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Reetika Khera (2011), Economic and Political Weekly, Vol. XLVI, No. 44 & 45, Nov 5

A nine-state survey of the PDS in India shows that the revival of the scheme in several states, which can be traced, in large part, to a renewed political interest, has positively impacted food security situation in rural India. Therefore it is perhaps more sensible to further improve the PDS, rather than replace it with cash transfers.

In official circles in India, there is growing perception that the public distribution scheme (PDS) in India is not delivering on its goal. The criticisms against the system range from being inefficient, prone to corruption, to being administratively difficult. The policy debate at the centre is increasingly focusing on replacing the PDs with cash transfers or coupons. At the level of states, on the other hand, several state governments have initiated policy changes to restore PDS and make it functional.

In this paper, Reetika Khera analyses the various policy changes undertaken by the nine state governments, the diversity in the state-level reforms and the role of the reformed system in ensuring food security. It also discusses “peo­ple’s views on cash transfers as an alternative to subsidised food from the PDS”.

The report is based on a survey of 1,227 house­holds and interview with Fair Price Shops (FPS) dealers based in nine sample states. These states are divided into three categories based on the performance of the PDS. The sample consists of three states having functional PDS (Andhra Pradesh, Himachal Pradesh and Tamil Nadu), three with reviving PDS (Chhattisgarh, Orissa, and Uttar Pradesh) and three in which PDS is ‘languishing’(Bihar, Jharkhand and Rajasthan).

The report brings out several new dimensions related to the PDS in Indian states. It shows that the states which have well functioning PDS have brought in policy reforms in terms of raising the number of ‘below poverty level’ (BPL) households entitled to PDS commodities, beyond the caps imposed by the central government. In addition, in many states, households which are slightly less poor and categorised as ‘above poverty level’ (APL) have been included in the PDS. This category of households had been almost excluded from PDS when the centre introduced targeted PDS in the mid-1990s. Several states have also reduced the PDS prices at which grains are made available, with Tamil Nadu providing free grain since June 2011. Also, more recently, some states have started including more nutritious and non-grain items such as edible oil and pulses among commodities distributed through the PDS.

However, the inclusion of greater number of BPL households notwithstanding, in states where the scheme is not universal and is targeted to only a section of the poor (e.g. Bihar, Jharkhand and Uttar Pradesh), the coverage has remained patchy and suffer from huge ‘exclusion errors’.

Regarding the issue of corruption in the PDS, one of the major findings of the survey is that there has been a distinct decline in the incidence of corruption. Households in states other than Bihar and Jharkhand, are able to avail at least 80 per cent of their entitlement from the PDS. Also, three-fourths of BPL (and poorer) households in all the nine survey states get their full entitlement, although the figures are much lower for Bihar and Jharkhand.

The assessment of the PDS clearly shows that, except in Bihar and Jharkhand, there has been significant improvement in the “predictability and regularity of PDS distribution and opening of FPSS”. In this context, the author argues that there is a close association between households getting their PDS entitlements and the predictability of opening FPS. This is because more regularity and predictability in opening of these shops helps in preventing diversion of PDS quotas. Also, 45 per cent respondents feel that the quality of foodgrain provided through the PDS are ‘fairly’ good, although in Bihar and Jharkhand one-third feel that PDS food grain are of poor quality.

Given these improvements, it is not surprising that the PDS has become an important tool for ensuring food security in rural India. Although, overall more than one-fifth of the respondents are reported to have skipped a meal in the three months preceding the survey, there are huge inter-state variations. The incidence of hunger is relatively low in states with well-functioning PDS (even those which are relatively poor states) and extremely high in states where it is almost dysfunctional. Significantly, the PDS also plays an important role in ensuring greater diversification of diets. This is reflected by the fact that in states where the PDS supplies non-cereal items the proportion of households which did not consume pulses, or other non-cereal food items even once in the week preceding the survey is negligible.

This perhaps also explains why two-third of all the respondents prefers food over cash. However, once again, there are significant inter-state variations in preference for food over cash and these are linked to the situation of the PDS in the state. That is, it is mainly in Bihar that people were open to the idea of cash transfers instead of food. There are several reasons for preferring food over cash: “food security, poor access to banks and post offices, unimpressive record of other cash transfer programmes, under-developed rural markets, apprehensions regarding possible misuse of cash, and familiarity with the existing system”, etc.

Finally, the improvement in the functioning of the PDS in several states, the author notes, is also linked to other reforms taken in the function of the PDS. These relate to the rise in commissions for FPS dealers leading to increased viability, better coordination between grain supplying agencies and the PDS dealers, handing over management of the PDS to cooperatives or gram panchayats instead of private dealers, computerisation of records and so on.

The author concludes on the note that an important part of the revival of the PDS in various sample states “is a new political will to make the PDS work”. Although the PDS survey focused mainly on BPL (and poorer) households, there is enough evidence to show that the PDS is an important lifeline for the rural people. A move to dismantle the PDS in favour of cash transfers would expose rural households to considerable uncertainty. There is, thus, a need to improve further the working of the PDS and also move towards universalising the system.