Given thecountry's current level of food production, it may not be possible to meet the requirements of a universal PDS.
The debate over the proposed National Food Security Bill has been on for quite some time now. The National Advisory Council (NAC), led by Ms Sonia Gandhi, had favoured a universal public distribution system (PDS) and increasing the allotment of grain to eligible families from 25 kg to 35 kg. However, the Planning Commission recently expressed its reservation about the universalisation of PDS.
The Planning Commission Deputy Chairman, Dr Montek Singh Ahluwalia, has proposed that food-grains for above poverty line (APL) families be sold at a much higher price than those for the below poverty line (BPL) families, which may continue to get them at Rs 3 per kg (rice or wheat). Also, he favours per capita allotment of grain (6 kg per person) against the NAC's idea of providing 35 kg of grain to each entitled family, so as to bring down the subsidy burden
Even the Food Ministry, headed by Mr Sharad Pawar, had ruled out a universal PDS earlier, on the ground that given the country's current level of food production, it may not be possible to match the procurement levels with the requirements of a universal PDS. Thus the dilemma on the Food Security Bill persists, with no solution in sight.
VALID RESERVATIONS
The reservations expressed by the Plan panel as well as the Food Ministry are well founded and deserve to be taken note of. The Planning Commission has estimated the cost to the exchequer of the universal food security programme at a whopping Rs 1.9 lakh crore, against the current subsidy bill of about Rs 80,000 crore. Hence, it favours continuation of the targeted PDS.
Moreover, the Planning Commission has expressed its inability to provide the required funds for implementation of the proposed National Food Security Act in the final lap of the Eleventh Five-Year Plan, arguing that doing so would mean diversion of funds from ongoing schemes. Dr Ahluwalia, in his presentation before the NAC, proposed the roll-out of the scheme from the beginning of the Twelfth Plan, starting from April 2012. Though silence followed Dr Ahluwalia's presentation, sources indicate that the NAC chairperson, Ms Sonia Gandhi is not unsympathetic to the fiscal concerns voiced by the Plan panel. The fiscal concerns and the prevailing widespread leakages in the PDS cannot be brushed aside easily. Unfortunately, the NAC is silent on reforming the prevailing PDS, which is corruption-ridden and appears beyond redemption.
Second, apart from the fiscal considerations, there are other equally important reservations against universalisation of the PDS. For instance, it would mean procurement of much larger quantities of wheat and rice every year to the tune of about 100 million tonnes or nearly 50 per cent of India's total grain production. This will result in very low availability of food-grains in the open market, leading to a sharp rise in open market prices. Unfortunately, the promised new deal to agriculture and raising the growth rate of farm output to at least four per cent per annum remain elusive, despite repeated promises by policy-makers.
With stagnant agricultural production, even the current level of procurement by the Government is one reason for the upward pressure on the open market prices of food-grains. Also, the country has often witnessed a paradoxical situation of thousands of tonnes of food-grains rotting away in the Food Corporation of India (FCI) godowns and the authorities denying the poor and the needy access to the bulging stocks.
Clearly, there is now a new urgency to seriously examine whether a better alternative can be found to the PDS, which has proved exorbitant, wasteful and corrupt. Way back in 2005, a Planning Commission study had revealed that the targeted PDS had to spend Rs 3.65 to transfer just one rupee's worth of benefit to the poor. Even more shocking was the revelation that about 58 per cent of subsidised grain failed to reach the poor because of identification errors, rampant corruption and inefficient operations. Over 35 per cent was siphoned off by shopkeepers and traders and another 21 per cent was leaked to non-poor households. The cost of handling of food-grains by the FCI is also huge.
TIME TO REFORM PDS
The government should now consider the better alternative suggested by many experts of giving cash directly to the eligible poor through a coupon system. In fact, the Government's pre-Budget Economic Survey also came out with a similar suggestion aimed at making the PDS more effective and leak-proof. The Survey went a step further and said that the eligible households should be given the freedom to choose the store from which to buy grains. In fact, the Government's chief economic advisor, Dr Kaushik Basu, in a recent working paper prepared for the Finance Ministry, advocates that the poor should be given the option to convert the coupons either into money at a bank, or into goods in a shop. This will help eliminate corruption.
The Planning Commission's suggestion to implement the Food Security Act only from the beginning of the Twelfth Plan period also deserves favourable consideration. The time available till then could be used fruitfully to identify the really eligible families with the help of the ongoing Census data and the proposed Unique Identification (UID) system.
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