Poor Distribution System

8226; To what extent does the PDS reach the poor?

Of the estimated 45.41 million Below Poverty Line BPL households in India in 2001, just over half 57 per cent are covered by the PDS. The 8216;exclusion error8217; that measures the percentage of poor households excluded from the PDS is highest in Assam 47.29 per cent, Gujarat 45.84 per cent, Maharashtra 32.69 per cent and West Bengal 31.74 per cent.

In addition to the 8216;exclusion error8217; the study also makes an assessment of an 8216;inclusion error8217; when families who are not poor are given BPL cards due to wrong classification or corruption. For example, in Karnataka 42.43 per cent families with BPL cards are not poor. In Andhra Pradesh they are 36.39 per cent of the total BPL card holders. In Kerala they are 21.04 per cent. In Himachal 20.39 per cent, and in Tamil Nadu 49.65 per cent.

In a striking example of an inclusion error, an Indian Express report from Kolkata says that West Bengal Governor Gopalkrishna Gandhi figures in the BPL list in Raigunj, North Dinajpur district.

8226; Where will the bulk of the dal and oil meant for the poor go?

The Planning Commission study shows that less than half 42 per cent of subsidised food grains issued from the central pool reaches the poor. The leakage through ration shops constitutes the bulk of the leakage. Bihar and Punjab have a total leakage of more than 75 per cent, out of which two-thirds is through ration shops. Haryana, Madhya Pradesh and UP have leakages between 50 to 75 per cent. Assam, Gujarat, Himachal Pradesh, Karnataka, Maharashtra and Rajasthan have high leakages between 25 to 50 per cent.

8226; What is the share of genuine BPL households in the PDS?

In 2003-04, 14.07 million tonnes of subsidised grain was issued to the 16 large states for delivery to BPL families. Only 5.93 million tonnes was delivered to BPL families. A whopping 8.14 million tonnes of subsidised foodgrain did not reach the poor. In states with high leakages this meant that the unintended subsidy or additional cost of delivery of food grains was shockingly high. For example, in Bihar, while the intended subsidy was Rs 4.52 per kg, if we take into account the total subsidy to what actually reached the poor, the subsidy ended up being Rs 50.98 per kg due to leakages and diversions. In Punjab, while the intended subsidy was Rs 4.22 per kg, it ended up being Rs 40.15 per kg of foodgrain.

8226; What other ways are there to deliver food subsidies?

If the government decides that it wants the poor to consume dal and oil at subsidised rates then it needs to find more efficient ways of targeting and delivering the subsidy. One proposal is to provide them with smart cards with the required amount of money credited to them and which can be used at certain retail outlets who will get reimbursement from the government. The expenditure will be limited largely to Rs 10 per kg or litre of the dal and oil actually bought by BPL households instead of more than double of that amount lining the pockets of traders on the way. No procurement for the PDS or supply chains will have to be set up as would need to be done for delivery of the PDS.

The writer is senior fellow, National Institute of Public Finance and Policy, New Delhi