Wednesday, Sep 17, 2014

A grain of sense

Wheat is procured from the farmer through ‘artiyas’ who then sell it to the mandis. Wheat is procured from the farmer through ‘artiyas’ who then sell it to the mandis.
Posted: May 2, 2014 1:28 am

By: Aditya Puri

How Punjab is making the best use of the flawed public distribution system.

Inclusive economic growth is a political, economic and social necessity. The question is: what is the right strategy to ensure this? Most of our programmes to help the underprivileged have suffered from leakages and inefficiencies, so that the benefits have not accrued to the targeted groups but the strain on our fiscal deficit remains. Subsidies are a classic example of this failure. The task of distributing them is colossal and we have not been able to arrive at a proper system. This article will focus on the issues with the creaking public distribution system (PDS).

The PDS assumes greater importance with the passing of the National Food Security Act, which entails a manifold increase in foodgrain distribution. It would be unable to meet the objective of food security even with substantial investment. The former chairman of the Commission for Agricultural Costs and Prices estimates a minimum investment of Rs 6.8 lakh crore in production and infrastructure over the next three years to make the system work well. This is in addition to the Rs 1.15 lakh crore budgeted for subsidies this year, considered by most analysts to be a conservative figure. From a fiscal perspective, this seems unviable.

The problems with food distribution have always seemed too large to tackle, and the programme doomed to inefficient execution. The choice has been to live with it or dismantle the system altogether.

But there seems to be a middle path. Recently, the Kellogg business school-educated Adesh Pratap Singh Kairon, food and civil supplies minister of Punjab, updated us on the new PDS that the state had introduced to address the shortcomings of the prevailing system. The system he outlined was elegant, simple and effective. While it underlines the need for administrative and process reforms, it also highlights the fact that there are workable solutions to improve the system.

Today, the PDS operates through a network of approximately 5.3 lakh fair price shops, which reach out to more than 90 crore people. There is a multilevel process in place, through which the Centre and the states share the responsibilities of procuring and disbursing grain. But a World Bank study showed that just 41.1 per cent of the grain reaches the intended beneficiaries.

The Punjab food and civil supplies ministry has studied the process changes required to ensure efficient implementation. In Punjab, the process used to start with artiyas or commission agents aggregating wheat from farmers and selling it to the procurement agencies in the mandi. This grain was bought by five agencies from 1,750 mandis across Punjab. These would supply the wheat to the Food Corporation of India (FCI), where it would be stored in Central godowns. The government would then release continued…

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