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PDS supplies decline despite inflation surge

PDS supplies decline despite inflation surge
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First Published: Mon, Sep 24 2007. 02 15 AM IST

Updated: Mon, Sep 24 2007. 02 15 AM IST
New Delhi: In an ironical twist, allocation of subsidized wheat for sale to the poor through the public distribution system (PDS) declined by a quarter in the last one year, even as food price inflation averaged about 10% and demand for the grain increased.
“Since offtake had started declining three to four years back, the food ministry took a view on reducing the allocation in both BPL (below the poverty line) and APL (above the poverty line) categories. This was aimed at rationalizing the PDS,” said a senior government official familiar with the situation. The officer, who didn’t want to be named, added that the ministry did this to check diversion of foodgrain to the open market.
Meanwhile, what this has meant is that at a time when open market prices of wheat were rising, there wasn’t enough wheat in the PDS for those eligible to buy it there for less than the market prices.
The lack of sufficient supplies could also become a political lightning rod for the Congress party, which leads the United Progressive Alliance government at the Centre, even as it faces criticism about the stubbornly high inflation in food commodities. Despite a reduction in overall inflation in the week ended 8 September, prices of the food articles group actually rose 0.2%, the government said on Friday.
Says Gurudas Dasgupta, the Communist Party of India’s leader in the Lok Sabha: “The situation is alarming. At a time when the food price inflation is persisting at around the double-digit mark, and the per capita food production is down to the 1970 level, the allocation is going down and the offtake figures are even more alarming.”
Rajiv Pratap Rudy, a national spokesperson of the principal opposition party, the Bharatiya Janata Party, said: “It is clear that the so-called government of the aam aadmi (common man) is working diametrically opposite to its slogan. The allocation has always been inadequate, both in amounts and quality, but further cuts completely expose this government.”
A food ministry official said that as part of a rationalization exercise, the ministry had indeed asked states to provide data pertaining to leakages, bogus ration cards and new ration cards, and several states didn’t bother to respond.
“The ministry, therefore, cut allocations of such states and (an) attempt was not made to revise them in the wake of (rising food) inflation,” said the same official.
An analysis of data from 2005-06 onward reflects a consistent fall in allocation of wheat in the BPL category, even while there was a perceptible upward shift in demand.
A proxy measure for demand, the ratio of offtake to allocation shows a sharp jump that was consistent with a spurt in inflation. Typically, demand from the poor for subsidized grains is far higher during periods of high inflation.
Demand jumped from 73% in 2005-06 to 89% in 2006-07, while year-end food price inflation, based on the index of industrial production for industrial workers, spurted from 4.9% in March 2006 to 12.2% this March.
The decline in allocation of wheat to the PDS comes at a time when the government has faced a rapid depletion in its food stocks, following its inability to mop up wheat from the markets. Even after taking into account this year’s procurement, stocks are still short by 3.5 million tonnes, forcing the government to take recourse to imports.
Says Himanshu (he only uses his first name), a fellow at Centre De Sciences Humaines, a Delhi-based research organization supported by the French government: “Even though the prices for BPL under the PDS have not risen due to inflationary conditions, lack of supply of wheat forces the poor to buy the foodgrain in the open market.
“There is gross mismanagement... The country has had two bumper crops and still there are problems of inadequate supplies,” he added.
Experts in this area argue that the whole PDS has become self-defeating. Ashok Gulati, director in Asia, International Food Policy Research Institute, maintains that PDS is one of the most inefficient ways to reach the poor.
“The whole system of PDS needs to be replaced by conditional cash transfers (like food coupons) to provide support to the poor,” he says. The “government needs to get out of physically handling procurement, stocking and distribution of grains in the name of food security for the poor.”
PDS grains find their way to market
Senior government officials fear that North-Eastern states, especially Assam and Nagaland, may be diverting wheat and rice procured through the Public Distribution System (PDS) to neighbouring countries such as Bangladesh andNepal. Sale through PDS extends to people above the poverty line (APL), below the poverty line (BPL) and social schemes.
“There is a heavy offtake of foodgrains through PDS in the entire North-East and though we have no substantive evidence, there are chances that foodgrains are being diverted to the neighbouring countries,” said a senior government official.
Data for 2007-08 (between April and July) suggest that offtake in Nagaland and Assam in wheat have surpassed allocation. This, from states where people are primarily rice eaters. Also, the offtake for the entire North-East is 93% of allocation during this period, against an all-India average of 83%.
In the case of rice, offtake is 100% of the allocation. The all-India average offtake is just 59%. Assam and Tripura have more than 100% offtake of the allocation. Officials from the Assam government declined comment. “I can’t say because I don’t deal with the subject,” said Sharad Gupta, resident commissioner, Assam government. Officials from the Nagaland government were unavailable.
According to officials, who did not wish to be identified, Food Corporation of India (FCI), the government agency that procures and stocks foodgrains, will soon be writing to the food ministry seeking joint sampling of foodgrains with respective states to ensure adequate quality of grain offered through the PDS.
In addition, the FCI is demanding that a quality control department and a vigilance official be put up in every state agency and large scale random checking be done at state levels to check diversions.
sangeeta.s@livemint.com
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First Published: Mon, Sep 24 2007. 02 15 AM IST