Leakages in the public distribution system may have risen steadily over the past decade. According to a forthcoming ICRIER paper by Ashok Gulati and Shweta Saini, in 1999-2000, such leakages amounted to 24 per cent of all grain distributed by the Food Corporation of India, but in 2011-12, this number rose to almost 47 per cent. Worryingly, while the percentage had shown a steady decline between 2004-05 and 2009-10, there has been a 6 per cent increase from 2009-10 onwards. The issue of leakages in targeted subsidies has been a subject of constant debate, and alternative mechanisms such as cash transfers and vouchers have been proposed. While the new government at the Centre has indicated its willingness to undertake reforms to the PDS system, some of the issues deserve to be re-examined.
All elected governments agree on the need for a social welfare system for the poor, though disagreements remain on the scope of coverage and method of delivery. While one system may, in fact, be more efficient than the other, it is also true that under the existing infrastructural constraints, even a complete shift from one system to another may not yield more than incremental results. For example, a move to direct benefit transfer through bank accounts may not yield efficiencies in a largely under-banked economy such as India’s. The government has pushed the Jan Dhan Yojana with much fanfare, but as of now, there is no reassuring data on the usage of these bank accounts.
Data has consistently shown that better-off states, including most southern states, have had greater success in plugging leakages. At the same time, poorer states like Chhattisgarh have failed to do so, in spite of adopting technology-driven solutions. Clearly, one critical need is to develop basic state capacity and infrastructure that allow recipients greater ease in accessing benefits, in whatever form they are transferred. Focusing on this may also force an acknowledgement of the need to ensure that the basic mechanisms of delivery of services required for all sections of the society, such as roads, banking and payment systems, and electricity, are developed on a priority basis. These priorities are not either-or choices. They are complementary and interdependent.