The Delhi government is likely to take a radical step of phasing out the public distribution system (PDS) as we know it and replace it with cash transfer: a topic of hot debate for quite some time.

Chief minister Sheila Dikshit has approved the proposal drafted by the department of the food and supplies, sources have told Governance Now.

According to the proposal, an amount of Rs 600 will be transferred every month to the bank account of a woman of every BPL household, using aadhar or UID number.

Cash transfer, quite successful in several South American countries, has been advocated as a solution to the leakages of a highly inefficient PDS. It can stop wastage of food grain in transit, corruption in the process and other ills in the system by giving enough cash in the hands of the beneficiary. The woman representative of the household can go to the market and buy the food grain and other essentials.

On the other hand, several experts argue that cash is not a solution as it can be spent on inessential items including on liquor – if the male head of the family has his way in many cases. They insist that the right way to go is to revamp the PDS.

To cut through the debate, the Delhi government last year launched a pilot project in Raghubir Nagar, involving 450 BPL families. While 100 of them were given Rs 1,000 a month, the rest continued to receive wheat, rice and sugar from the local ration shops.

At the end of a year, the Self-Employed Women’s Association (SEWA) was brought in to find out what the beneficiaries had to say. A survey found that the 100 families were satisfied with the cash transfer.

The survey analysis showed that though there was little difference between the amounts of wheat, rice and sugar consumed by the two groups, cash transfer had been effective in significantly increasing consumption of pulses, egg, fish and meat. Also, some households even managed to use part of the money on medical needs.

The survey also found that the performance of the ration shops in the west Delhi area improved after the project was started.

Although 96% of those included in the pilot wished to continue receiving cash, many have a strong opinion in favor of the PDS system of subsidized food and fuel, in spite of its many defects.

The survey recommended that the government must gradually introduce the cash transfer scheme and that too as an option, allowing the people to choose between ration cards and cash.