With food security on the government’s agenda, the public distribution system (PDS) has come into focus. Different people have suggested improvements in the current PDS, ranging from universalizing the PDS to improving the administrative efficiency of the programme. One idea that is gaining popularity is to simply dismantle the PDS, replacing it with either food coupons or direct cash transfers. But this idea, of doing away with the PDS as intermediary, may not work for India’s poor.
Food coupons allow people to buy the foodgrains they are entitled to from any retailer, the retailer then redeeming the value of the coupon from the government. Competition between private retailers—proponents argue—will ensure quality and efficiency, also relieving the government of the “unnecessary” burden of storage and transportation costs.
Some PDS critics suggest starting direct cash transfers that are equivalent to the government’s food subsidy. Such a system would, supposedly, again save the government a lot of effort and resources, ensuring that every penny spent actually reaches the poor household. Such a system of direct transfers through banks or post offices is expected to reduce leakages. While these arguments are very appealing, it is important to ask to what extent a system of cash transfers solves the problems that one sees in the PDS. Moreover, how much does this contribute towards meeting what PDS set out to achieve?
First, one of the most significant problems with the PDS currently is that of targeting errors. Data from the 61st round of the National Sample Survey, or NSS, show that only 44% of the households in the poorest quintile have below-the-poverty -line, or BPL, cards, while 17% of the households in the richest quintile do so. There is nothing inherent in cash transfers that would solve this. Yet, the efficacy of the programme is dependent on targeting beneficiaries correctly. One can imagine all the current problems involved with the setting of a poverty line and identifying BPL households to remain even if we shift to cash transfers.
Second, and importantly, by making a shift towards cash transfers, the government would lose an important instrument of ensuring price stability. Food coupons or cash transfers typically have a fixed monetary value and do not protect the poor from price shocks, especially the kind of food inflation that the country has been witnessing in the recent past. In the absence of a price stabilization scheme such as the PDS, prices will be entirely left to the vicissitudes of the market— making it susceptible to speculation, and so on. Therefore, instead of reducing the vulnerability of poorer households to food price spikes, it would in fact make them more vulnerable (unless these cash transfers are inflation-indexed).
Third, transfers or coupons assume that food is available in every corner of the country to reach those seeking it. This is unrealistic: Most Indian states are food-deficit, and there is need for a centralized system, which ensures that food from surplus states is transferred to deficit ones.
Fourth, if cash transfers were to replace the PDS, the government would not need to procure grain, implying that there will be no price support to farmers. In fact, it’s an expanded PDS that can actually translate into an opportunity to revitalize Indian agriculture with greater public investment.
Fifth, in our patriarchal society, women have control over any food that comes into the house, whereas, typically, it is the men who decide how cash is spent. There’s a good chance men won’t utilize the cash for food or other amenities.
So, while there may be a case for cash transfers as an income-support programme, this idea does not hold ground as a substitute for subsidized food. All of this is not to argue in favour of the PDS status quo—this system, as it stands now, is inefficient and suffers from leakages. The reforms needed, though, involve universalizing coverage and procurement, increasing transparency and accountability, removing private dealers and using technology to the extent possible.
Dipa Sinha is a research scholar at Jawaharlal Nehru University, New Delhi, and is associated with the Supreme Court commissioners in the Right to Food case. These are her personal views. Comments are welcome at firstname.lastname@example.org