Thursday, March 3, 2011

102 - PDS in a shambles - Source Hindu Business line

PDS in a shambles

The time has come to examine whether there could be an alternative to the existing PDS. Experts suggest giving cash directly to the eligible poor through a coupon system as an option.

The poor seldom get PDS foodgrains in proper quantity and quality.

S. D. Naik

The Supreme Court-appointed Central Vigilance Committee's report on the sale of foodgrains through the public distribution system (PDS) throughout the country will not come as a surprise to anyone.

The Committee's finding that shop-owners, transporters, and officers have been colluding to deprive the poor and that the whole system is in a shambles, only reinforces what earlier studies had pointed out more than a decade ago.

The Committee headed by the retired Supreme Court judge, Justice D. P. Wadhwa, found that there was large-scale diversion and black marketing of PDS foodgrains. “Subsidised PDS foodgrains does not reach the poor who desperately need the same. These poor people never get PDS foodgrains in proper quantity and quality. The fair price owner is aware of bogus/fake ration cards and uses these for black marketing of PDS foodgrains,” the Committee's report said.

Commenting on the State-wise situation, the Committee said the PDS has collapsed in Rajasthan; in Jharkhand, the system is a glaring example of what the system ought not to be; in Bihar, the beneficiaries get ration of a month after a wait of three-four months; in Gujarat, shop-owners admitted bribing the officials; in Orissa, grain storage agents are susceptible to political influence; in Karnataka, there is collusion between officials, investigating agencies, dealers, wholesalers and other vested interests.

A study in 2007 had revealed that over a three-year period alone Rs 31,586 crore worth of wheat and rice meant for the poor were siphoned off and sold in the open market illegally.


The number of “ghost” ration cards at that time, were found to be at a staggering 2.3 crore, while as many as l.21 crore deserving poor had been left out of the food security umbrella.

The study had also pointed out that every year the poor were cheated out of 53.3 per cent of wheat and 39 per cent of rice allocated for PDS. The worst offenders were Uttar Pradesh, West Bengal, Madhya Pradesh, Rajasthan and Maharashtra. The North-East was worse off: Of the eight North-East States, not a single grain supplied to Sikkim, Meghalaya, Manipur, Mizoram, Nagaland and Assam reached the targeted population. In fact, it was found that the grains allotted did not even reach the States concerned and were siphoned off from Delhi itself.

Similarly, in the case of PDS kerosene too. About 35 per cent of it finds its way to the open market where it is sold at about Rs 25 a litre against the controlled price of Rs 11. It is also used to adulterate diesel and petrol.

Every year lakhs of tonnes of foodgrains are allowed to rot and go waste because of the severe erosion of PDS-related infrastructure, improper warehousing facilities, decline in the number of fair price shops, understaffed monitoring mechanism, and laxity in anti-hoarding laws.

In fact, coinciding with the release of the report, there have been reports about foodgrains worth crores of rupees rotting on roads in Punjab for want of warehousing facilities. The Punjab Government has reportedly requested the Centre to lift the stock and distribute the same to the poor free of cost, if necessary.

According to the State Government sources, the stocks are already pledged to the Centre, but the Centre has not lifted the same. Consequently, some 70 lakh tonnes of stocks have been rotting. Still greater worry is, fresh harvest will be arriving within the next few weeks and the State Government is finding itself in a difficult situation.

The Agriculture Minister, Mr Sharad Pawar, has promised hiring of more godowns to store the excess stocks. One wonders why the Government is not off-loading more stocks in the open market, instead of allowing the excess stocks to rot in warehouses and on the roads at a time when the high food inflation continues to remain a major worry.

In fact, this is a recurring problem. In July 2008, for instance, it was reported that over 10 lakh tonnes of foodgrains, that could have fed one crore hungry people for one year, were damaged in FCI godowns. The damages were incurred, despite the FCI spending Rs 242 crore to prevent such losses.

Meanwhile, the food subsidies paid by the Centre have more than doubled over the last four years to Rs 56,000 crore in 2009-10, but the Centre and the State governments have failed to reduce wastages and improve delivery mechanisms by plugging the enormous leakages.


Clearly, the time has come to examine whether there could be an alternative to the existing PDS.

In fact, this assumes greater urgency since the Empowered Group of Ministers (EGoM) headed by the Finance Minister, Mr Pranab Mukherjee, has now cleared the National Food Security Bill, guaranteeing 25 kg of wheat and rice to the poor every month at Rs 3 a kg.

The Bill is expected to be tabled in Parliament in the monsoon session to fulfil the poll pledge of the UPA Government. Once it becomes law, the Government's food subsidy bill is expected to go up further.

To eliminate, or at least minimise, the prevailing corruption and wastages, a better alternative suggested by many experts is giving cash directly to the eligible poor through a coupon system. In fact, the latest Economic Survey has also come out with a similar suggestion which appears to be quite pragmatic. It says:

To make PDS more effective, and leak-proof, the subsidy should be handed over directly to the households who should be given the freedom to choose which store it buys the food from.

The households should be given the coupons which can be used at PDS stores in lieu of money when buying wheat or rice and the stores should be free to charge the prevailing market rate.

Such a system will be more impervious to corruption, says the Economic Survey. However, for the full success of this “coupon system” what is needed is an effective method of identifying the poor.

This is where the proposed Unique Identification (UID) System would come into play. Hopefully, the UID System would be in place before the passing of the National Food Security Act.