27-07-2012, 02:20 PM
Dossier on the Public Distribution System in India
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Introduction:
The British Government introduced the public distribution of cereals (i.e. a fixed quantity of rice or wheat) in India through a rationing system. The Government of British India created the Department of Food in 1942 towards this end. The rationing system was abolished in 1943 when the War ended.
The newly independent India had to reintroduce rationing in 1950 in “the face of renewed inflationary pressures in the economy” (Devasahayam, 2001 and passim).The public distribution of foodgrainswas retained as “a deliberate social policy, when it embarked on the path of planned economic development in 1951.” In the First Plan, the then urban-based systemwas extended to rural areas which suffered chronic food shortages. But by the end of the First Plan (1956), the foodgrain availability in the market improved and the rationing system started losing its relevance.
However, the food production “dropped in 1958 when the Second Plan had just commenced. This forced the Government to restart the procurement of foodgrain and cereals and impose control on trading of foodgrains. It also decided to reintroduce PDS.” The Food Corporation of India and the Agricultural Prices Commission were created in 1965 which helped to consolidate PDS. “The Government was now committed to announce a minimum support price for wheat and paddy and procure quantities that could not fetch even such minimum prices in the market. Foodgrains thus procured were to be used to maintain distribution through the PDS with a portion used to create and maintain buffer stocks.” Through these measures, the PDS was poised to emerge from being a mere rationing system to “a National Food Security System.” The system was expanded to rural and tribal areas in 1970s and it remained a general entitlement system for all, without any specific target, until 1992.
There are three broad debates which frame the PDS question in India: (i) identification of the poor and BPL families, (ii) universal vs. targeted coverage of PDS, and (iii) the institutional design, including the choice of technology, in resolving the problems within the PDS.
The Debate on Identifying the Poor and the Determination of BPL families:
The Public Distribution System is part of the poverty alleviation programmes in India. Poverty alleviation programmes can be categorised into universal programmes (or programmes whose beneficiaries are self-selected), and targeted programmes (or programmes that are exclusively for predetermined target groups) (Ramachandran et al, 2010). The Public Distribution System (PDS) for the provision of fair-priced/subsidised food is a targeted programme.
The entitlement to fair-priced/subsidised food depends on being identified as a poor. The poverty line which demarcates the boundary between the poor and not-poor is based on a calorie norm. ‘Task Force on Projection of Minimum Needs and Effective Consumption Demand’ constituted by the Planning Commission in 1979 defined the poverty line as that per capita expenditure [1973-74 is the base year, when a survey of consumer behaviour was conducted] level at which the average per capita per day calorie intake was 2400 kcal for rural population and 2100 kcal for urban population. This calorie intake was considered to be an “acceptable ‘minimum needs’ and it excluded expenditure on health and education, both of which were expected to be provided by the state. Corresponding to this calorie norm, it suggested a fixed commodity consumption basket, which was Rs.49.09 per person per month at 1973-74 prices for rural areas and Rs.56.64 for urban areas. “The consumption basket identified separately for rural and urban areas is evaluated at state-specific prices to arrive at state specific poverty lines in the base year, 1973-74. …The state-wise poverty lines computed for the base year 1973-4 are adjusted for prices for the subsequent years. ..For any year, poverty levels are estimated for each state using the state level consumer expenditure distribution. Aggregating the state-wise poverty ratios, the all India poverty ratio is estimated. Given the all India poverty ratio, poverty line is estimated using the consumer expenditure distribution for that year..”(Report of the XI Plan Working Group on Poverty Elimination Programmes; henceforth, XI Plan WGR).
While the poverty line is determined by the Planning Commission of Government of India , the actual identification of poor people or families below the poverty line [BPL] is done through the BPL Survey, undertaken by the Ministry of Rural Development. In 1992, the BPL Survey “used an income criterion to determine poverty, and the annual income cut-off was fixed at Rs. 11,000 per household. The BPL Census of 1997 was conducted in two stages. First, some families were excluded on the basis of certain criteria. In the second stage, each remaining household was interviewed to determine its total consumer expenditure, and was identified as a BPL household if its per capita consumer expenditure was below the poverty line set by the Planning Commission” (XI Plan WGR).
However,“the BPL Census 2002 used a “score-based ranking.” Each household questionnaire had two parts. Section A recorded some introductory characteristics of households. These were the “non-scoring parameters,” which did not figure in the final assessment of the household's poverty status. Section B, which recorded 13 “scoring parameters,” was intended to evaluate the quality of life of the households. ... The aggregate score of the thirteen parameters for each household was calculated and the absolute and relative position of each household in a village in respect of its poverty status was set” (XI Plan WGR).
The Expert Group to Review the Methodology for Estimation of Poverty, which submitted its report to the Planning Commission, recommended that the poverty line be based on a single calorie norm of 1800 Kcal per day, citing the FAO recommended norm of minimum dietary energy requirements (MDER). On the basis of the use of new price indices, it estimated the percentage of BPL families to be 41.8 per cent of the rural households in 2004-05, as compared to the current estimate of 28.3 per cent.
Scholars like Saith (2005) have criticised the original poverty line based on 2100 calories per person per day in urban areas and 2400 calories per to be low, and also for focusing on calorie intake leaving out other household expenditures like health, education and other basic needs. Madhura Swaminathan (2010) criticised the Expert Group’s methodology as it proposes to consider “reduced calorie consumption (i.e. universal 1800 Kcal per day), and fails to provide for reasonable household expenditure” in its poverty estimation. She points out that FAO recommends 1800 Kcal as “minimum dietary energy requirement’ as an amount of energy needed for light or sedentary activity.
The Debate on the Targeted PDS:
In June 1992, PDS was revamped for the first time, and this “Revamped Public Distribution System Approach” was centred on the effective reach, doorstep delivery of commodities to the Fair Price Shops and the inclusion of additional commodities in PDS. In 1997, the Government of India decided to further refine PDS, with the second revamping of the system in the form of the “Targeted Public Distribution System”. The prime reason for switching to the Targeted PDS was to curb the rising food subsidy bill borne by the Government of India. Under this scheme, the Below Poverty Line (BPL) families would get basic commodities at a subsidized rate, whereas the Above Poverty Line (APL) families would get them only at their economic cost.
Today, there are more than 4.9 lakh Fair Price Shops (FPS) in the country which distribute commodities worth Rs. 15,000 crores to about 16 crores houses annually (IIMA, 2010).
The effectiveness of TPDS to address food insecurity has been a contentious issue. The 2005-2006 National Family Health Survey showed that 46% of children below three years were underweight; 33% of women and 28% of men had a Body Mass Index (BMI) below normal; 79% of children aged 6-35 months had anaemia, as did 56% of married women aged 15-49 years and 24% of similar men; and 58% of pregnant women. The national averages mask locational differences: all these indicators were much worse in rural India and they had not changed since 1998-99 (Ghosh, 2010). The TPDS has been criticised for collapsing the food-needy households with the BPL households. To make this point clearer, a recent study by Deaton and Dreze, reveals that over 76% of the total population of the country had nutrition consumption below the norm of 2400 calories per day in 2004-05, though TPDS is targeted to only 36.1% of the population, based on the Planning Commission’s poverty estimate of 1993-9 (Deatonand Dreze, 2009). So debate on the appropriateness of using the poverty line as a basis for identifying food insecure households has brought the question of the standard of measurement to the fore, i.e. what is poverty and how ‘poverty’ should be conceptualized and measured?[1] The criterion guiding TPDS remains an open-ended debate. The second problem arises in the operationalization of this criterion: at the level of the actual selection of ‘beneficiaries’, where often it has been noted that the officials in charge of this exercise, at the local level, deliberately ignore this criterion while drawing up the list of eligible households (which in this case is the same as the identification of BPL households) (Khera, 2011).
The other problems that have plagued TPDS are (i) the ‘last mile’ monitoring of the distribution of food grains, (ii) the viability of fair price shops and (iii) the unequal distribution of ration cards between fair-price shops. These problems are well-recognized; for example, the Report of the Wadhwa Committee[2] on TPDS acknowledges these problems, as well as uses existing studies to present these problems without any contestation. The viability question has been brought up by the Performance Evaluation Organization of the Planning Commission. The governance of fair-price shops is an issue that has been raised by civil society actors time and again – in fact, for this section, the Committee chooses to make use of an NGO study ( the research study of the Centre for Media Studies on Corruption) to present the problems involved.
In addition to the pre-existing recommendations on rationalised licensing of fair-price shops, rationalising commission and allowing trade in non-FSA commodities at the Fair-Price Shops (from PEO study) and the recommendations on timely delivery and vigilance audit of TPDS (from the Centre for Media Studies study), the Wadhwa Committee offers further recommendations, of which two are very important in the context of the current debates over TPDS.
The Wadhwa Committee makes a choice of continuing with TPDS as against the universal entitlement to PDS and allows for further monitoring and vigilance in the selection of beneficiaries. The rationale guiding this recommendation is that, at present, much of the subsidy is appropriated by APL and incorrectly identified BPL households.Here, it is important to note that the critics of TPDS argue for a Universal PDS precisely because of the difficulty in correctly identifying beneficiaries. In fact, some studies suggest that the impact of universalization of the PDS may require an increased outlay of 0.64% of the GDP and therefore raises questions about the subsidy burden argument made for the continuance of TPDS (Kumar & Dixit, 2010). For a more detailed explanation, see the diagram below:
The Wadhwa Committee recommends an automated system of monitoring of food grain transportation till the point it reaches the Fair Price shops as well as the time of identification of beneficiaries, for effective delivery. The Wadhwa Committee has done an analysis of ‘Pros’ and ‘Cons’ of various technologies that can be deployed in PDS, but leaves the question of the choice of technology open.
Institutional Design of PDS : Problems of the Public Distribution System:
1. Inadequate quantity and quality allocation of PDS.The 20 kg per family provision is insufficient food for families of 6 or more; this should be better examined and larger families should be able to buy more from the PDS.
2. An inability of the poorest to access and pay the 2 rupee subsidized price of food
3. Caste discrimination
4. Frequent smuggling of large quantities of PDS food grains and other PDS commodities
5. Difficulty in obtaining ration cards. Newly married persons, migrant workers and inter-state migrant workers who are living in migrated areas don’t have ration cards.
6. Irregular shop hours
7. Food grains being imported for PDS due to the state’s failure to maintain buffer stock and its systematic attempt to weaken procurement from our farmers.
8. Lack of community monitoring and rampant corruption at various levels of the implementing agencies.
9. People are often forced to purchase other commodities form the fair-price shop soa s to avail their allocated quota.
10. Cardholders are often sent back home empty-handed with officials claiming that commodity stock has been exhausted.
11. PDS rice is often smuggled to rice mills and converted to cattle feed by grinding and mixing it with paddy husk
12. The light blue coloured PDS Kerosene is openly sold in local markets.
13. Each ration shop has more ration cards than the stipulated 1000 cards per FPS
Technologisation of PDS: The case of Tamil Nadu
The monitoring system to ensure the ‘Last Mile’ reach of food articles is very much a part of current discussions – Food Coupons, Food Stamps, SMS announcements of grain delivery (as in the case of Tamil Nadu and Chhattisgarh), community monitoring of grain trucks and Fair Price Shops (Chhattisgarh) have all been tried or tested in part, or been put across as part of policy recommendations (See IIMA, 2010, Khera, 2011). The introduction of new technologies for monitoring is an emerging issue.
The success of PDS in Tamil Nadu is accorded to the massive administrative and technological interventions. The focus of such interventions is obviously to check the diversion of food supplies, to create “innovative fool-proof delivery mechanisms.” At the ground level, it involves “old-fashioned policing, surprise checks and constant reviews, and fixing responsibility at each level” (Vydhianathan and Radhakrishnan, 2010 and passim).