PDS

In addition to the physical food grain requirement, the proposed bill has large subsidy implications. The total subsidy out go is expected to be much higher than the government projections. Again, the extra food grains required for the distribution will have to be produced either through area expansion or through productivity growth. The production cost to the government will have to be added in the subsidy cost to know the total financial burden to the government. According to an estimate, If Parliament passes the Bill, the food subsidy bill is expected to rise by Rs. 27,663 crore at nearly Rs. 95,000 crore only in the first year of the implementation of the Bill. The production cost of producing extra 20 to 25 million tons of food grains has been estimated at Rs. 1,10,600 crore.

 If the extra food grains required for is produced through an area expansion the problem is that the arable land is shrinking. ISRO mapping shows 81 million hectare has undergone desertification. India has net sown area of 140 million hectare only and there is ever growing pressure of urbanisation and land going to non-agricultural uses. The food corporation of India has limited storage capacity and every year lakhs of tons of food grains is destroyed due to open storage. The cost of inefficiencies of FCI will further cause problems for the authorities.

Again if the food grains required is produced through the gain in productivity the trend witnessed do not favour the argument. Already the Per-capita availability of food grains has started showing  a declining trend. In the year 2000 the per-capita availability of rice was 203.7 grams per day while that of wheat was 160 gms per day. The availability has declined by 2009 to 188.4 gms and 154.7 gms respectively. A number of measures will have to be taken to increase the food grains production.

The present food security system in India is marked by strange paradoxes[1]. Under this system the relatively affluent farmers in the better of irrigated areas are given incentives in the form of a high and rising support price. The Procurement and distribution of food grains involves a subsidy and it is believed to go not to the consumers of PDS grains but to make good the losses incurred by the FCI. PDS has remained untargeted for years and even today the benefits do not reach the targeted population. It can also be easily seen that poor seem to prefer to purchase food grains in the open market despite all government efforts. The system originated as a response to a critical food crisis and it works well in the situation of crisis. Rao further mentions if earnestly implemented liberalization could enable the food security system to much more effectively help the poor at much less cost. The food security system has to aim at three objectives:

·         Keeping the aggregate production at or above the level necessary for self sufficiency

·         Reducing the instability in food grain markets

·         Making dependable arrangements for helping the poor to get adequate access to food

Regarding the first two objectives mentioned above, they may be better served by phasing out the government interventions rather than by continuing the present price support cum procurement operations. Given the recent strong and broad based trend in production of food grains and its likely continuance it makes little economic sense to continue with a highly centralised and subsidized arrangements for procuring large quantities of food grains in one corner of the country, to store them for long periods often in the open in the absence of storage space and to move them over long distances for distribution to consumers who appears to be increasingly turning to the market for meeting their requirements.

Again this system is confined to rice and wheat- has hardly much relevance in stabilising the food grains markets which comprise besides rice and wheat coarse cereals and pulses marked by considerable instability in prices. So long as the production and supply situation continues to be comfortable, the best policy would be to leave the markets free and gradually diminish the present large scale procurement operations. FCI may be allowed to work as an autonomous company on commercial principles but during the time of draught/crisis it should take control of the entire system.

Regarding the third objective, viz., making dependable arrangements to ensure adequate access to food for the poor, it is necessary to keep the following points about the PDS in mind:

The families purchase p part of their requirements from the open market. Sharma (1995) Indrakant (1995) Rao (1996) Radhakrishna (1996) find a number of poor depends totally on market. It would be necessary to find out how far the poor turn to the market because of absence of PDS or its poor quality and how far due to positive preference?. It would also be important to know how is the grain purchased by the poor from the market is utilised.

The NSS data on consumer expenditure indicates that over the recent years the lowest three deciles of the population rural as well as urban have increased the consumption of non-food grains food items like milk edible oil sugar and Gur and other food while their consumption for cereals has remained unchanged or even declined. There are reports that upper strata among the poor tries to catch up the consumption pattern of the strata above them. Such people may sale off the PDS grains in the open market to finance their purchases on non-food grain items below the price of their purchase. Some members of the family may sale the grain to finance their liquor consumption or the consumption of tobacco products.

The PDS and food security provisions therefore need to design in such a way to prevent such types of misappropriations. The present thinking of issuing the Smart Card to the beneficiary of the scheme of Cash Transfer may simply assure that the food grains reaches in the hands of the targeted beneficiary. The beneficiary in the target group should be classified on the basis of the ownership of assets as (a)asset rich-income poor (b) asset poor-income poor (c) asset less-income poor. The first target should be the third category of beneficiaries. This group is most vulnerable and also most careless. They simply does not care for themselves and also misuse the benefits by reckless expenditure pattern. This is the only reason for their not having any productive asset. If cash benefits  are transferred to them they may misuse use it  for financing their bad habits. If the beneficiary himself is misusing the benefits who is going to stop them and how? One possible way is to give this responsibility to the Panchayati Raj Institutions at local level. It is believed that the decentralisation will make the system more transparent and the active participation of the needy poor will definitely improve the food security system meant for them. Another suggestion may be that such beneficiaries should be provided with the  benefits in group through a scheme like mid-day meal so that any one person may not spoil the scheme. 

---

[1] V.M. Rao (1996), Policy Research for Liberalized Agriculture: Some illustrative Research Areas, Indian Journal of Agricultural economics, Vol.51 No.1&2, Jan-Jun. pp. 138

In addition to the physical food grain requirement, the proposed bill has large subsidy implications. The total subsidy out go is expected to be much higher than the government projections. Again, the extra food grains required for the distribution will have to be produced either through area expansion or through productivity growth. The production cost to the government will have to be added in the subsidy cost to know the total financial burden to the government. According to an estimate, If Parliament passes the Bill, the food subsidy bill is expected to rise by Rs. 27,663 crore at nearly Rs. 95,000 crore only in the first year of the implementation of the Bill. The production cost of producing extra 20 to 25 million tons of food grains has been estimated at Rs. 1,10,600 crore.

 If the extra food grains required for is produced through an area expansion the problem is that the arable land is shrinking. ISRO mapping shows 81 million hectare has undergone desertification. India has net sown area of 140 million hectare only and there is ever growing pressure of urbanisation and land going to non-agricultural uses. The food corporation of India has limited storage capacity and every year lakhs of tons of food grains is destroyed due to open storage. The cost of inefficiencies of FCI will further cause problems for the authorities.

Again if the food grains required is produced through the gain in productivity the trend witnessed do not favour the argument. Already the Per-capita availability of food grains has started showing  a declining trend. In the year 2000 the per-capita availability of rice was 203.7 grams per day while that of wheat was 160 gms per day. The availability has declined by 2009 to 188.4 gms and 154.7 gms respectively. A number of measures will have to be taken to increase the food grains production.

The present food security system in India is marked by strange paradoxes[1]. Under this system the relatively affluent farmers in the better of irrigated areas are given incentives in the form of a high and rising support price. The Procurement and distribution of food grains involves a subsidy and it is believed to go not to the consumers of PDS grains but to make good the losses incurred by the FCI. PDS has remained untargeted for years and even today the benefits do not reach the targeted population. It can also be easily seen that poor seem to prefer to purchase food grains in the open market despite all government efforts. The system originated as a response to a critical food crisis and it works well in the situation of crisis. Rao further mentions if earnestly implemented liberalization could enable the food security system to much more effectively help the poor at much less cost. The food security system has to aim at three objectives:

·         Keeping the aggregate production at or above the level necessary for self sufficiency

·         Reducing the instability in food grain markets

·         Making dependable arrangements for helping the poor to get adequate access to food

Regarding the first two objectives mentioned above, they may be better served by phasing out the government interventions rather than by continuing the present price support cum procurement operations. Given the recent strong and broad based trend in production of food grains and its likely continuance it makes little economic sense to continue with a highly centralised and subsidized arrangements for procuring large quantities of food grains in one corner of the country, to store them for long periods often in the open in the absence of storage space and to move them over long distances for distribution to consumers who appears to be increasingly turning to the market for meeting their requirements.

Again this system is confined to rice and wheat- has hardly much relevance in stabilising the food grains markets which comprise besides rice and wheat coarse cereals and pulses marked by considerable instability in prices. So long as the production and supply situation continues to be comfortable, the best policy would be to leave the markets free and gradually diminish the present large scale procurement operations. FCI may be allowed to work as an autonomous company on commercial principles but during the time of draught/crisis it should take control of the entire system.

Regarding the third objective, viz., making dependable arrangements to ensure adequate access to food for the poor, it is necessary to keep the following points about the PDS in mind:

The families purchase p part of their requirements from the open market. Sharma (1995) Indrakant (1995) Rao (1996) Radhakrishna (1996) find a number of poor depends totally on market. It would be necessary to find out how far the poor turn to the market because of absence of PDS or its poor quality and how far due to positive preference?. It would also be important to know how is the grain purchased by the poor from the market is utilised.

The NSS data on consumer expenditure indicates that over the recent years the lowest three deciles of the population rural as well as urban have increased the consumption of non-food grains food items like milk edible oil sugar and Gur and other food while their consumption for cereals has remained unchanged or even declined. There are reports that upper strata among the poor tries to catch up the consumption pattern of the strata above them. Such people may sale off the PDS grains in the open market to finance their purchases on non-food grain items below the price of their purchase. Some members of the family may sale the grain to finance their liquor consumption or the consumption of tobacco products.

The PDS and food security provisions therefore need to design in such a way to prevent such types of misappropriations. The present thinking of issuing the Smart Card to the beneficiary of the scheme of Cash Transfer may simply assure that the food grains reaches in the hands of the targeted beneficiary. The beneficiary in the target group should be classified on the basis of the ownership of assets as (a)asset rich-income poor (b) asset poor-income poor (c) asset less-income poor. The first target should be the third category of beneficiaries. This group is most vulnerable and also most careless. They simply does not care for themselves and also misuse the benefits by reckless expenditure pattern. This is the only reason for their not having any productive asset. If cash benefits  are transferred to them they may misuse use it  for financing their bad habits. If the beneficiary himself is misusing the benefits who is going to stop them and how? One possible way is to give this responsibility to the Panchayati Raj Institutions at local level. It is believed that the decentralisation will make the system more transparent and the active participation of the needy poor will definitely improve the food security system meant for them. Another suggestion may be that such beneficiaries should be provided with the  benefits in group through a scheme like mid-day meal so that any one person may not spoil the scheme. 

---

Public Distribution System – Procurement, Off-take and Stocks

(Million Tons)

Year	Procurement			Off-take			Stocks
	Rice	Wheat	Total	Rice	Wheat	Total	Rice	Wheat	Total
1	2	3	4	5	6	7	8	9	10
1980-81	5.34	5.86	11.20	5.88	7.51	13.39	6.69	3.07	9.87
1985-86	9.62	10.35	19.97	7.40	11.72	19.12	10.34	10.21	20.75
1990-91	12.92	11.07	23.99	7.91	8.58	16.49	10.21	5.60	15.81
1995-96	9.93	12.33	22.16	11.63	12.72	24.35	13.06	7076	20.82
2000-01	18.93	16.36	35.29	10.42	7.79	18.21	23.19	21.50	44.98
2005-06	26.69	14.79	41.48	25.08	17.17	42.25	13.68	2.01	16.62
2010-11	31.13	25.92	56.79	29.80	23.07	52.87	28.82	15.36	44.35