NCAER and the University of Maryland, supports the finding that there's been an increase in accessing the PDS, nationally. Its popularity is attributed to wide coverage of poor beneficiaries and increasing amounts of food subsidy along with volatile market prices of foodgrain. It is also heartening to know that the amount of implicit subsidy per capita per person is considerably high in the three States operating under the NFSA compared to the States following TPDS. Implicit subsidy refers to the amount of money saved by a household when it purchases from PDS at a lower price compared to the market price.

What does National Council of Applied Economic Research (NCAER) survey say?

The NCAER survey reveals that lack of awareness of issue price is the primary reason for the discrepancy. In many places, beneficiaries know how much to pay for a food basket in aggregate for diversified commodities. But they are ignorant about the per unit price of separate commodities. Display boards at fair price shops are supposed to mention the right amount of entitlement and issue price for each of the PDS commodities. In reality, such boards may not be displayed everywhere or what's displayed may not be legible. FPS dealers in some parts of Uttar Pradesh confess that they charge extra to cover the cost of transportation from the godown to the local FPS. Although the cost of transportation is supposed to be reimbursed to the dealer, FPS dealers claim that they end up covering it.

Conclusion

Though commitment to cash transfer is given, the budget has slashed various social expenditures The liberal economists who support cash transfer for stimulating economic activity and growth don't reckon increased public expenditure to finance cash transfer. India is facing poor social protection system due to extremely low social sector expenditure. Dismantling PDS but not heeding to the demand for increase in public outlay will not improve food security or promote economic growth.

Way ahead : Strengthen the system

To improve the overall functioning of the PDS, the monitoring system needs to be strengthened, beneficiaries' awareness regarding entitlement and issue price has to be increased, and modern techniques need to be adopted to curb malpractices in the system. Introducing electronic weighing machines in place of conventional ones to curtail weight-related anomalies could be considered. To tackle awareness-related issues, it should be made mandatory for all fair price shops to maintain display boards containing information about entitlement, availability of foodgrain and issue price. The information on the board should be written legibly and in the local language NGOs and government officials should disseminate PDS-related information among those who cannot read. Respondents in the survey suggested that display boards be kept in prominent places in the village such as the local panchayatbhawan and near schools, in addition to those at fair price shops.