Just when everybody had written off the Public Distribution System (PDS) with stories of large-scale leakages, recent surveys have shown that PDS may actually be seeing a revival. This revival—led largely by initiatives of the state governments—is no more limited to showcase states of Tamil Nadu and Chhattisgarh, but by states that are otherwise not held as exemplars of good governance. The message: Success of PDS rests on two crucial reforms—low prices and expanded, near universal coverage.
The evidence comes from two surveys—the consumption surveys of the National Sample Survey (NSS) for 2009-10 and the survey conducted by a team led by Jean Dreze and Reetika Khera across nine states in June 2011. Both surveys confirm that the performance of PDS is much better than what has been claimed using secondary data. They also report large variations across states in the functioning of PDS in terms of access by the households, prices paid and the extent of leakage compared with official data.
The broad results of the NSS survey show that 39% of the population reported purchasing cereals from PDS in 2009-10 as against 26% in 1993-94 and 23% in 2004-05. The coverage in rural areas is 44.9% compared with 26% in urban areas. Total purchase of rice from PDS in 2009-10 is 17.5 million tonnes (mt), almost double of the corresponding purchase of 9.8 mt in 2004-05. Similarly for wheat, the purchase at 7.7 mt in 2009-10 is more than double that of 3.5 mt in 2004-05. For those households purchasing cereals from PDS, the average quantity purchased is 20.7kg per month (21.1kg in rural areas and 19kg in urban areas).
The second survey was conducted in nine states spread across the country. Based on the preliminary results reported, 100% of respondents among below poverty line (BPL) households reported getting their full quota of foodgrain in Andhra Pradesh, Chhattisgarh and Tamil Nadu. The percentage was 99% in Orissa and 96-98% in Rajasthan. Two poorly performing states are Bihar and Jharkhand with only 23% and 21% of BPL households reporting purchase from PDS. The other state that showed improvement was Uttar Pradesh with 78% of BPL households reporting purchase from PDS and 85% of them saying they received their full quota of grains. The survey also asked respondents about their preference of cash transfers over grain entitlement. An overwhelming majority among the states that have a functional PDS preferred grains over cash. The situation was mixed in the states where PDS has been less than functional.
What do these surveys imply as far as leakages from PDS are concerned? The Dreze-Khera survey results on this count are not known yet, but whatever little can be inferred from preliminary estimates, the extent of leakage appears to be lower than previous estimates. However, it is possible to get some idea of the leakages from the consumption surveys and the official off-take data reported by the ministry of food and consumer affairs (MFCA). Leakage is defined as the shortfall of the actual consumption reported by consumption surveys compared with official off-take by MFCA.
Using this method, leakage in PDS in 2009-10 is around 40%. That is, actual consumption reported by consumption surveys is only 60% of the estimate reported by MFCA. Of course, this is dependent on the accuracy of the estimates reported by MFCA—which are anything but transparent—but also on the extent of under-coverage in consumption in PDS (a point usually made in comparison with national accounts statistics data). Nonetheless, the leakages at 40% are unacceptable although they’ve come down significantly from the 2004-05 level of 55%. On a lighter note, adjusting for under-coverage using the Surjit Bhalla index would, however, mean that leakages are far lower than what has been assumed so far. However, the extent of leakages seem to have come down drastically in most states other than the usually cited examples of Tamil Nadu, Andhra Pradesh, Chhattisgarh and Himachal Pradesh and the so-called laggard states of Bihar, Jharkhand and Uttar Pradesh. The state that seems to be doing remarkably well in this round is Orissa, where the leakages have come down from 75% in 2004-05 to 25% in 2009-10.
The question then is what has happened between 2004-05 and 2009-10, which leads to a much improved performance of PDS. First, many states have given up on the targeting principle and coverage have been extended to make PDS as near universal as possible. In some states such as Tamil Nadu, and now Kerala, it is universal. But even in other states, such as Bihar, there has been an extension of coverage beyond the Planning Commission’s poverty figure: A majority of large states now do not follow this. Secondly, most states have reduced PDS prices, particularly for rice to Rs 2/kg and even lower. In fact, even the average price reported is similar to the price proposed in the National Food Security Act. A look at the extent of leakages and coverage of the poor is clearly evidence that these two measures not only make PDS accessible to the poor, they also are the surest way of reducing leakages in PDS.
Himanshu is assistant professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humanities, New Delhi
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