Essays

Public Distribution System in India

Category : Essays

In India, the Public Distribution System (PDS) was introduced during the Second World War after the Great Bengal Famine, but over the years, the PDS has degenerated to such an extent that there are periodic calls by Government officials to streamline it. This article shall consider the PDS as it is organized in Tamil Nadu where every family is entitled to a ration card to buy subsidized provisions. The foodstuff is procured by the Tamil Nadu Civil Supplies Corporation and there is an allotment from the "Central Pool", which is handed over to the cooperative societies with over 20,000 shops all over the State, the rest managed by the TNCSC.

A report in The Hindu, (February 19, 1994) said, "Cocking a snook at the authorities are innumerable employees of the nearly 22,000 fair price shops (FPS) spread all over the States. The charges against them relate to underweightment and diversion of essential articles like rice, sugar and wheat to wholesale traders and provision stores and holding out threats against consumers who challenge their shady deals." The report goes on to add that "none of the consumers seems to have bothered to have the supplied articles weighed in any other shop nor aware of the existence of a complaint book in every shop. Entries are manipulated in stock registers in respect of those consumers who do not draw the allotted monthly quota of essentials and the quantities thus cornered usually find their way to the open market. Of the estimated Rs. 400- crores annual subsidy provided... at least Rs. 100 crores reach various hands at 'various levels' the quantum depending upon the power and pelf that one commanded."

It is not difficult to find the reason for this adulteration, underweightment and smuggling into the open market; say commodity X has two prices, one the market price and another lower fixed by the Government, it is not difficult to visualize the scene. Scon the quality of X will deteriorate and the retailer will divert the product into the open market for a better price. Thus the loopholes in the PDS are because of the monopoly of retailing and the lack of freedom of choice for the consumers: they cannot move from shop A which indulges in these malpractices to shop B which does not.

Let the Government invite private parties to take over the fair price shops on the condition that they pay a refund- able deposit, with the provision that they can set up shop anywhere they like, and not only at designate locations. Let us call the money thus realized as the Public Deposit Fund, which can be invested in high-yielding securities (not necessarily junk bonds). Then the fund can be used to (a) finance the food subsidy or at least lessen its burden, and (b) offer attractive profit margins to the PDS retailers. The Government can then issue each prospective retailer to a licence to open shop wherever he chooses to. The consumers can then be given the freedom to buy items from any ration shop.

There will be takers for this idea for two reasons (a) there is a large number of unemployed in India and (b) the deposit is refundable. The banks can come into the picture either to give a loan or at least to guarantee it after checking the credit worthiness and other credentials of the prospective PDS retailers. In each district, the Government can set up vigilance committees or grievance cells to which malpractices can be reported.

There will then be three checks on PDS retailers (a) the Government can revoke the licence and seize the deposit; (b) the cardholders can go to another shop; and (c) the banks can keep a watch over them.

Since the quantity of foodstuff with the government is limited and it is equally distributed among the retailers, what happens if a card holder moves from shop A to shop B? What one loses, the other gains. But what does shop B do to meet the increase in demand? There are two options: (a) "liaison committee," comprising a Government official, a retailer and a civil supplies official can be constituted to consider increased allotment to a particular retailer; (b) the retailer can buy the items in the open market and sell them at subsidized rates, claiming the difference from the Government.

The market will then curb cheating, with the Government acting Big Brother watching over the retailers. Some Issues: The model that follows purports to eliminate malpractices in the PDS to some extent, but some issues remain—how to cut the subsidy check and control storage loss, and eliminate bogus ration cards.

What is the index that a State's overall wealth has raised? Obviously it’s Gross Domestic Product (GDP), and it is logical to cut the subsidy a little if the State's wealth rises.

This concept of cutting subsidies is only a rough formula and has to be made perfect. For instance, I have ignored inflation which may push up the market price every year so that the tortoise of the subsidized price may never overtake the hare of the market price. But this will remove adhocism and provide a rough principle, to work upon.

After providing for buffer stock, food-for-work programmes and exports, what is done with the remaining foodstuff? Where there are enough storage facilities, it is not a problem. If the facilities are poor or non-existent, the total cost of the excess may be calculated as follow: Total cost = storage cost + wastage + opportunity cost.

Calculation of the first and third costs involves some complicated accounting procedures, but how do we recover them? Again, only a rough method may be suggested. It can be done by increasing the stock with consumer-friendly retailers, selling it in the open market and fixing a price above the subsidized price. This priced the foodstuff can be sold, to wherever the farmer wants through comporting outlets; the Food Corporation of India can set up its outlets and so can the State Civil Supplies Corporation. Half of what is recovered could go to the State exchequers and the other half to a "Storage Modernization Fund."

Policing may not be the only answer to bogus cards and here are two steps which have to be implemented together. First, a computer network in every district may be installed to check and control the stock with each PDS retailer. Secondly, as has become fashionable now, an all purpose photo identity card can be issued to the consumers. The network can identify and control the stock and also monitor who is consuming what and at what intervals.

Although food security has claimed the attention of many economists and political scientists, famines regularly occur, especially in Africa and Asia. During the great Bengal Famine of 1943, around three million people died of starvation and the vulnerable section that is the occupational groups were "fishermen, transport workers, paddy-huskers, agricultural labourers, craftsmen and non-agricultural labourers, in that order. The least affected were peasant cultivators and share- croppers," (Amartya Sen, "Poverty and Famines," 1981). Amartya Sen and Jean Drezc in their work, "Hunger and Public Action," (1989) say that more insidious than periodic outbreaks of famines is "endemic under nutrition and deprivation," this model will, to some extent, take care of the problem but to prevent famines, international effort is required. This can be done in three stages:

The Food and Agricultural Organisation can set up a "Famine Prevention Committee" (FPC) composed of experts drawn from the agricultural sciences, economics and political science. This committee will identify famine prone countries and even specify the provinces (or districts) which are more susceptible. There is a problem in this, as Dreze and Sen Say,".....frost often, the warning of imminent dangers come from general reports of floods or droughts or economic dislocations and from newspaper coverage of each hardship and visible hunger. In countries with relatively pluralist political systems, open channels of protest have also helped to desert forcefully the attention of the authorities to the need for preventive action without delay". This may be a good caveat but liberal democracy and a free press are not universal phenomena and the FPC has to identify the areas mainly through hindsight or whatever specialized method it can devise.

In the second stage, the World Bank, with the aid of the FPC will position food stock at Strategic locations near the famine-prone areas every year; if there is no likelihood of a famine, the bank can auction the food and give the money back to the donors. Third, if a famine is imminent and the country has suffered a civil strife or a natural calamity the FPC can place its case before the U.N. Security Council, which can authorize action either peacefully or through force. Hopefully, problems will be solved in stages I and II.

India has not suffered a serious famine after Independence and the credit for this should go to its pluralistic politics and a free press, but there is "endemic under nutrition and deprivation," the burden of this article; but after all political parties know that the way to the voter's heart is through his stomach.


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