PDS and India

7/28/2019 PDS and India

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PDS and India's food security

M. G. DevasahayamIF WE care about true food security, an efficient and effective mechanism toreach food to all people at all times at affordable prices is an essentialprerequisite. This is also crucial to alleviate poverty.In the context of national food security and poverty alleviation, it is essential totake a look at the ``efficiency and efficacy'' of the public distribution system(PDS), which has been operating as the food access mechanism for severaldecades. Propon ents of the rationing system and its successor, the PDS, claimthat these two measures have played an important role in ensuring higher levelsof household food security and ``completely eliminating the threat of famines''.It was the compulsions at the time of World War II that forced the then BritishGovernment to introduce the first structured public distribution of cereals inIndia through the rationing system -- sale of a fixed quantity of ration (rice orwheat) to ent itled families (ration cardholders) in specified cities/towns. TheDepartment of Food, under the Government of India, was created in 1942 to co-ordinate this arrangement. When the War ended, India, like many othercountries, abolished the rationing syste m in 1943.In the face of renewed inflationary pressures in the economy immediately afterIndependence, the Government had to reintroduce rationing in 1950. Indiaretained public distribution of foodgrains as a deliberate social policy, when itembarked on the path of planned economic development in 1951. In the FirstPlan, the system, which was essentially urban-based till then, was extended toall such rural areas which suffered from chronic food shortages. Towards the endof the First Plan (1956), rationing had started losing its relevance due tocomfortable foodgrains availability.

However, true to its cyclic nature, food production dropped in 1958, when theSecond Plan had just commenced. This forced the Government to restart theprocurement of foodgrain and cereals and impose control on trading offoodgrains. It also decided to r e-introduce PDS.The creation of the Food Corporation of India and the Agricultural PricesCommission in 1965 consolidated the position of the PDS. The Government wasnow committed to announce a minimum support price for wheat and paddy andprocure quantities that could not fetch even such minimum prices in the market.Foodgrains thus procured were to be used to maintain distribution through thePDS with a portion used to create and maintain buffer stocks. PDS was sustainedas a deliberate social policy of the Governmen t with the objectives of:

* Providing foodgrains and other essential items to vulnerable sections of societyat reasonable (subsidised) prices;* Having a moderating influence on the openmarket prices of cereals, the distribution of which constitutes a fairly big share ofthe total marketable surplus; and* ensuring equity in the matter of distribution of essential commodities;In short, PDS, from mere rationing, had evolved into the National Food SecuritySystem.Ministry-level evaluation of PDSThough PDS has become the nation's food security system, functioning for morethan four decades now, there has been no dispassionate review of the systemwith reference to food security and poverty alleviation. Nevertheless, a

``Ministry-level evaluation '' of PDS carried out in 1991 had brought out the``merits and demerits'' of the system as it has been operating. The greatest


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achievement of PDS was claimed to be ``preventing any more famines inIndia''. Overcoming the 1987 drought, considered the wors t in the century, withdignity and effectiveness has been seen as the PDS's biggest success.However, the evaluation pointed out several shortcomings in the functioning ofPDS. These include the urban and pro-rich bias of the system and its

ineffectiveness in reaching the poor; the lack of effective contribution towardshousehold food security; PDS is not cost-effective and its operations are toocostly due to `wasteful' movements of grain and high storage losses. Anothervalid deficiency was its marginal impact, as far as income transfer to poorhouseholds is concerned.Despite such flaws in the PDS, official circles adopted the typical insensitiveapproach and declared that, ``the system has, however, come to stay,notwithstanding its shortcomings, because millions of India's poor derive director indirect benefits fro m the very existence of this system''. All they suggestedwas some tinkering.Tinkering with PDS

These changes were made in 1991-92 through a crash programme designated``Revamped PDS'' (RPDS), with components such as opening of several newFair Price Shops (FPS) to improve physical access of beneficiaries; mounting ofspecial campaigns by the State governments to cancel the bogus entitlementcards and to issue new cards to households found to be without them;progressively bringing more and more FPS under the system doorstep deliveryof PDS commodities; setting up vigilance committees of local peo ple withsubstantial representation of women for each FPS at the village and higherlevels; improving the supply chain by constructing or hiring small intermediarygodowns; and introducing additional commodities through FPS, in these areas.PDS has not provided food security

RPDS, nevertheless, was only a temporary reprieve. It could not reform asystem that had grown so enormous and bureaucratic. The ultimate solution wasto reform the PDS by changing its universal character and targeting it to thereally poor and deserving . Accordingly, a Targeted Public Distribution System(TPDS) to directly and effectively benefit those Below the Poverty Line (BPL) wasset in motion in June, 1997. Under this programme:a) BPL families, as estimated by an expert group set up by the PlanningCommission, were to get an assured supply of 10 kg of foodgrains a month. Therate fixed for this quantity was Rs 2.50 per kg for wheat and Rs 3.50 per kg forrice. This marked a red uction of the issue price by Rs 1.52 for wheat and Rs1.87 for rice from the existing levels; andb) APL families were to get only that part of the allocation to each State, decidedon a new formula, after meeting the assured supplies to the BPL families. Thequantity to be allocated to each State was fixed at its average offtake between1985-86 and 1995-96.This new system was lauded on two counts:(i) With the introduction of the TPDS, for the first time, an attempt was made totarget the really poor and provide them an assured supply of foodgrains; and(ii) The price at which the foodgrains were supplied to the BPL families waswithin the affordable range of the really poor.But an informal evaluation carried out by two officials of the Agricultural PricesCommission (The Hindu Business Line) reveal that these reforms have notworked and there are several lacunae and shortcomings in the TPDS. First, thequota of 10 kg of foo dgrains per month per family, irrespective of the household


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size, was grossly inadequate and meagre in proportion to the quantity requiredfor consumption.Rice being the staple food of this area and given the family size and per capitaconsumption, the household requirement in this region was 70-80 kg per month.By slashing the ration scale drastically to 10 kg per family per month, the TPDS

not only nulli fied the reduced issue price but also forced the poor to buy the restof their cereal requirements from the open market at a much higher price. Thisnegated the fundamental principle of food access and security.Second, the identification of the BPL families was itself based on questionablegrounds. To take delivery of the BPL quota, the State governments had first tomatch the number of BPL families in their States with that estimated by theexpert group of the Planning Commission. Most State governments found thatthe number of BPL families in their States was higher than the expert group'sestimate, while some states, such as Haryana, found it less. But in a dynamiceconomy, a family categorised as BPL one d ay can become APL the next, andvice-versa.

At the behest of the World Bank, concerned with the efficacy of India's PDS as asafety net for the poor in the context of the ongoing economic reforms, acomprehensive study was undertaken recently by a team of researchers. Thesummary of their findings are:* PDS in India is the oldest and one of the most comprehensive anti-povertyprogrammes in terms of budgetary expenditure of the Central and Stategovernments. From the mid-1960s, it has evolved into a price support, rationingand subsidy programme.* Although the food situation in the country has undergone drastic changes,from recurring scarcity to a food surplus situation today, the PDS is continuingmore or less unchanged.

* There is a serious regional mistargeting of PDS. That is, in Kerala and AndhraPradesh, where the level of poverty is substantially low, the offtake from PDS isbetter, whereas in Orissa and Madhya Pradesh, where the level of poverty issubstantially h igh, the offtake is poor, thereby confirming the widely held viewthat there is limited access of the poor to India's PDS.* The cost of PDS operation is too high. A rupee of income transfer through foodand non-food items sold through PDS involves a fiscal cost of Rs 4.27 to thegovernment, making the scheme grossly unsustainable.* Welfare gain from PDS is negligible. On per capita terms, it works out to Rs2.01 per month in rural areas and Rs 3.40 per month in urban areas. For thecountry as a whole, the reduction in poverty due to PDS is hardly twopercentage points of the pove rty ratio.Based on these findings, the study made three major recommendations:* The PDS should be disbanded. The ration shops may be converted into normalgrain retail outlets like other private retail shops;* Government control on the foodgrains market should be phased out. The FoodCorporation of India (FCI), which undertakes procurement stock-keeping andallocations to State governments, should stop all these activities. However, itmay be assigned a mini mal role of purchasing foodgrains from the open marketin competition with the private trade for the purpose of price stabilisationthrough open market releases;* The subsidy saved due to the phasing out of FCI and PDS may be utilised fordistributing food stamps to the poor, linking it with the existing ruraldevelopment schemes.


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These are similar to the conclusions of the Report of the High Power Committeeon Agricultural Policies and Programmes submitted to the Government in 1990.Obviously, this report was not available to the researchers.According to recent estimates, approximately 36 per cent of the population livedbelow the poverty line. This means their income is not sufficient to buy enough

food. About 80 per cent of these poor people live in the rural areas. TheGovernment and most State governments have formulated and implementedvarious schemes to alleviate poverty and improve the social security of thesedeprived people. These schemes aim to enhance self-employment, generatewage employment or transfer income to the poor.PDS, which is the largest among these schemes, is a massive food-rationingprogramme meant to reduce food insecurity and improve the welfare of thepoor. On this programme, the 1998-99 Budget allocation was Rs 9,000 crore. ByJanuary 1999, the actual exp enditure was around Rs 10,500 crore, compellingthe Government to announce a price hike on commodities supplied to BPLconsumers, thereby nullifying the cardinal principle of food security and poverty

alleviation.Despite such a huge cost to the exchequer and burden to the taxpayer, PDSand, by extension, the FCI, have not achieved any of the primary requirementsof food security and poverty alleviation.None of the assumptions made by mandarins while formulating policies for foodsecurity -- that targeting will help reduce the food subsidy Bill; that all the poorin the poor States will benefit if foodgrain allocation to these States is increasedand fo odgrains become cheaper; that the delivery system is able to cope withtargeting and it is possible to ensure a proper selection of beneficiaries -- havecome true. This is primarily because of the vast chasm that exists betweenpolicy formulation and im plementation.

Food policies are shaped by Central politicians and senior civil servants who arenot well aware of the practical and political difficulties at the local level resultingfrom their policies. Unless the present moth-eaten administrative system isdrastica lly overhauled, this malady will continue, accelerating the socio-economic convulsions.So, what is the alternative? Given the liberalised atmosphere and comfortablefoodgrain situation, it is better to rely on the personal involvement of thestakeholders, who are the producers, and the open market mechanism thatinfluences the consumption for India's food security. At the same time, thefarmer and the consumer need to be protected against the vagaries ofproduction and the market forces to enhance agricultural productivity andensure fair prices. This can be done by vesting effective inte rventionary powersin the hands of the Government in times of need to protect the interests ofproducers or consumers.The delivery system would also be efficient since it has to be competitive andcompetent. The huge saving thus accruing to the Government could be utilisedto step up public investments in rural and urban infrastructure and services,thereby generating e mployment and income opportunities -- both directly andindirectly. For the genuinely needy, `food vouchers/stamps' could be suppliedthrough the Panchayat Raj or local government machinery that could bestrengthened and empowered for the purpose.

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PDS and India