Thefts from the public distribution system (PDS) are consistently rising and, according to the latest data for FY12, were a little over Rs 48,000 crore — or roughly the same as the median loss estimated by the CAG for the telecom scam of 2008.
Just that unlike the 2G scam, the PDS theft happens every year. And its value rises as the costs of wheat and rice go up — the same level of loss this year, for example, would have amounted to Rs 61,000 crore.
According to a forthcoming ICRIER paper by Ashok Gulati and Shweta Saini, leakages from the PDS have been steadily rising — from 24 per cent of all grain distributed by the Food Corporation of India (FCI) in 1999-2000 to a little under 47 per cent (or 26 million tonnes) in 2011-12.
Theft levels have been calculated by taking the foodgrains-distributed figure from FCI and subtracting from this the foodgrains actually received by people — this figure is got from the government’s National Sample Survey (NSS) data, the latest of which is available for 2011-12.
The study comes at a time when the government is looking at replacing physical transfers of foodgrains through PDS by cash transfers equivalent to the effective subsidy. That is, if PDS rice that costs Rs 20 per kg is to be sold at Rs 2, a cash transfer of Rs 18 per kg is to be made.
Gulati, Infosys Chair Professor for Agriculture at ICRIER, is also on a panel set up by PM Narendra Modi to recommend ways to reform the FCI-led PDS system.
The study finds that the highest incidence of theft from the PDS system is in states that have the largest number of poor. So, UP, Bihar, MP, Maharashtra and West Bengal, which account for 60 per cent of India’s poor, also leaked close to 50 per cent of the country’s grain in 2011-12.
The study also shows that states like Chhattisgarh, which have used technology — installing GPS sets in PDS trucks and sending SMSes to customers — to fix their PDS systems have not fared much better than others. Some earlier studies had shown there was no leakage (minus 1.5 per cent in 2007-08) in Chhattisgarh, but this was based on the grain released by the Centre and that consumed in the state. But once the gra‘n ‘top-up’ done by states is factored in, loss levels shoot up to around 38 per cent, say Gulati-Saini.
With theft levels the highest in the poorer states, Gulati-Saini find that the poor in states like Bihar and UP end up buying 80-85 per cent of their foodgrains from the open market, making it clear just how ineffective the PDS system is.
An earlier ICRIER study by Saini and Marta Kozicka had found that while the paddy MSP was Rs 1,310 per quintal, FCI’s rice costs ended up at somewhere between Rs 2,210 and Rs 2,396 per quintal. So, FCI’s inefficiency drove up the price of even free-market foodgrains the poor bought, leaving them worse off than they would be if there was no PDS.