Coupening the PDS

The Public Distribution System (PDS) operating through the fair price shops are the single most crucial outlet to address the poverty and hunger in the country. Unfortunately money hungry corruption rats have not spared this vital instrument to help the poor people in the country. From top level politicians to the bottom level fair price shop sales personnel, swindling the food resources meant for the extremely poor people is order of the day. So much so these corrupt rats have bulged in their physique and wealth beyond the known sources of their income. There is no way so far these rotten rats could be controlled. The Government announces its genuine intention to rein in these rats publicly. So the sweet word goes. But nothing happens after the announcement. The recent news about the UPA II’s reform agenda to clean up the PDS is welcome. Let us wait and watch how this is going to work.

T. Nandakumar writes in The Economic Times on 27 April 2010

The government seems to be considering a new system to replace the present system of targeted public distribution system (TPDS) with food coupons or direct cash transfer. The ills that plague the present TPDS are well-known and well-documented.

The two national surveys, one by Programme Evaluation Organisation of the Planning Commission and the other by ORG-Marg, both at the instance of the Union government, have identified the major problem areas in the present system. These can be summarised as follows:

Exclusion errors: Families who deserve to be in the BPL list are excluded,

Inclusion errors: Families who are not eligible are included,

Ghost cards: Ration cards in the name of fictitious/non-existent families,

Leakage at fair price shop: Simply stated, the quantum of food grain leaked/stolen by transporters/shopkeepers, and

Unacceptable quality: Complaints of quality sometimes due to the replacement of procured stocks by lower quality at various levels.

Does the proposed system of food coupons address these deficiencies? The system of food coupons cannot address the issues of exclusion and inclusion errors since these emerge from the process of identification. Who would not like to be included in the BPL list, especially when many goodies flow from the welfare state, be it subsidised health care or an Indira Awas?

The chances, therefore, are that the errors in identification will remain. Add to this the arguments for increasing the scope (read: size) of the BPL list (Tendulkar committee, Saxena committee et al). Ghost cards, however, could be minimised if the payment systems are designed properly.

The food coupons can effectively break the hegemony of the present set of fair-price shopkeepers, who, over a period, have developed vested interests and have also managed to gain substantial political clout. In fact, most of the ills of the present system can be attributed to the patronage in allocating fair price shops.

To be fair to these shopkeepers, the commission they get is so low that they are compelled to resort to malpractices, which over a period of time has become a habit driven mostly by greed. The resistance faced by the government of Chhattisgarh in moving to a new system of shops is ample testimony to this.

The first step in the food coupon system, therefore, has to be the closure of all existing fair price shops – they can continue to be normal grocery shops if they wish – in the area and giving a choice to the coupon holders to buy their food grain from any ‘designated’ grocery shop in the region. I use the word designated because the payment mechanism for the proposed coupons will need financial oversight.

If there are too many choices, managing the accounts could be problematic. Ideally, the coupon holder in a ward/area could be given an option to purchase her food grain from a set of identified grocery shops – not less than three and not more than five – every month. The coupons shall carry a fixed value – the value will have to change at least every year to take care of inflation – and the shopkeeper permitted to encash these coupons from designated bank branch(es) in the locality. The coupons should also have a validity period to allow the shopkeepers to deliver food grain every month. The success of the scheme will depend on a caveat that there will not be any scrutiny of the items purchased by the family as long as the coupon has been used in the designated shop and during the month for which it is authorised.
Most importantly, the coupon gives a choice to the family to choose the grain it prefers. This should take care of most of the quality complaints. Even if the coupon has been used to buy other things such as pulses, edible oils, sugar etc, it is worth the effort. All the coupons for a year should be given to the family at one go. This will facilitate verification where required every year as well.

Given the propensity of the male members of the family to misuse the coupons and exchange them for money – even if this happens, the government should not bother – the cards and the coupons should be in the name of the female member of the family. There is likely to be an argument that food-deficit regions will be adversely affected by this system. The success of the coupon system will depend on providing choices to coupon holders at the point of purchase.

Therefore, adequate availability of food grain is a sine-qua-non for the success of this initiative. It would, therefore, be prudent to start this initiative in big towns and in food-surplus states. However, states with universal two-rupee rice schemes may not be too keen to accept this scheme. It would be necessary to incentivise the states that agree to implement this scheme.

Is there a possibility of spurious coupons getting into the system? Yes, there is. The traceability of the coupons has, therefore, to be built into the system. What will then happen to FCI and procurement? In the new system, the government can fix MSP without looking at procurement targets. The market will determine the actual prices. FCI can continue its MSP operations and also keep the buffer and strategic reserves for the government. FCI, hopefully, will become a lean and efficient organisation. The excess stocks, if any, can be offloaded into the market at suitable intervals to keep a lid on prices.

While food coupons is a good idea, one must understand that this does not remove all the ills in the system: but is better than the present system by all means. However, direct cash transfers to the beneficiary (women) will be a much better option. This could even attempt to reduce the inclusion errors since bank payments can be tracked easily. With so many ATMs available in cities, this could be the best available option at this point in time at least for the cities. The success of the scheme will depend on its design and, more importantly, its phasing.

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More development; more chaos

The purpose of governance and development is to minimize the chaos and maximize common people’s convenience. Unfortunately our government programs have failed to achieve these twin objectives of governance. Wherever we go there are massive constructions, expressways, fly over and other noisy development activities. Unlimited amount of torture has been done to the people in the name of development. It is high time for us to decide what we want and what we don’t want.

During my visits to several states I encountered the faulty face of development. The expressways are used wrongly. Trucks are parked on the wrong side. Motor bikers race pace on the opposite directions. These are signs of devastation we have created.

Especially the blind development brings danger of its own. Once we decide firmly the nature of development the rhetoric over fancy development will end to usher a genuine growth around the country.

Rajiv Desai writes in The Times of India on 22 april 2008

In many ways, the government has embarked on a path-breaking route, in terms of both domestic and foreign policy. For instance, sometime ago, the issue of fertiliser subsidies came up. In one fell swoop, the government changed the game by targeting subsidies on the basis of nutrients. Thanks to the policy change, farmers will look to nutrients other than urea. This will increase yields dramatically. Urea-based fertilisers were once good and government policies championed their use. Over the years, it became clear that they had passed the point of diminishing returns. Everywhere in the world, governments have promoted suplhur-based and other nutrients in the mix to increase yields and protect the soil.

With all the noise about food inflation, the government has pointed to the exploitative role of middlemen in the journey farm products make from the fields to the market. In recent times, the finance minister has made several references to the need for organised retail in the grocery business, most recently at the CII national meeting in Delhi.

Coming to taxes, the finance minister cut individual taxes while increasing some indirect levies. The idea is sterling: put more money in the hands of middle-class families and let them decide what they can or cannot afford. If i am considering buying a car and it costs a few thousand rupees more, it is my call. By putting economic decisions in the citizens’ hands, the government has been making a major paradigm shift.

The emphasis on infrastructure is also welcome. Roads, ports, airports and railroads are being built. The trouble is that modern infrastructure is at the disposal of government agencies and citizens with zero ethics or civic consciousness. Thus, it gets caught up in bottlenecks caused by lackadaisical enforcement and citizens who habitually violate the law.

For instance, many cities now have modern airports. They are like white elephants because, the minute you step outside, there is total chaos. It’s the same thing for highways. We recently travelled to Chandigarh from Delhi. The road is work-in-progress and there are significant flyovers and wide pavements. But there is total traffic chaos.

Even as you rev to the top speed of 90 km per hour, you find yourself having to deal with vehicles going the wrong way, underpowered trucks, three-wheeled vehicles, bullock carts, cycle rickshaws, handcarts, herds of cows and sheep and, scariest of all, daredevil pedestrians trying to cross the highway. They make the journey a nightmare. There is simply no policing, no signage or other facilities that go with modern highways. It’s almost as though modern amenities are made available to citizens with a pre-modern mindset by officials with no clue about modernity.

The tragedy is that the police have no authority to enforce the law. Even worse, they don’t even know the law. Just recently, i stopped a police car on the spanking new expressway that connects Delhi and Gurgaon to airports. I told the police officer that the unchecked use of the expressway by two- and three-wheeled vehicles was a major traffic violation and that there were signs that these vehicles were not allowed. He told me to mind my own business. The government needs to show its hard-headedness in such matters as much as it is doing with the Maoists in central India.

Talking of internal security, the government has made major moves. It has taken on the Maoist movement with force. True, there are complaints of security forces riding roughshod over the ultras. But then, the Maoists are not known for grace and diplomacy either. A tough approach will not only contain the insurgents but also send a clear message that this is a hard government that will not stomach violent agitations.

On national security, the government has embarked on a new course. Even while initiating talks with Pakistan, it authorised a major air force exercise sometime ago in the Rajasthan desert to demonstrate its fighting capabilities. It was a brilliant move to invite most defence attaches of diplomatic missions, leaving out the representatives of China and Pakistan. The idea was to exhibit hard power.

To reinforce the government’s hard line, the prime minister went to Saudi Arabia and urged its authorities to weigh in with Pakistan to control terrorist groups operating from there. It is clear Pakistan’s government has neither the wherewithal nor the will to rein in various terrorist groups with a free run within the country’s borders. A Saudi nudge could go a long way to boost the crippled civilian government against rogue elements within the army and intelligence agency.

In the end, however, you have in India an enlightened government beset by a crude political class, a malignant bureaucracy and a pre-modern citizenry. Also, the ship of state seems unable to deal with casteism, communalism and corruption. Bureaucrats blame crass politicians and the ignorant citizenry. Politicians castigate the bureaucracy. Citizens berate politicians and bureaucrats. It’s a sort of beggar-thy-neighbour view enabling the entire system to elude responsibility. If everyone’s to blame, nobody is accountable. What’s clear is that citizens have to take on responsibility; blaming the government and politicians is not enough.