S Murlidharan

Solving PDS woes

S. Murlidharan | Updated on May 28, 2011 Published on May 21, 2011

The present public distribution system leaks like a sieve.   -  THE HINDU

Cash transfer seems to score over the coupons as most of the banks are networked and their intranet information system functions rather well.

Both the World Bank and the Indian Government are worried about the huge leakages and wastages in the extant public distribution system operational in many States. A lot has been written on the inherent weaknesses in the PDS model — breeding a white elephant called Food Corporation of India (FCI) with its over 3 lakh employees, mind-boggling logistical problems and the heightened risks of grains becoming unfit for human consumption due to rotting in the open, besides of course the problem of diversion of good quality grains into the open market with or without official connivance.

Food coupons

Quite a few alternatives have been bandied about and even implemented on either full or pilot scale. Food coupons have been tried but ; they tantalise both the consumer and the trader due to its fungibility with cash - a poor man or woman might exchange the coupons for cash at a steep discount either to meet a social obligation or to sate dissolute habits such as gambling or drinking. Armed with such coupons procured at humungous discounts , a trader laughs all the way to the bank when he redeems them at face value.

Even the officialdom can make some money on the sly by using its might to deny the illiterate consumers their legitimate quantity of coupons and exchanging the coupons thus scrimped for cash with the wily kirana store owner playing ball. Entitlements are often either misused or traded on the sly and hence food coupons do not commend themselves for adoption.

Cash transfers are talked about animatedly in official quarters and seminar circuits. If people and the size of families are correctly accounted for, , there is no reason why it should not work especially when the subsidy amount is deposited in the bank accounts of the intended beneficiaries. There are a couple of worries though. Cash transfers may not be an adequate solution in inflationary times. But sensitive governments can overcome this by increasing the subsidy amount periodically.

Worrisome issue

The more worrisome issue is diversion - what is the guarantee that the money made available will not be used for the same dissolute purposes enumerated in the earlier discussion on coupons? In fact with cash transfers the danger of diversion is greater . While in case of vouchers, the kirana store owner has to be brought around , the cash deposited is all yours calling for neither cajoling nor pressure tactics. There is a view that cash deposited in the name of womenfolk runs a lesser risk of diversion, but in a male-dominated society there is no guarantee that the man of the family would not arm twist his wife out of money and into submission.

Experience with kisan cards shows that it is by far the best and relatively more fool-proof in empowering the farmer. A kisan card holder can buy only fertilisers and other agricultural paraphernalia. Extending this experiment to food items for the Below the Poverty Line segment of the populace may, however, not meet with the same degree of success. A smart card with biometric features would definitely be an improvement over the paper cards in terms of its durability and anti-tinker properties, but it would necessitate persistence with fair price shops and hence state procurement through the FCI. Besides, it would call for computerisation and networking of all fair price shops a la the armed forces canteens — a tall order indeed.

Private trade simply cannot be made a part of the system unlike in a food coupon regime because it would be too much to expect all kirana store owners across the countries not only to own computers but be networked as well, given the present rate of literacy, computer literacy at that.

Difficult choice

The choice indeed is difficult. But one thing is certain. The present PDS with FCI as its lynchpin leaks like a sieve. The choice is between food coupons and direct cash transfer. Both of them run the risk of diversion for anti-social and extraneous purposes. In addition, coupons also bristle with the possibility of forgery. Cash transfer seems to score over the coupons especially in the light of the fact that most of the banks are networked and their intranet information system functions rather well. Thus transfer into the individual accounts of the beneficiaries can be done in a jiffy. Perhaps transfer into the accounts of females might reduce a bit the risk of diversion.

Perfect model or solution for any problem is Utopian. One has to then philosophically settle for the lesser evil. And that appears to be direct cash transfers, warts and all including the possibility of fake account holders bedeviling the system a la ghost workers enabling skimming of funds for company managements.

(The author is a Dekhi-based chartered accountant.)

Published on May 21, 2011
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