• Will food coupons solve problems related to PDS?
  
• Trend analysis of NSSO survey on PDS
• Lessons to be learnt from government food assistance schemes
  

Will food coupons solve problems related to PDS?

In view of the failure of the Targeted Public Distribution System (TPDS), the government plans to introduce food coupons for people living below the poverty line. This might undermine the food security of the poor, and will have serious repercussions in terms of their nutritional requirements.
Supriya Singh

Even before the government could finalise its plan of introducing food coupons for the poor, controversy dogs the issue. In order to discourage malpractices within TPDS and prevent black marketing, the central government is planning on allocating food subsidy to the states in cash.

TheThe idea is to universalise the price of food grains to the above poverty line (APL) prices and then extend the subsidy to the poor by giving them food coupons worth a particular sum. Effectively, there will be no limits on entitlements and the poor can choose what to buy.

These could then be exchanged for food grains at Fair Price Shops (FPS, which are TPDS outlets) and any additional amount could be paid in cash. Private ration shops will be gradually introduced into the system in order to provide a healthy choice to consumers, and bring food grains closer to their homes.

Though planning is still at a nascent stage, sources in the Union ministry of food and civil supplies reveal that a pilot project is already under way in Thane (Maharashtra) and Anand (Gujarat) districts. This World Bank-sponsored project is being implemented by the Union ministry of finance to gauge the feasibility of issuing food coupons. The scheme will be formulated and implemented based on the recommendations of the project.

The idea of food coupons has been in circulation since 2001 when the Planning Commission talked of food coupons as an alternative in its approach paper for the 10th Five–Year Plan in May 2001. The finance ministry took this up as a part of its roadmap for targeting subsidies to the poor (Central Government Subsidies in India: A Report, December 2004). It called for an end to the current policy of procurement of food grains and introduction of food coupons among other measures to bring down expenditure.

Reports on food coupons schemes from other countries have not been very encouraging. Moreover, there are basic issues that critics of the scheme have raised. Biraj Patnaik, principal adviser to the Office of the Commissioners of the Supreme Court, is against the idea: “Food stamps are virtually cash and it’s a fact that in whichever form cash enters the household economy, men control it. Women’s access to food is likely to be compromised with food coupons as these could then be easily bought or sold in the market.”

Experiences in countries like Sri Lanka show that food coupons are not adjusted to inflation and can be duplicated easily.

“The whole purpose of PDS was to target hunger and malnutrition and address the agriculture pricing issues. The introduction of food coupons does not address these problems. It does not ensure the physical availability of food either,” says K S Gopal, director, Centre for Environment Concerns, Hyderabad.

There is also talk of introducing smart cards but their feasibility remains unclear. N D George, director, Food and Food Security, Development Policy Division, Planning Commission, says, “Food coupons are just one of the options the government is looking into. Use of smart cards within TPDS is also being considered in order to efficiently monitor the disbursement of food grains and prevent leakages. However, decisions on pricing and targeting the scheme only for those living below the poverty line (BPL) have not been taken yet. How the scheme will shape up depends on the pilot projects and experiences form different states.”

Bihar’s experience with food coupons hasn’t been favourable. The state tried to introduce coupons under the existing PDS system of assigned quota of food grains and kerosene. With a large population of APL but poor families in rural areas there were protests against drawing BPL lists and the government had to withdraw the coupons. The state government asked the Centre to increase the state quota and revise the definition of poverty but the application is still pending.

Food coupons are a means of narrowly targeting the beneficiaries. “A scheme that is only for the poor remains ‘poorly implemented’ as the voices of the poor are always drowned. If we have to make any scheme viable we need to increase its reach. In targeting the poorest of the poor the government might end up compromising the food security of millions,” says Biraj Patnaik.

Closely linked to food security is nutrition. In the United States, a household is eligible for food subsidy when it spends one third of its total expenditure on food (roughly three times the cost of a nutritionally adequate diet). In India where the target population is obviously very large, it is equally important to target malnutrition and therefore a universal scheme like PDS before 1997 is a far better option than further narrowing the beneficiary pool

Also, administrative costs for such schemes can be huge given the scale they need to be implemented on. Issuing and delivery of food coupons might not be as trivial an issue as it looks.

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Trend analysis of NSSO survey on PDS

(Source: NSS Report No. 510: Public Distribution System and Other Sources Of Household Consumption, 2004-05)

Even a ‘targeted’ Public Distribution System (PDS) falls short of the needs of its intended beneficiaries. Though PDS appears to have covered ground, questions on its effectiveness as a system remain. The ‘National Sample Survey Organisation (NSSO) 61st round report on the Public Distribution System and other sources of household consumption, 2004-05’ analyses data from around 80,000 rural households and arrives at some interesting trends

The Public Distribution System (PDS), a government run network to distribute essential commodities at subsidised prices to holders of ration cards, purportedly benefits those at the lowest rungs of society. The government runs food assistance programmes namely ‘Food for work’, ‘Annapurna’, ‘Integrated Child Development Scheme’ and ‘Midday Meal’ for the economically disadvantaged to supplement PDS.

Till 1997 India had a universalistic PDS system wherein everyone had access to subsidised food grains and other essential commodities. This was replaced by a targeted PDS that aimed to cater to the very poor segments of the population. The population was divided into Below Poverty Line (BPL) and Above Poverty Line (APL) based on the income criterion. BPL was further divided into BPL and Antyodaya (poor and very poor).

Those in APL could accrue benefits once the needs of the poor had been met. However, in 2000 all subsidies for APL families were eliminated. The rate at which BPL families could purchase their allocated amount became 50 per cent of the central government’s procurement cost. Antyodaya cardholders get their share at even lower costs.

Trends

A. Possession of ration cards
In terms of population coverage under PDS, 81 per cent rural and 67 per cent urban households hold ration cards of any type. Around 26.5 per cent rural households and 10.5 per cent urban households hold BPL cards. However, in terms of target beneficiaries, the people who require PDS the most (poorest possessing less than 0.01 hectares (ha) of land) do not hold any ration cards. Compared to this, in all other size classes, about 77-86 per cent households hold a ration card of some type.







B. Around 43 per cent agricultural labour households, and 32 per cent other labour households hold BPL cards. Again, 5 per cent agricultural labour households, and 4 per cent other labour households hold Antyodaya cards. The percentage of households holding any kind of ration card is highest among self-employed households, about 11 per cent of which hold BPL cards.



C. With the majority of beneficiaries being Schedule Castes (SC) and Schedule Tribes (ST) -- in rural India, ST households hold 40 per cent BPL cards, SC households hold 35 per cent, Other Backward Classes (OBC) households hold 25 per cent BPL cards, and remaining households hold 17 per cent -- economic classes make a huge difference in selection of target groups under PDS

Reports indicate that an increasing number of APL households hold BPL cards. Though the percentage of households holding BPL cards declines gradually from 41 per cent in the bottom Monthly Per Capita Expenditure (MPCE) class to 11 per cent in the top class.

In the top three MPCE classes representing ranges of “Rs 690-890, Rs 890-1,155 and Rs 1,155 or more”, 18 per cent, 14 per cent and 11 per cent households hold BPL cards respectively. The poverty line for rural India being Rs 356 a month, the top three MPCE classes easily fall under the APL category.



D. Main commodities consumed under PDS are rice, wheat, sugar and kerosene. The consumption patterns under PDS compared to overall consumption of commodities in the country show that barring kerosene all other commodities fare badly.

Kerosene has the largest consumption from PDS -- 77 per cent for rural, and 57 per cent for urban India. For rice the share in PDS in total consumption is 13 per cent for rural and 11 per cent for urban areas. This is followed by sugar (9.5 per cent for rural and 6.5 per cent for urban areas), and wheat (7 per cent for rural and 4 per cent for urban areas).

E. Compare these statistics with those of other food assistance schemes like Food for Work (FFW), Annapoorna (ANN), Integrated Child Development Scheme (ICDS), and Midday Meal (MDM) and one finds that even here households possessing more than 0.4 hectares (ha) of land have a higher representation among recipients of benefits than households possessing land less than 0.4 ha.


F. Even in schemes such as ANN and ICDS the proportion of families does not drop very sharply as MPCE levels rise, especially in rural India.



G. Planning Commission’s evaluation of TPDS
58 per cent subsidised food grains do not reach BPL families, 22 per cent reach APL families, while 36 per cent are sold in black. With each one rupee transferred to the poor, the government of India spends Rs 3.65.

Then there are issues like targeting errors, ghost cards and non-BPL households to deal with when it comes to PDS.
Only 57 per cent BPL households have ration cards, while the homeless often do not have any.

(Source: Biraj Patnaik, Office of the Commissioners to the Supreme Court (Writ 196/ 2001), Antyodaya Anna Yojna)

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Lessons to be learnt from government food assistance schemes

Supriya Singh

The 61st round of the National Sample Survey Organisation (NSSO) highlights certain interesting facets of government run food assistance schemes. In conjunction with the Public Distribution System (PDS), these schemes have had a limited impact. This should serve as a lesson for the future

The NSSO report on ‘Public Distribution System and other sources of household consumption, 2004-05’, shows that only 28 per cent of the rural poor have benefited from any type of government food assistance schemes, and for urban areas the figure is just 9.5 per cent.

The poorest, who own less than 0.01 hectares of land, fare worse than the average in all schemes except Annapoorna (ANN). Aiming to reduce the food insecurity among poor and to target malnutrition among children, these schemes have just created ripples so far.

The latest figures on poverty place 27 per cent of India’s population below the poverty line. Out of this 72 per cent resides in rural areas. For years government run food assistance schemes -- Food for Work (FFW), ANN, Integrated Child Development Scheme (ICDS) and Midday Meal (MDM) -- have been a part of the social safety net of the poor.

While FFW and ANN were launched in 2000, ICDS has been around since 1975. FFW has now been replaced by the National Rural Employment Guarantee Act (NREGA). Other schemes continue to function.

Given the fact that funds allocated for MDM run to the tune of Rs 7,324 crore, and budgetary allocations under ICDS have been increased from Rs 4,087 crore in 2006-07 to Rs 4,761 crore in 2007-08, the figures in the NSSO report paint a dismal picture.

Children from 22.8 per cent rural households benefited from MDM, which is a better figure compared to ICDS that could only reach 5.7 per cent. Interestingly, FFW could only reach children from 2.7 per cent rural households, and ANN a measly 0.9 per cent.

Within the fortunate few who benefited from one scheme or the other -- if we look at occupational categories in rural India -- manual labour households got the most from each of these schemes. Similarly in urban areas, casual labourers gained the most.

Coupled with the finding that STs were the biggest beneficiaries in both rural and urban India, the report states the obvious -- that it is the poorest among the poor who are dependent on such schemes.

The statistics are a grim commentary on the way these schemes are handled. When the welfare of its citizens is the main concern of the government’s programmes then why are the beneficiaries so less?

Clearly, there is something wrong in the way these schemes target the poor. In the wake of the implementation of NREGA, there are important lessons that the government needs to learn from its failure in food assistance programmes.

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