Pilot project in Ranchi for PDS subsidy transfer

Objective is to ensure zero leakage of subsidy

GN Bureau | July 25, 2017


#public distribution system   #food grains   #subsidies  
(Illustration: Ashish Asthana)
(Illustration: Ashish Asthana)

After Chandigarh, Puducherry and Dadra & Nagar Haveli, the government is now looking at subsidy transfer scheme for Public Distribution System (PDS) in Ranchi through a pilot project.
 
But, there is a crucial difference between the Ranchi project and the initiative already in place in the three union territories where the entire subsidy amount is transferred to the beneficiaries’ account and they are free to buy the grains from anywhere.
 
In the pilot project, the beneficiaries will get the subsidy amount in advance in their bank accounts and they will have to buy the food grain from any ration shop, which has got the electronic point of sale (e-PoS) devices.
 
Times of India reported that this initiative will ensure zero leakage of the subsidy and foodgrain as well. A government source said the beneficiaries' failure to buy the foodgrains from the e-PoS enabled ration shop would result in no transfer of the subsidy for the next month. This will also ensure that beneficiaries under National Food Security Act don't use the subsidy amount for anything else,
 
 
Ram Vilas Paswan, union minister for food and consumer affairs, said on May 16, 2017 that the Modi government has been pushing for reforms in the PDS in the last three years.
 
Paswan told the Financial Express: “We have covered more than 80.5-crore population under NFSA so far. However, the pace of installation of electronic point of sale (ePoS) machines at fair price shops (FPSs) has been rather slow. Out of the total 5.2 lakh FPSs in the country, around two lakh FPSs (38%) have ePoS enabled. Most of the ePoS-enabled PDS outlets are in Andhra Pradesh, Chhattisgarh, Gujarat, Tamil Nadu, Jharkhand, Madhya Pradesh, Rajasthan and Telangana.”
 
“In the last two years, DBT in PDS is being implemented on a pilot basis in Chandigarh, Puducherry and urban areas of Dadra and Nagar Haveli. However, the states have been slow and reluctant in implementing DBT. We have requested states to carry out DBT pilots in at least one district to understand the implications,” he added.
 
The Niti Aayog in an evaluation study on role of Public Distribution System in shaping household and nutritional security in India said that “in an era of growing overall incomes, the availability of subsidised cereals skews consumption towards greater cereal consumption at all income levels”.
 
“Almost all the households purchase some cereals from the market and PDS purchase accounts for less than half of the total cereal consumption. At this infra-marginal level, would it not be possible for households to curtail their market cereal purchase and use that money for other foods? However, this does not seem to be the case. It may be that instead of the PDS grains being the staple and market grains being the additional, market grains form the staple of household consumption, possibly because of their higher quality. However, even if the market-purchased rice is being used for special meals, the PDS rice may be used for the preparation of foods like dosa or khichdi, in which case the quality of the grain is less important. Consequently, access to the TPDS may add to cereal consumption rather than replacing market purchases.”
 
The Nity Aayog report said: “Cash transfers may be a way of avoiding skewing the household consumption of cereals by depressing prices. However, their success would depend on the ability to 85 effectively administer transfers and reduce leakages. Moreover, how this may affect grain markets remains unknown. International research on cash versus in-kind food subsidies presents mixed results with the effectiveness of cash transfers depending on the institutional framework. Thus, while in theory it seems likely that cash subsidies instead of in-kind subsidies via PDS may increase dietary diversity, it may make sense to experiment with a cash transfer programme in a few districts—particularly districts with diverse food habits and market infrastructure — before engaging in the massive transformation of India’s Public Distribution System.”
 
One does have to bear in mind that the PDS is the key element of the government's food security system in India.
 
“It is an instrument for ensuring availability of certain essential commodities at easily affordable prices especially for the poor. The government, via the Food Corporation of India (FCI), procures and stocks food grains which are released every month for distribution through the PDS network across the country. In addition to sugar, edible oils and kerosene, food grains, mainly rice and wheat, are distributed to the public via a network of Fair Price Shops (FPS). The system of procurement is also used by the Government of India to provide minimum support prices to the farmers so as to stabilise farm output and income.
 
“To begin with, in the sixties efforts were made to procure rice and wheat not only for normal distribution through Fair Price Shops under the PDS but also to maintain buffer stocks, which were built in the years of good production to tide over the periods of lean production. In the eighties, given the increases in the food grains production and the resilience in the agricultural production scenario, the Government of India decided to operate a system whereby certain norms were fixed regarding the quantities to be held by the Food Corporation of India at different points of time during the year, thus merging the stocks meant for normal distribution and buffer stocks,” said the planning commission
 
PDS had emanated from the critical food shortages of 1960s. PDS had substantially contributed to the containment of rise in food grains prices and ensured access of food to urban consumers. As the national agricultural production had grown in the aftermath of Green Revolution, the outreach of PDS was extended to tribal blocks and areas of high incidence of poverty in the 1970s and 1980s.
 
PDS, till 1992, was a general entitlement scheme for all consumers without any specific target. The Revamped Public Distribution System (RPDS) was launched in June 1992 in 1775blocks throughout the country. The Targeted Public Distribution System (TPDS) was introduced with effect from June 1997, said the department of food and public distribution. 
 
 

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