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Loksabha TV Insights: PDS Reforms

LSTV Insights – PDS reforms

13/1/2015

(Read basics here)

New government formed a committee last year under Dr. Ashok Gulati to review the PDS system operating in India. Committee’s report is due to be submitted but it has asked for extension of 3 months to undertake detailed studies. It has given indications that leakage of subsidized food given under PDS is rising. This is contrary to what NSSO data and other studies indicate i.e. leakage is coming down. Committee is accused (by the panel) of colluding with government in its neo liberalist agenda which is anti-farmer and pro free markets.

Performance of states varies greatly in performance of PDS. States performing well are Chhattisgarh, Madhya Pradesh, Tamil Nadu, and Kerala. Those performing worst are UP and Bihar. Comparative rich states like Gujrat, Haryana and Punjab are also bad performers. Instead of thinking of dismantling PDS system, System of successful states needs to be replicated in non-performing states.

There varying estimates of leakage in different surveys. Pro-Market studies claim that leakage is more than 50%, while pro farmer studies claim it has come down to about 29% at all India level. Governments all over the world provide minimum support to farmers some or the other way. India, where 80-85% farmers are marginal cannot survive without ‘Minimum Selling Price’ regime. Further, it is also said that, huge number of small and marginal farmers captively consumes whatever they produce. So they are left with nothing to sell and richer farmer drives most benefit.

Also, Direct Benefits transfer or Cash coupons, in order to be successful need adequate infrastructure in place. We have seen current NREGA subsidies and other old age subsidies (which are given in cash) are being delayed. First we need to ensure that these subsidies are delivered regularly, only then it makes sense to move to cash transfers.

FCI and whole system needs urgent reforms. Procurement, Storage and distribution function needs to be decentralized. Storage and procurement capacity is concentrated in Punjab, Haryana, UP, Madhya Pradesh, but grain is transported to long distances in other states. More is the distance, more is the leakage. We need to diversify procurement as per local needs, so that what is available locally can be procured. This way there will be less storage which costs about Rs 5/ year.

Earlier state governments used to declare bonus over and above center’s MSP, which was also compensated by Center. But Center has recently told states that, if they declare additional bonus, their procurements and disbursements will not be compensated. This is a retrograde step.

Center needs to treat different states differently on basis of their performance. States which are not performing well should be closely monitored by center.

National Food Security Act has 10 point reform agenda, which is optional for states to adopt. But unfortunately, states have ignored this.