NATIONAL FOOD SECURITY BILL 2013
Act Highlights
* PDS
* Rice > Rs 3 per kg, wheat > Rs 2 per kg, coarse cereals > Rs 1 per kg (subject to revise after 3 years)
* 75 % rural population, 50 % urban population will get 5 kg/month.
* Antyodaya Anna Yojana > 35 kg (present scheme continue).
* 80 million covered under the Targeted Public Distribution System.
* Children
* 6 month to 14 years > get take-home rations or hot cooked food.
* By local Anganwadi, Free of charge
* Free mid-day meal in govt and govt-aided schools.
* Below 6 months > exclusive breastfeeding shall be promoted
* Pregnant and Lactating Women
* Maternity benefits of at least Rs. 6000
* Free meal at local Anganwadi
* Identification of beneficiaries
* State govt responsibility
* Based on socio-economic and caste census (SECC) Data.
* To be complete in 365 days and made public.
* Implementation
* Creation of state food commission to monitor implementation.
* Prepare annual reports.
* Hear appeal against order of DGRO.
* Two tier Grievence Redressal Structure > 1st -DGRO (District Grievance Redressal Officer), 2nd food commission.
* All PDS related reports to be made public.
* Conduct social audit of PDS
* Use of IT for transparent reporting.
* Setting up of vigilance committee to supervise
* Food security allowance for non-supply of food.
* Food commission can impose penalty and fine upto Rs.5000 on concerned officer or authority in case of non-compliance.
* PDS reforms
* Doorstep delivery and end-to-end computerization.
* Leveraging ADHAR for identification.
* Cash transfer, food coupons to ensure entitlement.
* Central govt will provide money to states and union territories if it runs low on grain as well as providing them with assistance towards the cost of intra-state transportation and handling of grains.
* Oldest adult woman in each house would be considered the head of that household for the issuing of ration cards.
* The total estimated annual food grains requirement is 612.3 lakh tons.
Merits
* If proper implementation > Lower spending on food > more on health, education and nutritious food.
* Savings of around Rs 4,400 this yearis estimated.
* Spend more on protein-rich food, thereby improving their nutritional intake.
Demerits
* Inefficient distribution channel leads to waste
* Implementing the bill in a fair, equitable and transparent manner is going to be a big challenge for the government.
* Ends up being sold illegally in markets rather than in fair price shops
* Discourage the agriculture production in the country.
* Additional subsidy burden of Rs 1.20 lakh crore per annum.
* Cost to the exchequer > fiscal and current account deficit.
* The task of construction of additional storage to the states, which may not be practically feasible given constrained center-state relations among diverse political parties.
* Lack of enough storage capacity >rotting of food.
* The rush to pass the bill implies the intent is nakedly political.
THE PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY ACT, 2013
Act Highlights
* To provide for the establishment of an Authority to promote old age income security by establishing, developing and regulating pension funds, (in short Statutory powers to the Pension Authority to act as a regulator)
* To protect the interests of subscribers to schemes of pension funds.
* Formally changes the name of the New Pension System to the National Pension System (NPS)
* NPS: contribution scheme for all central government employees, other than the armed forces, who joined after January 2004.
* Implemented through a combination of retailers, pension fund managers, and a record-keeper.
* Subscribers with individual pension account (portable across job changes)
* Free to choose fund managers and schemes to manage their pension wealth
* Extended to all general citizens including un-organised sector. (But not mandatory like USA which have a mandatory system to ensure that all persons have old-age income security)
* Allow subscribers to invest in stock markets with a cap.
* Allows 26 per cent foreign direct investment (FDI) in the pension sector
Merits
* Old age income security for government employees and general public.
* New pension products in the market
* More choice for customers and can start investing earlier and as per individual need.
* Invest in the portfolio > high returns and fixed returns at the time of retirement.
* Improve quality of service and greater fixed and variable returns.
* Mobilise substantial long-term funds, which can be used to build infrastructure.
* Subscribers won't be exposed to risk of government default.
Demerits
* No explicit or implicit guarantee on the pension wealth, except in cases where the subscriber purchases market-based guarantees. (This rule differs from bank deposits, where deposits up to Rs. 1 lakh are guaranteed.)
* Investment risk will be entirely borne by subscribers.
The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2012
Act Highlights
* The Bill will replace the existing Land Acquisition Act, 1894.
* Land can be acquired for
* Public projects like Strategic use by the armed forces, paramilitary, state police; for national security; for infrastructure projects
* Private projects like hospitals, private education institutions and private hotels;
* Projects related to industrial corridors, mining, national investment and manufacturing zone, sports, healthcare, tourism and space programs;
* Housing projects for income groups specified by government, projects planned for development of village sites, residential areas for lower income groups in urban areas; projects involving agro-processing, warehousing, cold storage, marketing infrastructure, dairy, fisheries and meat processing cooperatives
* For a private entity or a PPP project > social impact assessment (SIA) and an environmental impact assessment (EIA), to identify the families to be affected.
* Consent
* Private entity > 80 % of the affected families.
* PPP > 70% of the affected families
* Compensation package
* Rural Areas > 4 times of market value
* Urban Areas > 2 times of market value
* When acquired land is sold to 3rd party > 40% of benefit. (Exempt from tax and stamp duty)
* A Land Acquisition and Rehabilitation and Resettlement Authority to be established
* Retrospective cause > Applicable on cases where no land acquisition award made.
* Lease > Industry can take land on lease but with state govts permission.
Merits
* Just and fair compensation to families whose land has been acquired for industrial purposes.
* Making affected persons partners in development, leading to an improvement in their post-acquisition social and economic status.
* Instead of acquisition, land could be leased to developers so that its ownership remain with farmers and provide them regular annual income.
Demerits
* For project owners
* Make the land acquisition process slower
* Compensation would raise costs of projects fivefold
* Retrospective application clause not favorable
* For Land owners
* No guarantee of jobs in R&R package;
* Compensation calculated according to circle rates much less than market prices;
* No protection to farmland;
* State government to decide if unused acquired-land should be returned to the farmer or added to its land bank. This applies even if owners return the compensation
The Real Estate (Regulation and Development) Bill, 2013
Act Highlights
* Standardization of Definitions > Definitions of "Apartment", "Common Area", "Carpet Area", "Advertisement", "Real Estate Project", "Prospectus" etc.
* Carpet Areafor sale, instead of ambiguities of "Built Up Area", "Super Built Up Area" etc.
* Real Estate Regulatory Authority > This Authority is similar to TRAIof Telecom and IRDAfor Insurance. It provides specialized regulation and enforcement. It can impose penalties on Developers for violations including imprisonment upto 3 years.
* Registration of Real Estate Agents > The Agents must maintain and preserve books of accounts, records and documents, facilitate the possession of documents to allottees as entitled at the time of booking etc.
* Duties and Functions of the Promoter > towards disclosure of all relevant information, adherence to approved plans, veracity of advertisement for sale or prospectus, rectify structural defects, and refund money in case of default.
* Rights and Duties of Allottees > Right to obtain all information related to property booked, know stage-wise completion schedule, claim possession as per promoter declaration, claim refund with interest in case of Promoter default, after possession claim necessary documents and plans.Duty of the Allottees is to make necessary payments and any other responsibility per the Agreement.
* Register all projects > The registration is to happen AFTER receiving all approvals from Development/Municipal authorities.
* Public Disclosure > details related to the project: Details of the Promoter, Project, Layout Plan, Plan of Development Works, Land Status, Carpet Area , number of apartments booked, status of the statutory approvals, names and addresses of architect, contractor, structural engineer, real estate agents etc.
* Separate Bank Account for each Project and deposit 70% of the Amount received by him towards the Project in this Account. The Deposit percentage may change as notified by the Appropriate Government (state govt?)
* Fast Track Dispute resolution > Real Estate Appellate Tribunal.
Merits
* Uniform regulatory environment in the real estate sector
* Eradication of problems like black money, corruption, red tapism, land mafias and corruption.
* Ensure sale of immovable properties in an efficient and transparent manner
* Protect the interest of consumers in the real estate sector.
* Easy Grievance Redressal avenues.
* Easily accessible information for Buyers to validate Property Documents & Clearance Documents.
Demerits
* Substantial delays in approvals, especially environmental clearances.
* Regulations on foreign investment make it difficult for small developers to access low-cost capital.
* Approvals of building plans by the planning authority or a municipal corporation result in abnormal delays.
Rajiv Gandhi National Aviation University Bill, 2013
Reason
* Marked absence of credible institutions imparting specialised technical and managerial training in air transportation, safety, security and regulatory areas
Act Highlights
* To train pilots, cabin crew and aircraft engineers.
* Promotion of aviation studies, training and research with focus on aviation medicine, aviation safety and security, aviation law, aviation science and engineering, aviation history, aviation regulation and policy and aviation management.
* Public-Private Partnership (PPP) for construction of Airports.
* Autonomous body under administrative control of the Civil Aviation Ministry.
* Funding of 202 crore Rupees during the 12th Plan period (80 crore sanctioned)
* Become a knowledge partner to safety and security regulators.
* At the Indira Gandhi Rashtriya Udaan Academy at Fursatganj in Rae Bareli. (Constituency of Sonia Gandhi)
Merits
* Qualified and trained manpower for aviation sector.
* Opening of more domestic airports in the country.
* Expand the airports of the Air Force for this purpose in some districts
Demerits
* Rae Bareli is an aviation desert. Best place should be Banglore.
* Another scheme named after Rajiv Gandhi !!
by Bharat Chaudhary
References:
* http://www.prsindia.org/
* http://www.business-standard.com/article/pf/10-things-you-wanted-to-know-about-the-new-pension-bill-113090400910_1.html
* http://www.jagranjosh.com/current-affairs/lok-sabha-passed-the-rajiv-gandhi-national-aviation-university-bill-2013-1378534663-1
* http://www.moneycontrol.com/news/current-affairs/bill-to-setfirst-national-aviation-university-passed_946140.html
* http://www.indianexpress.com/news/lok-sabha-passes-bill-to-set-up-first-national-aviation-university/1165622/0
* http://www.firstpost.com/economy/all-you-need-to-know-about-national-food-security-bill-1063107.html
* http://www.tehelka.com/exclusive-summary-of-the-national-food-security-bill-2013/
* http://blogs.wsj.com/indiarealtime/2013/08/07/fact-sheet-indias-food-security-bill/
* http://www.business-standard.com/article/economy-policy/things-you-must-know-about-the-land-acquisition-bill-113082900824_1.html
* http://zeenews.india.com/news/nation/five-things-you-need-to-know-about-land-acquisition-bill_872529.html
* http://apartmentadda.com/blog/2013/09/03/10-features-of-the-real-estate-bill-2013/
* http://www.mondaq.com/india/x/257592/real+estate/The+Real+Estate+Regulation+And+Development+Bill+2013
Showing posts with label PDS. Show all posts
Showing posts with label PDS. Show all posts
Monday, January 13, 2014
PUBLIC DISTRIBUTION SYSTEM :
PUBLIC DISTRIBUTION SYSTEM :
Definition:
The system of the government and its agencies supplying the essential commodities to the consumers at reasonable prices is called the Public Distribution System (PDS).
History:
The institution of fair price shops came into existence during the Second World War. Earlier, the Government had made arrangements to open grain shops in different industrial and rural areas for the distribution of specified quantities of food grains at subsidised rates to labourers.
To stabilise the prices of food grains. the Government organised fair price shops where card-holders could make purchases at fixed prices. Thus, the Government tried to influence the priccs in the open market.
The Central Government formulated a scheme in 1956 for the extensive sale of food grains through fair price shops. All the State governments were asked to open a large number of fair price shops mainly for the distribution of rice and wheat. The total distribution of food grains in 1956 from the Government stocks was 2.1 million tonnes.
The amount of grains thus distributed increased significantly after 1964 because of poor agricultural production over the three years from 1964-65 to 1966-67. In 1965, statutory rationing (rationing as per law) where the quota of sales for individuals is set by the Government was introduced in four major cities and later extended to a further 10 cities in the country. The family ration card system was also introduced.
WORKING OF THE PUBLIC DISTRIBCTTION SYSTEM (PDS)
The farmers producing the food grains are distributed throughout the length and breadth of the country. So also, the consumers are geographically distributed. Most of the consumption points are the large townships and urban areas where food is not grown. The food grown by the farmers will have to be supplied to these consumption centres. There are both rich and poor people, and in the case of an increase in the prices, it is the latter who stand to suffer. The trading community usually takes care of assembling the crops grown by the farmers and marketing them to the consumers. But, left to themselves, the traders indulge in speculative activities i.e. they speculate (expect) the prices to increase during the nonharvest season because of low availability of foodgrains. This goes by
the simple principle in economics which says that when the demand for a commodity is more than its supply, the price of that commodity increases. Hence, there is a possibility of the traders hoarding (stocking) the commodity and thus creating an artificial scarcity in the market. This leads to an increase in the prices of food grains when the traders release their stock, thus enabling them to make higher profits. It is here that the Government intervenes to prevent such a situation and comes to the rescue of the consumers.
Role of State:
The Government agencies which are involved in the PDS are the Food Corporation of India and the Food and Civil Supplies Corporations for the State Governments. They buy the food grains grown by the farmers usually at the regulated markets. They store these grains and transport them to the distribution (off take) points. From these points, the retailers (Fair Price Shops) buy the commodities and ultimately sell the grains to the consumers. The Central Government fixes the quota month wise for each state regarding the quantity of food grains which can be sold through the PDS. This quota depends upon the needs of the population of the state and its contribution to the central pool of food stocks. Rice and wheat are the two commodities which have been given maximum emphasis for the sale of procurement and distribution through the PDS.
How the PDS helps the consumers:
There are two important concepts.
1)The Market price
2)The Issue Price.
1)Market price :
It is the price of a commodity prevailing in the open market. We usually concentrate on the wholesale price in the open market. This is because the retail price depends upon the wholesale price.
2)The Issue price :
It is the price at which the government releases (sells) its stock to the retailers (Fair price shops) for distribution. Here again, the price we pay in our shop will be more than the issue price itself. The information on prices will usually be converted to Index numbers (Price Indices) to facilitate a better comparison hetween different points of time.
The benefit to the consumers:
* The benefit to the consumers due to the PDS can be realised when we compare the movement of wholesale {open market) prices and issue .
* The benefits not only include the availabiliy of foodgrains at lower prices but also include availability of the commodities throughout the year.
* The PDS in India is recognised as a permanent feature of the strategy to control prices, to reduce fluctuation in prices and to achieve an equitable distribution of essential commodities i.e. all people can have access to buying the essential items at reasonable prices.
* The PDS involves a very good co-ordination between production, procurement, transportation, storage and distribution.
Commodities recognised for sale by PDS :
The Government of India has recognised the following commodities as essential items reflecting the needs of the common man.
1 Cereals-rice and wheat
2 Sugar
3 Edible Oil
4 Soft Coke (for fuel)
5 Kerosene
6 Controlled Cloth
7 Tea
8 Coffee
9 Toilet and Washing Soaps
10 Match Boxes
11 Exercise Books for Children
However, the Central Government has confined its responsibilities to the seven commodities viz., wheat, rice, sugar, edible oil, kerosene, soft coke and cloth. These seven commodities form the core of the PDS. It is not necessary to standardise the commodities sold throughout the country through the PDS because the needs of different states will be different. Hence, we see that some State Governments are distributing a large number of essential commodities through fair price shops. The Central Government also helps the State Governments in acquiring many commodities of common use like razor blades, toilet soaps, cycles, and tubes, etc., at wholesale prices for distributing through the fair price shops.
The working of the PDS is periodically reviewed in consultation with the State Governments. At the Central Government level, an Advisory Council on the Public Distribution System has been constituted to review its working from time to time. All the State Governments have also established such Advisory Councils at district and tehsil levels.
Expansion of the PDS has been an important point of action in the New 20-point programme. Special emphasis is laid on increasing the number of fair price shops in the areas which have not been sufficiently served by the PDS. Hence, the expansion of PDS is supplementary to the poverty alleviation programmes.
FAIR PRICE SHOPS :
As the name itself indicates, a fair price shop is one in which the commodities are sold at reasonable and fixed prices. As far as possible, the Government recognises the co-operative stores as fair price shops. However, many private traders are also permitted to sell the commodities through the PDS by being recognised as fair price shops by the Government.
The number of fair price shops increased from 2.39 lakhs in March 1979 to 3.15 lakhs in January, 1985 .These fair price shops are scattered over both the urban and rural areas. 'Thus all sections of society can derive benefits from them. As was mentioned earlier, several essential commodities are being sold by the fair price shops. The more important of these commodities are food grains, sugar, edible oil, kerosene oil and cheaper varieties of cloth.
In our country there is a system of rationing followed for distribution of commodities by the fair price shops. In fact, they are more popularly called 'ration shops'. Any person or family willing to buy commodities from the ration shops should possess a 'ration card'. The ration card which serves as a permit will be issued only by the Directorate of Food and Civil Supplies of the concerned State Government. On application to the Directorate, a ration card is issued to a family. The family is also referred to the particular shop from where they can buy their supplies. All families living in the jurisdiction of a particular office (Directorate) are eligible to become ration card holders.
The major advantage of buying your requirements from a ration shop:
* It is that you can get the commodities at lower prices as compared to buying the same in the open market (any other shop).
* The prices at which these commodities are sold in the ration shops do not fluctuate as much as they do in the other shops. For example, the price of edible oils increases during the festive season in other shops, while in the ration shop it does not. Hence you are assured of your quota of commodities at stable prices.
* The rationing system has been particularly helpful to the poorer sections of society.
* The poor spend a very large portion of their income on food articles. So, when these commodities are available to them at lower prices, they will be benefitted.
* Further, because the ration shop network is fairly widespread, they can have access to these commodities close to their homes.
Thus, the Government's policy relating to the Public Distribution System and the fair price,shops go together. This policy has helped all sections of the population to avail of essential commodities at stable prices.
FOOD SUBSIDIES :
Definition:
A subsidy is that component of the total price which a buyer need not pay. Food subsidy is one helps the consumer buy his food at a cheaper rate than what he would have actually paid for.
Subsidies are usually awarded by the Government, either Central or State. The main intention of a subsidy is to help the buyer purchase his requirements at cheaper prices. In fad, subsidies are sometimes are sometimes also used to encourage the consumption of some commodities. Examples of such subsidised products include new commodities sold in the market or indigeneously produced goods as against imported ones. Subsidies may come either in the form of absorption of certain costs by the Government or in the form of cash.
e.g. You may have observed that during the loan melas, when loans are given to poor people, it will usually be in the form of providing productive assets like sewing machines, etc. Out of the total loan of Rs. 5000 granted, Rs. 1500 will be subsidy and the remaining Rs. 3500 will be the loan component.
The other form of subsidy may be in the form of non-transfer of some costs to the consumer.
e.g. The Government may incur heavy costs in transporting the goods from one place to another, but will not include these costs in the prices it fixes for the consumers. Most of the public service utilities you consume-such as drinking water, bus transport, electricity, etc., are subsidised in this form.
Buying procedure:
The Government has to first buy the commodities to build up its stock. The procedure of buying stocks by the Government through its agent i.e., the Food Corporation of India (FCI) is called 'procurement. The foodgrains are procured by the FCI from either the open market or collection in terms of some compulsory sales by the millers. The price at which FCI buys the foodgrains is called 'procurement price' .Procurement prices are fixed by the Government of India. The prices at which different commodities like rice, wheat, coarse grains, etc. are procured will be different.
A matter of policy, the Government announces the procurement prices for different commodities at the beginning of the sowing season. Hence, if we closely observe, the procurement prices for kharif crops (June to November) are announced in June. while those for rabi crops (October-November and March-April) are announced in November.Such an announcement of procurement prices in the beginning of a crop season has a favourable impact on the producers. This is because the farmers are aware that this is the minimum price at which they have to sell their produce.
The procurement price is fixed according to the recommendations of an advisory body called Commission on Agricultural Costs and Prices. This body was formerly known as the Agricultural Costs and Prices Commission. This Commission takes into account the average cost of production of the crop (cost per quintal) for its recommendations of procurement prices.
In addition to the payment of procurement price, the FCI has to spend a huge amount of money as incidentals. These include the following:
1 Obligatory charges (Mandi charges, sales tax, cost of gunny bags)
2 Storage and interest charges
3 Handling charges (labour, internal movements etc.)
4 Establishment charges
5 Other miscellaneous charges
The FCI also incurs costs on the following items of distribution.
1 Freight
2 Interest
3 Transit and storage loss .
4 Handling expenses at the godowns
5 Administrative overheads
Thus you see, the total cost of procurement includes
a) Procurement price
b) Procurement incidentals and
c) Distribution incidentals
When you add these three, you arrive at the cost of procurement (per tonne or quintal) which is called the 'Economic Cost'.
The difference between the 'Economic' cost of procurement and the issue price of a commodity is what is considered as 'Consumer Subsidy'. The benefit of this subsidy directly goes to the consumers.
Buffer Stock:
Another important component of food subsidy is the expenses incurred on maintaining the buffer stock of grains. In very simple terms "Buffer Stock" is the total quantity of grains held by the Government agencies, mainly the Food Corporation of India,to meet any emergency requirements of foodgrains during times of shortage of production.
For instance, in the year 1987-88, when the entire country was affected by drought, there was a shortfall in the production of foodgrains to the tune of about 20 million tonnes. Now the buffer stock of foodgrains available in India (about 23.5 million tonnes at the beginning of this year) will be used to make up this shortage.
Uses Of Buffer Stock:
* This buffer stock is needed to stabilise the availability of foodgrains in the country as well as to stabiIise their prices.
* Maintaining these buffer stocks involves costs to the Government.
* These costs include, cost of money used (interest), storage charges, administrative costs, etc.
* These costs are almost entirely borne by the Government. These are called "Carrying costs of buffer stock". In the year 1981-82, the Government spent a total of Rs. 154.81 crores to maintain the buffer stock.
GLOSSARY :
Buffer Stock : Stock of essential commodities held by the Government to meet emergency situations.
Procurement price : The price at which the Food Corporation of India buys the food grains.
Consumer Subsidy : The difference between the Economic Cost of procurement and the Issue Price of a Commodity is
Consumer Subsidy: The non-transfer of certain costs to the consumer such as procurement and distribution incidentals by the Government forms the consumer subsidy.
Freight : Goods transported by commercial transport
Issue Price : The price at which the Government releases its stock.
Market Price : The price prevailing in the open market (wholesale).
Price Index : An indicator of the percentage change in price with respect to a base period. Procurement Price : The procedure of buying stock by the Government through its agent (Food Corporation of India (FCI) is called procurement price.
Public Distribution System: The system of the Government distributing essential (PDS) commodities through fair price shops.
Procurement : The process of Government buying commodities from producers to supply them to consumers through public Distribution System
Rationing : The system of quota of essential commodities permitted to be bought under the Public Distributioil System
TARGETED PUBLIC DISTRIBUTION SYSTEM(TPDS)
Rationing was first introduced in India in 1939 in Bombay by the British Government as a measure to ensure equitable distribution of food-grains to the urban consumers in the face of rising prices due to increased demand from the armed forces.In 1943, the First Food-grain Policy Committee set up by the Government recommende continuation of rationing, maintenance of reserve stocks and extension of rationing to rural areas also.
From the first phase of rationing of food-grains in short supply, the system evolved into the present day Public Distribution System (PDS) in the mid 1960s as the Government envisaged an elaborate PDS as a necessary part of its strategy to boost agricultural production in selected areas through infrastructural investment, technological inputs and price incentives to farmers through government intervention in the food-grain markets.
This second phase, characterized by near self-sufficiency in food-grains production, holding of huge buffer stocks of food-grains by the government and rapid expansion of the network of distribution outlets deep into the rural areas of the country has continued till the present day.
The Public Distribution System, however, has failed in translating the macro-level selfsufficiency in food-grains achieved by the country into micro-level household food security for the poor in the country. In a system that allows access to all, the rich and the poor alike, the quantum supplied by the PDS to each household forms only a small portion of the familys total requirement. Increases in the Minimum Support Price over the years, considered necessary by the Government to keep up agricultural production, has led to corresponding increases in consumer prices in the PDS, adversely affecting the economic access of the poor to the PDS food-grains. The holding of huge buffer stocks through a highly centralized Food Corporation of India has led to enormous costs of storage and transportation, which have to be borne by the Government.
The importance of an effective Public Distribution System that ensures availability of food at affordable prices at the household level for the poor can hardly be over emphasised. The PDS as it stood earlier, however, was widely criticized for its failure to serve the population below the poverty line, its urban bias, negligible coverage in the States with the highest concentration of the rural poor and the lack of transparent and accountable arrangements for delivery. Realising this, the Governmen streamlined the PDS by issuing special cards to families Below Poverty Line (BPL)
and selling food-grains under the PDS to them at specially subsidized prices with effectfrom June 1997.
The Targeted Public Distribution System (TPDS):
Poor family was originally entitled to 10 kgs of food-grains per month at specially subsidized prices and this was likely to benefit about 6 crore (i.e. 60 million) poor families. The identification of the poor is done by the States as per the state-wise poverty estimates of the Planning Commission. These estimates regarding the proportion and the number of the poor in each state are based on the methodology developed by the Expert Group chaired by late Prof. Lakadwala. The policy thrust is to include only the really poor and vulnerable sections of the society, such as the landless agricultural labourers, marginal farmers, rural artisans/craftsmen such as potters, tapers, weavers, blacksmiths, carpenters, etc, in the rural areas and slum dwellers and persons earning their livelihood on a daily basis in the informal sector like porters, rickshaw pullers and hand cart pullers, fruit and flower sellers on the pavements, etc. in the urban areas.
Keeping in view the consensus on increasing the allocation of food-grains to BPL category and to better target the food subsidy, the Government of India increased the allocation to BPL families from 10 kgs. to 20 kgs. of food-grains per family per month on April 1, 2000. The allocation for the Above Poverty Line (APL) population was retained at the earlier level.The number of BPL families was increased in the official records with effect from December 1, 2000, by shifting the base from the earlier population projection of 1995 to the population projections of the Registrar General as on March 1, 2000. This change has resulted in raising the number of BPL families to 652.03 lakhs as against 596.23 lakhs originally estimated when the TPDS was introduced in June 1997. The increased level of allocation of food-grains for BPL category is about 147 lakh tonnes per annum.
In order to reduce the excess stocks lying with the Food Corporation of India, the Government initiated the following measures under the TPDS with effect from July 12, 2001:
The BPL allocation of food grains was increased from 20 kgs. to 25 kgs. Per family per month with effect from July 2001 and the issue price for BPL families was fixed at Rs. 4.15 per kg. of wheat and Rs. 5.65 per kg. of rice.
Reference : B.Udhayakumar
Ignou material
Definition:
The system of the government and its agencies supplying the essential commodities to the consumers at reasonable prices is called the Public Distribution System (PDS).
History:
The institution of fair price shops came into existence during the Second World War. Earlier, the Government had made arrangements to open grain shops in different industrial and rural areas for the distribution of specified quantities of food grains at subsidised rates to labourers.
To stabilise the prices of food grains. the Government organised fair price shops where card-holders could make purchases at fixed prices. Thus, the Government tried to influence the priccs in the open market.
The Central Government formulated a scheme in 1956 for the extensive sale of food grains through fair price shops. All the State governments were asked to open a large number of fair price shops mainly for the distribution of rice and wheat. The total distribution of food grains in 1956 from the Government stocks was 2.1 million tonnes.
The amount of grains thus distributed increased significantly after 1964 because of poor agricultural production over the three years from 1964-65 to 1966-67. In 1965, statutory rationing (rationing as per law) where the quota of sales for individuals is set by the Government was introduced in four major cities and later extended to a further 10 cities in the country. The family ration card system was also introduced.
WORKING OF THE PUBLIC DISTRIBCTTION SYSTEM (PDS)
The farmers producing the food grains are distributed throughout the length and breadth of the country. So also, the consumers are geographically distributed. Most of the consumption points are the large townships and urban areas where food is not grown. The food grown by the farmers will have to be supplied to these consumption centres. There are both rich and poor people, and in the case of an increase in the prices, it is the latter who stand to suffer. The trading community usually takes care of assembling the crops grown by the farmers and marketing them to the consumers. But, left to themselves, the traders indulge in speculative activities i.e. they speculate (expect) the prices to increase during the nonharvest season because of low availability of foodgrains. This goes by
the simple principle in economics which says that when the demand for a commodity is more than its supply, the price of that commodity increases. Hence, there is a possibility of the traders hoarding (stocking) the commodity and thus creating an artificial scarcity in the market. This leads to an increase in the prices of food grains when the traders release their stock, thus enabling them to make higher profits. It is here that the Government intervenes to prevent such a situation and comes to the rescue of the consumers.
Role of State:
The Government agencies which are involved in the PDS are the Food Corporation of India and the Food and Civil Supplies Corporations for the State Governments. They buy the food grains grown by the farmers usually at the regulated markets. They store these grains and transport them to the distribution (off take) points. From these points, the retailers (Fair Price Shops) buy the commodities and ultimately sell the grains to the consumers. The Central Government fixes the quota month wise for each state regarding the quantity of food grains which can be sold through the PDS. This quota depends upon the needs of the population of the state and its contribution to the central pool of food stocks. Rice and wheat are the two commodities which have been given maximum emphasis for the sale of procurement and distribution through the PDS.
How the PDS helps the consumers:
There are two important concepts.
1)The Market price
2)The Issue Price.
1)Market price :
It is the price of a commodity prevailing in the open market. We usually concentrate on the wholesale price in the open market. This is because the retail price depends upon the wholesale price.
2)The Issue price :
It is the price at which the government releases (sells) its stock to the retailers (Fair price shops) for distribution. Here again, the price we pay in our shop will be more than the issue price itself. The information on prices will usually be converted to Index numbers (Price Indices) to facilitate a better comparison hetween different points of time.
The benefit to the consumers:
* The benefit to the consumers due to the PDS can be realised when we compare the movement of wholesale {open market) prices and issue .
* The benefits not only include the availabiliy of foodgrains at lower prices but also include availability of the commodities throughout the year.
* The PDS in India is recognised as a permanent feature of the strategy to control prices, to reduce fluctuation in prices and to achieve an equitable distribution of essential commodities i.e. all people can have access to buying the essential items at reasonable prices.
* The PDS involves a very good co-ordination between production, procurement, transportation, storage and distribution.
Commodities recognised for sale by PDS :
The Government of India has recognised the following commodities as essential items reflecting the needs of the common man.
1 Cereals-rice and wheat
2 Sugar
3 Edible Oil
4 Soft Coke (for fuel)
5 Kerosene
6 Controlled Cloth
7 Tea
8 Coffee
9 Toilet and Washing Soaps
10 Match Boxes
11 Exercise Books for Children
However, the Central Government has confined its responsibilities to the seven commodities viz., wheat, rice, sugar, edible oil, kerosene, soft coke and cloth. These seven commodities form the core of the PDS. It is not necessary to standardise the commodities sold throughout the country through the PDS because the needs of different states will be different. Hence, we see that some State Governments are distributing a large number of essential commodities through fair price shops. The Central Government also helps the State Governments in acquiring many commodities of common use like razor blades, toilet soaps, cycles, and tubes, etc., at wholesale prices for distributing through the fair price shops.
The working of the PDS is periodically reviewed in consultation with the State Governments. At the Central Government level, an Advisory Council on the Public Distribution System has been constituted to review its working from time to time. All the State Governments have also established such Advisory Councils at district and tehsil levels.
Expansion of the PDS has been an important point of action in the New 20-point programme. Special emphasis is laid on increasing the number of fair price shops in the areas which have not been sufficiently served by the PDS. Hence, the expansion of PDS is supplementary to the poverty alleviation programmes.
FAIR PRICE SHOPS :
As the name itself indicates, a fair price shop is one in which the commodities are sold at reasonable and fixed prices. As far as possible, the Government recognises the co-operative stores as fair price shops. However, many private traders are also permitted to sell the commodities through the PDS by being recognised as fair price shops by the Government.
The number of fair price shops increased from 2.39 lakhs in March 1979 to 3.15 lakhs in January, 1985 .These fair price shops are scattered over both the urban and rural areas. 'Thus all sections of society can derive benefits from them. As was mentioned earlier, several essential commodities are being sold by the fair price shops. The more important of these commodities are food grains, sugar, edible oil, kerosene oil and cheaper varieties of cloth.
In our country there is a system of rationing followed for distribution of commodities by the fair price shops. In fact, they are more popularly called 'ration shops'. Any person or family willing to buy commodities from the ration shops should possess a 'ration card'. The ration card which serves as a permit will be issued only by the Directorate of Food and Civil Supplies of the concerned State Government. On application to the Directorate, a ration card is issued to a family. The family is also referred to the particular shop from where they can buy their supplies. All families living in the jurisdiction of a particular office (Directorate) are eligible to become ration card holders.
The major advantage of buying your requirements from a ration shop:
* It is that you can get the commodities at lower prices as compared to buying the same in the open market (any other shop).
* The prices at which these commodities are sold in the ration shops do not fluctuate as much as they do in the other shops. For example, the price of edible oils increases during the festive season in other shops, while in the ration shop it does not. Hence you are assured of your quota of commodities at stable prices.
* The rationing system has been particularly helpful to the poorer sections of society.
* The poor spend a very large portion of their income on food articles. So, when these commodities are available to them at lower prices, they will be benefitted.
* Further, because the ration shop network is fairly widespread, they can have access to these commodities close to their homes.
Thus, the Government's policy relating to the Public Distribution System and the fair price,shops go together. This policy has helped all sections of the population to avail of essential commodities at stable prices.
FOOD SUBSIDIES :
Definition:
A subsidy is that component of the total price which a buyer need not pay. Food subsidy is one helps the consumer buy his food at a cheaper rate than what he would have actually paid for.
Subsidies are usually awarded by the Government, either Central or State. The main intention of a subsidy is to help the buyer purchase his requirements at cheaper prices. In fad, subsidies are sometimes are sometimes also used to encourage the consumption of some commodities. Examples of such subsidised products include new commodities sold in the market or indigeneously produced goods as against imported ones. Subsidies may come either in the form of absorption of certain costs by the Government or in the form of cash.
e.g. You may have observed that during the loan melas, when loans are given to poor people, it will usually be in the form of providing productive assets like sewing machines, etc. Out of the total loan of Rs. 5000 granted, Rs. 1500 will be subsidy and the remaining Rs. 3500 will be the loan component.
The other form of subsidy may be in the form of non-transfer of some costs to the consumer.
e.g. The Government may incur heavy costs in transporting the goods from one place to another, but will not include these costs in the prices it fixes for the consumers. Most of the public service utilities you consume-such as drinking water, bus transport, electricity, etc., are subsidised in this form.
Buying procedure:
The Government has to first buy the commodities to build up its stock. The procedure of buying stocks by the Government through its agent i.e., the Food Corporation of India (FCI) is called 'procurement. The foodgrains are procured by the FCI from either the open market or collection in terms of some compulsory sales by the millers. The price at which FCI buys the foodgrains is called 'procurement price' .Procurement prices are fixed by the Government of India. The prices at which different commodities like rice, wheat, coarse grains, etc. are procured will be different.
A matter of policy, the Government announces the procurement prices for different commodities at the beginning of the sowing season. Hence, if we closely observe, the procurement prices for kharif crops (June to November) are announced in June. while those for rabi crops (October-November and March-April) are announced in November.Such an announcement of procurement prices in the beginning of a crop season has a favourable impact on the producers. This is because the farmers are aware that this is the minimum price at which they have to sell their produce.
The procurement price is fixed according to the recommendations of an advisory body called Commission on Agricultural Costs and Prices. This body was formerly known as the Agricultural Costs and Prices Commission. This Commission takes into account the average cost of production of the crop (cost per quintal) for its recommendations of procurement prices.
In addition to the payment of procurement price, the FCI has to spend a huge amount of money as incidentals. These include the following:
1 Obligatory charges (Mandi charges, sales tax, cost of gunny bags)
2 Storage and interest charges
3 Handling charges (labour, internal movements etc.)
4 Establishment charges
5 Other miscellaneous charges
The FCI also incurs costs on the following items of distribution.
1 Freight
2 Interest
3 Transit and storage loss .
4 Handling expenses at the godowns
5 Administrative overheads
Thus you see, the total cost of procurement includes
a) Procurement price
b) Procurement incidentals and
c) Distribution incidentals
When you add these three, you arrive at the cost of procurement (per tonne or quintal) which is called the 'Economic Cost'.
The difference between the 'Economic' cost of procurement and the issue price of a commodity is what is considered as 'Consumer Subsidy'. The benefit of this subsidy directly goes to the consumers.
Buffer Stock:
Another important component of food subsidy is the expenses incurred on maintaining the buffer stock of grains. In very simple terms "Buffer Stock" is the total quantity of grains held by the Government agencies, mainly the Food Corporation of India,to meet any emergency requirements of foodgrains during times of shortage of production.
For instance, in the year 1987-88, when the entire country was affected by drought, there was a shortfall in the production of foodgrains to the tune of about 20 million tonnes. Now the buffer stock of foodgrains available in India (about 23.5 million tonnes at the beginning of this year) will be used to make up this shortage.
Uses Of Buffer Stock:
* This buffer stock is needed to stabilise the availability of foodgrains in the country as well as to stabiIise their prices.
* Maintaining these buffer stocks involves costs to the Government.
* These costs include, cost of money used (interest), storage charges, administrative costs, etc.
* These costs are almost entirely borne by the Government. These are called "Carrying costs of buffer stock". In the year 1981-82, the Government spent a total of Rs. 154.81 crores to maintain the buffer stock.
GLOSSARY :
Buffer Stock : Stock of essential commodities held by the Government to meet emergency situations.
Procurement price : The price at which the Food Corporation of India buys the food grains.
Consumer Subsidy : The difference between the Economic Cost of procurement and the Issue Price of a Commodity is
Consumer Subsidy: The non-transfer of certain costs to the consumer such as procurement and distribution incidentals by the Government forms the consumer subsidy.
Freight : Goods transported by commercial transport
Issue Price : The price at which the Government releases its stock.
Market Price : The price prevailing in the open market (wholesale).
Price Index : An indicator of the percentage change in price with respect to a base period. Procurement Price : The procedure of buying stock by the Government through its agent (Food Corporation of India (FCI) is called procurement price.
Public Distribution System: The system of the Government distributing essential (PDS) commodities through fair price shops.
Procurement : The process of Government buying commodities from producers to supply them to consumers through public Distribution System
Rationing : The system of quota of essential commodities permitted to be bought under the Public Distributioil System
TARGETED PUBLIC DISTRIBUTION SYSTEM(TPDS)
Rationing was first introduced in India in 1939 in Bombay by the British Government as a measure to ensure equitable distribution of food-grains to the urban consumers in the face of rising prices due to increased demand from the armed forces.In 1943, the First Food-grain Policy Committee set up by the Government recommende continuation of rationing, maintenance of reserve stocks and extension of rationing to rural areas also.
From the first phase of rationing of food-grains in short supply, the system evolved into the present day Public Distribution System (PDS) in the mid 1960s as the Government envisaged an elaborate PDS as a necessary part of its strategy to boost agricultural production in selected areas through infrastructural investment, technological inputs and price incentives to farmers through government intervention in the food-grain markets.
This second phase, characterized by near self-sufficiency in food-grains production, holding of huge buffer stocks of food-grains by the government and rapid expansion of the network of distribution outlets deep into the rural areas of the country has continued till the present day.
The Public Distribution System, however, has failed in translating the macro-level selfsufficiency in food-grains achieved by the country into micro-level household food security for the poor in the country. In a system that allows access to all, the rich and the poor alike, the quantum supplied by the PDS to each household forms only a small portion of the familys total requirement. Increases in the Minimum Support Price over the years, considered necessary by the Government to keep up agricultural production, has led to corresponding increases in consumer prices in the PDS, adversely affecting the economic access of the poor to the PDS food-grains. The holding of huge buffer stocks through a highly centralized Food Corporation of India has led to enormous costs of storage and transportation, which have to be borne by the Government.
The importance of an effective Public Distribution System that ensures availability of food at affordable prices at the household level for the poor can hardly be over emphasised. The PDS as it stood earlier, however, was widely criticized for its failure to serve the population below the poverty line, its urban bias, negligible coverage in the States with the highest concentration of the rural poor and the lack of transparent and accountable arrangements for delivery. Realising this, the Governmen streamlined the PDS by issuing special cards to families Below Poverty Line (BPL)
and selling food-grains under the PDS to them at specially subsidized prices with effectfrom June 1997.
The Targeted Public Distribution System (TPDS):
Poor family was originally entitled to 10 kgs of food-grains per month at specially subsidized prices and this was likely to benefit about 6 crore (i.e. 60 million) poor families. The identification of the poor is done by the States as per the state-wise poverty estimates of the Planning Commission. These estimates regarding the proportion and the number of the poor in each state are based on the methodology developed by the Expert Group chaired by late Prof. Lakadwala. The policy thrust is to include only the really poor and vulnerable sections of the society, such as the landless agricultural labourers, marginal farmers, rural artisans/craftsmen such as potters, tapers, weavers, blacksmiths, carpenters, etc, in the rural areas and slum dwellers and persons earning their livelihood on a daily basis in the informal sector like porters, rickshaw pullers and hand cart pullers, fruit and flower sellers on the pavements, etc. in the urban areas.
Keeping in view the consensus on increasing the allocation of food-grains to BPL category and to better target the food subsidy, the Government of India increased the allocation to BPL families from 10 kgs. to 20 kgs. of food-grains per family per month on April 1, 2000. The allocation for the Above Poverty Line (APL) population was retained at the earlier level.The number of BPL families was increased in the official records with effect from December 1, 2000, by shifting the base from the earlier population projection of 1995 to the population projections of the Registrar General as on March 1, 2000. This change has resulted in raising the number of BPL families to 652.03 lakhs as against 596.23 lakhs originally estimated when the TPDS was introduced in June 1997. The increased level of allocation of food-grains for BPL category is about 147 lakh tonnes per annum.
In order to reduce the excess stocks lying with the Food Corporation of India, the Government initiated the following measures under the TPDS with effect from July 12, 2001:
The BPL allocation of food grains was increased from 20 kgs. to 25 kgs. Per family per month with effect from July 2001 and the issue price for BPL families was fixed at Rs. 4.15 per kg. of wheat and Rs. 5.65 per kg. of rice.
Reference : B.Udhayakumar
Ignou material
Public Distribution System
Public Distribution System
OBJECTIVES
The PDS is a major State intervention in the country aimed at ensuring food security to all the people, especially the poor. The PDS operates through a large distribution network of around 4.99 lakh fair price shops (FPS), and is supplemental in nature. Under the PDS, the Central Government is responsible for the procurement and transportation of foodgrains up to the principal distribution centres of the FCI while the State Governments are responsible for the identification of families living below the poverty line, the issue of ration cards, and the distribution of foodgrains to the vulnerable sections through FPSs. PDS seems to have failed in serving the second objective of making foodgrains available to the poor. If it had, the consumption levels of cereals should not have fallen on averageas it has consistently over the last two decades.
With a view to improving its efficiency, the PDS was redesigned as TDPS with effect from June 1997. The TPDS envisages identifying the poor households and giving them a fixed entitlement of foodgrains at subsidized prices. Under the TPDS, higher rates of subsidies are being given to the poor and the poorest among the poor. The APL families are also being given foodgrains under TPDS but with lower subsidy. The scale of issue under TDPS for Antyodaya cardholders began with 10 kg per family per month, which has been progressively increased to 35 kg per family per month with effect from April 2002.
FUNCTIONINIG
Both the central and state governments shared the responsibility of regulating the PDS. While the central government is responsible for procurement, storage, transportation, and bulk allocation of food grains, state governments hold the responsibility for distributing the same to the consumers through the established network of Fair Price Shops (FPSs). State governments are also responsible for operational responsibilities including allocation and identification of families below poverty line, issue of ration cards, supervision and monitoring the functioning of FPSs.Under PDS scheme, each family below the poverty line is eligible for 35kg of rice or wheat every month, while a household above the poverty line is entitled to 15kg of foodgrain on a monthly basis.
A BPL card holder should be given 35kg of foodgrain and the card holder above BPL should be given 15kg of food grain as per the norms of PDS. However, there are concerns about the efficiency of the distribution process.
Public distribution shop
A public distribution shop also known as Fair Price Shop (FPS), part of India's Public Distribution System established by Government of India, is a kind of shop in India which is used to distribute rations at a subsidized price to the poor. As of date there are about 4.99 lakh Fair Price Shops (FPS) across India.
Locally these are known as "ration shop" and chiefly sell wheat, rice, kerosene and sugar at a price lower than the market price. However, other essential commodities may also be sold. These are also called Fair Price Shops. For buying items from this shop one must have a ration card. These shops are operated throughout the country by joint assistance of central and state government. No doubt the item from these shops are much cheaper but are of poor quality. Ration shops are now present in most localities, villages towns and cities. India has 478,000 shops constituting the largest distribution network in the world.
The introduction of rationing in India dates back to the 1940s Bengal famine.this rationing system was revived in the wake of acute food shortage during the early 1960s, prior to the Green Revolution.
LIMITATIONS
Major Deficiencies of TPDS
* As identified by various studies, the major deficiencies of the TPDS include:
* High exclusion and inclusion errors,
* Non-viability of FPSs,
* Failure in fulfilling the price stabilization objective, and
* Leakages.
(I) HIGH EXCLUSION AND INCLUSION ERRORS
The Programme Evaluation Organizations (PEOs) Study (2005) establishes large-scale exclusion and inclusion errors in most States.It also questions the BPL methodology used for identification of households at State level. There are two problems here. One is the criterion used for allocation of foodgrains by the Central Government to States. The Central Government allocates foodgrains to States based on a narrow official poverty line. There is a need to look at this allocation criterion to States. If we go by the official poverty ratio criterion, only 28% of the population is eligible under PDS at all-India level in 200405. However, food-insecure households may be much higher than the official poverty ratios. For example, undernutrition among children and households is much higher than this figure. The use of BPL estimates to determine Central allocations should be revisited because there is a significant mass of households just above the poverty line.
A second problem is the use of BPL method for identifying households by the States. This identification differs from State to State. For example, some of the south Indian States do not follow the official poverty ratio for limiting the ration cards. In Andhra Pradesh, more than 70% of the households have ration cards. This is one of the reasons for high inclusion errors in Andhra Pradesh.
(II) VIABILITY OF FPSs
An important institutional concern is that of the economic viability of FPSs, which appears to have been badly affected by the exclusion of APL population from the PDS (which happened after PDS became TPDS in 1997). The virtual exclusion of the APL population has led to a big decline in offtake. With fewer ration cards to serve, lower turnover, and upper bounds on the margins that can be charged to BPL consumers, the net profits of FPS owners and dealers are lower under the TPDS than before. Since there are economies of scale here, for instance, with respect to transport, the distribution of smaller quantities is likely to make many shops unviable. When FPSs are economically viable, there are fewer incentives to cheat.
Some of the steps suggested by the High-level Committee (HLC) on Long Term Grain Policy to revive the retail network were the following:
Relax restriction on eligibility to be a licensed FPS;
make NGOs and village-level retailers eligible toundertake licensed PDS distribution, and in particular, encourage women;
remove restrictions on the range of commodities that can be sold in a FPS
allow registered associations of FPS dealers to purchase the grain allocated directly from the FCI.
(III) REGIONAL ALLOCATION AND PRICE STABILIZATION OBJECTIVE
One of the objectives of the PDS has always been to ensure price stabilization in the country by transferring grain from cereals-surplus to cereals deficit regions. Targeted PDS has reduced the effectiveness of this objective. This is because under TPDS, the demand for cereals is no longer determined by State Governments (based on their requirements and in practical terms on past utilization) but on allocations decided by the Central Government (based on poverty estimates prepared by the Planning Commission). The new system of allocation, as pointed out by the HLC, has led to imbalances between actual allocations and allocations necessary to meet the difference between cereals production and requirement.
(IV) LEAKAGES AND DIVERSION
Undoubtedly, in many parts of India, the current system of delivery has weaknesses resulting in leakages at different stages. As the Programme Evaluation Organization, PEO Study (2005) points out, the share of leakages in offtake from the Central Pool is abnormally high, except in the States of West Bengal and Tamil Nadu. Further, in terms of leakages through ghost BPL cards, there are fewer problems in Andhra Pradesh, Haryana, Kerala, Punjab, Rajasthan and Tamil Nadu than in other States. At the FPS level, leakages were found to be high in Bihar, Punjab, and Haryana.
The study goes on to identify the factors associated with relatively low leakages at the FPS level and concludes that general awareness of the beneficiaries, high literacy and strong grass root-level organizations (particularly PRIs) have helped States like West Bengal and Himachal Pradesh in minimising FPS level leakage, while in the case of Tamil Nadu, it is the elimination of private retail outlets. It has been documented that strong political commitment and careful monitoring by the bureaucracy are the key elements of the success of PDS in Tamil Nadu.
Leakages cannot be lowered by finer targeting using official poverty criterion. They require political commitment and participation of the people in the delivery process. The nexus between officials, the mafia, and ration shop dealers must be broken in order to reduce leakages. Monitoring and accountability of TPDS (food security watch) should be improved in a significant way. The TPDS needs to be strengthened by means of the effective use of IT including introduction of a unique ID-based smart card system.
Coverage of Commodities Supplied through TPDS
If nutrition security is one of the considerations of TPDS, the government may explore the possibility of including more commodities under TPDS. For example, cereals such as jowar, bajra, and also pulses could be introduced in TPDS because of nutritional considerations. The consumption of pulses is low for the poor. Operational details of supplying these commodities, particularly, pulses have to be worked out. It is true that presently the country has a shortage of these commodities. However, the introduction of these commodities may encourage production of these crops especially in dry land areas. The National Food Security Mission has identified pulses as an area of focus.
Performance Evaluation of TPDS
* Only 22.7% FPSs are viable in terms of earning a return of 12% on capital.
* The offtake by APL cardholders was negligible except in Himachal Pradesh, Tamil Nadu, and West Bengal.
* The offtake per BPL card was high in WB, Kerala, Himachal Pradesh, and Tamil Nadu.
* The offtake by the poor under TPDS was substantially higher than under universal PDS.
* There are large errors of exclusion and inclusion and ghost cards are common.
* High exclusion errors mean a low coverage of BPL households. The survey estimated that TPDS covers only 57% BPLfamilies.
* Errors of inclusion are high in Andhra Pradesh, Karnataka, and Tamil Nadu. This implies that the APL households receive
* An unacceptably large proportion of subsidized grains.
* Leakages vary enormously between States. In Bihar and Punjab, the total leakage exceeds 75% while in Haryana and UP, it is between 50 and 75%.
* Leakage and diversion imply a low share of the genuine BPL households of the distribution of the subsidized grains.
* During 200304, it is estimated that out of 14.1 million tonnes of BPL quota from the Central Pool, only 6.1 million tonnes reached the BPL families and 8 million tonnes did not reach the target families.
* Leakage and diversion raised the cost of delivery. For every 1 kg that was delivered to the poor, GoI had to issue 2.32 kg from the Central Pool.
* During 200304, out of an estimated subsidy of Rs 7258 crore under TPDS, Rs 4123 crore did not reach BPL families.
* Moreover, Rs 2579 crore did not reach any consumer but was shared by agencies involved in the supply chain.
Fallouts of P.D.S.
* The Public Distribution System of India is not without its defects. With a coverage of around 40 crore BPL(Below Poverty Line) families, a review of the PDS has discovered the following structural shortcomings and disturbances:
* Growing instances of the consumers receiving inferior quality food grains in ration shops.
* Deceitful dealers replace good supplies received from the F.C.I (Food Corporation of India) with inferior stock and sell FCI stock in the black market.
* Illicit fair price shop owners have been found to create large number of bogus cards to sell food grains in the open market.
* Many FPS dealers resort to malpractice, illegal diversions of commodities, hoarding and black marketing due to the minimal salary received by them.
* Numerous malpractices make safe and nutritious food inaccessible and unaffordable to many poor thus resulting in their food insecurity.
REVAMPING
The GoI has taken following measures to strengthen TPDS and check diversion of foodgrains meant for TPDS:
CITIZENS CHARTER
A Citizens Charter has been issued in November 1997 for adoption by the State Governments to provide services in a transparent and accountable manner under PDS. Instructions have been issued for involvement of PRIs in identifications of BPL families and in Vigilance Committee.
PDS (CONTROL) ORDER, 2001
The Order, inter alia, covers a range of areas relating to correct identification of BPL families, issue of ration cards, proper distribution, and monitoring of PDS-related operations. Contraventions of the provisions of the Order are punishable under the Essential Commodities Act, 1955.
Clearly, these do not seem to have had much impact, since the NSSO estimates of 2006 suggest that the extent of leakage and diversion of grain has only increased.
In addition, a number of Plan Schemes have been introduced.
(I) CONSTRUCTION OF GODOWNS
The Scheme was conceived during the Fifth Five Year Plan to build and increase the storage capacity available with FCI for storage of foodgrains.
(II) INTEGRATED INFORMATION SYSTEM FOR FOODGRAINS MANAGEMENT (IISFM)
The main objective of the IISFM project in the FCI, initiated in 200304, is to put in place an online MIS that would give the stock position in any depot at any given point of time.
(III) STRENGTHENING OF PDS
Food Credit Cards/Computerization of PDS Operations
A new scheme Computerization of PDS Operations with a token provision of Rs 5 crore was introduced in 200607. The computerization of PDS operations would be an improvement on the existing system of ration cards, that is, the present manual system of making entries, etc. The new system will have personal details of all members of the family including their entitlement and the entire network of PDS from taluk to State level will be linked. With this kind of system in place, the objectives of Food Credit Card Scheme of checking diversion of foodgrains and eliminating the problem of bogus ration cards are expected to be met.
Curbing Leakages/Diversion of Foodgrains Meant for TPDS
This is a new scheme introduced during the Eleventh Five Year Plan to strengthen the PDS. The scheme aims at taking effective measures to curb diversion and leakages through Global Positioning System, Radio Frequency Identification Device, etc.
Eleventh Five Year Plan Generating Awareness amongst TPDS Beneficiaries about their Entitlement and Redressal Mechanism and Monitoring
A mass awareness campaign on the rights and entitlements of TPDS beneficiaries is proposed through newspaper advertisements, bill boards, posters, printing of annual calendar on the themes of TPDS, and audio-visual publicity measures such as short spots/quickies, audio jingles/radio spots, TV serials/documentaries.
Training and Awareness of Negotiable Warehouse Receipt System
This is a new scheme for the Eleventh Five Year Plan. The warehousing receipts at present do not enjoy the fiduciary trust of depositors and banks, as there is fear of not being able to recover the loans in events such as fraud or mismanagement on behalf of the warehouse or insolvency of depositor. The legal remedies are also time consuming and inadequate. In this context, it is proposed to develop a negotiable warehouse receipt system for commodities including agricultural commodities. The negotiable warehouse receipt system will result in increase in the liquidity in the rural areas, encouragement of scientific warehousing of goods, lower cost of financing, etc.
(IV) VILLAGE GRAIN BANK SCHEME
The Village Grain Bank Scheme, which was hitherto with the Ministry of Tribal Affairs, has been transferred to the Department of Food and Public Distribution. The objective of the scheme is to establish Grain Banks in chronically food-scarce area and to provide safeguard against starvation during the lean period. The scheme is also to mitigate drought induced migration and food shortages by making foodgrains available within the village during such calamities. During 200607, there was a budget provision of Rs 50 crore for setting up 8591 Village Grain Banks in food-scarce areas.
(V) AADHAR
Identification of households to be denoted status and distribution to granted PDS services has been highly irregular and diverse in various states. The recent development of Aadhar UIDAI cards has taken up the challenge of solving the problem of identification and distribution of PDs services along with Direct Cash Transfers.
Further Innovations Needed to Strengthen TPDS and the Way Forward
One of the long-standing criticisms of the TPDS has been that offtake of PDS cereals (rice and wheat) by States from FCI does not match with NSS estimates of PDS consumption of those same grains (as we noted earlier). The difference between the two shows the extent of leakage of PDS wheat and rice. This leakage was 28% for wheat and rice together in 199394, but it had risen to 54% by 200405a very significant increase in leakage. These facts clearly show that TPDS is in urgent need of reform.
These facts are further underlined by Annexure 4.1.4, which demonstrates the massive leakage of the fiscal subsidy to the non-poor on the one hand and the ineffective targeting of the poor by the cardholder-based TPDS system.
Annexure 4.1.5 drives home the point about the poor targeting by TPDS benefits. It estimates the benefits in rupees per household of PDS grain beneficiaries [calculated as PDS quantity consumed* (PDS PriceAverage Market Price)]. It shows that the benefits to the household are dependent upon whether you have a card or not (and which card you have APL, BPL, or Antyodaya), and not on whether you are poor or non-poor. In fact, it demonstrates that there is very little difference between the benefits (in Rs/household) of poor and non-poor households when one compares poor BPL cardholders with nonpoor BPL cardholders, or when comparing poor AAY cardholders with non-poor AAY cardholders.
Other Measures Needed to Reform
INTRODUCTION OF FOOD STAMPS
If markets are integrated, food stamps system may be introduced, which is supposed to be more effective than the present system. On food stamps/ coupons, the HLC has observed as follows: In the long run, as markets get better in tegrated, the PDS function need not remain restricted to designated FPS and a food coupon system valid even outside PDS outlets may become possible. Food coupons may allow wider choice of consumers in terms of commodities and outlets. In the Committees view, this is a course which should be followed with considerable caution in view of the experience of other countries, and the possibility of counterfeiting. However, the more important reason food stamps have not been successful elsewhere has been the erosion in the value of the coupons where it was fixed in nominal terms. If the coupon system is to succeed the PDS suggested above, the value of the coupon should be indexed to food inflation. The coupon system should not lead to a dilution of the Central Government commitment to food security.
Way Forward
NSS 61st Round enables an assessment of how effectively PDS and other food based schemes such as MDM, ICDS, and Food for Work are able to reach the poor. This shows that in more self-selecting schemes such as MDM, ICDS, and Food for Work, the total number of beneficiaries is similar to the number currently benefiting BPL or AAY status and indeed these self-targeted schemes are somewhat better reaching the poor than the assignment of BPL cards. Thus the leakages of physical grain could be reduced without greater fiscal cost and with somewhat better targeting towards the poor by redirecting subsidies currently in the PDS to better funding of the other schemes (i.e. the MDM, the ICDS).
However, a one-size-fits-all approach to food and nutrition management is mistaken. As there are large differences in the efficiency of implementation of the PDS among the States, it may be
desirable to introduce State-specific designs and implementation strategies rather than continuing
with a uniform design. Separate designs and implementation strategies may be thought of for areas with high concentration of the poor.
Since some distinction needs to remain between the poor and non-poor, the nature of exclusion/ inclusion errors suggests that it is much better to define poor for PDS purposes as much larger than current Planning Commission estimates of the number of poor, and exclude altogether the residual non-poor. If the current allocation of 35 kg per household per month continues, the present PDS offtake (rice + wheat) of about 40 million tones would meet PDS requirements of nearly 10 crore households, that is, roughly 60% more households than those defined to be poor by current official poverty estimates.
The effectiveness of the system can also be improved by better management with the help of IT. Computerization of PDS operations and introduction of a unique ID-based Smart Card System would help in addressing the issues related to bogus ration cards, diversion of foodgrains, etc. The Eleventh Plan will therefore focus on improving the delivery mechanisms and the monitoring arrangements based on IT.
There is also a need to make concerted efforts for minimizing the operational costs of the FCI from the present high levels through better management practices so that major part of the food subsidy actually accrues to the beneficiaries.
Attention should also be given to streamlining and standardizing the State level taxes on procurement of foodgrains. Decentralized procurement will be further encouraged and extended to other States with potential for procurement. It is also necessary to strengthen both domestic and international trade in foodgrains by means of appropriate changes in trade policies.
Neeraj Gaur
This a copy paste work from 11th fyp document. There is no info in the 12th fyp document but 11th fyp gave a good description. Coincidentally UPSC syllabus happens to be in the same flow as the article is in the document. I have deleted the old data since it is useless. This deserves no appreciation, its a shameless copy paste but probably the best description of PDS, far better than Wikipedia.
OBJECTIVES
The PDS is a major State intervention in the country aimed at ensuring food security to all the people, especially the poor. The PDS operates through a large distribution network of around 4.99 lakh fair price shops (FPS), and is supplemental in nature. Under the PDS, the Central Government is responsible for the procurement and transportation of foodgrains up to the principal distribution centres of the FCI while the State Governments are responsible for the identification of families living below the poverty line, the issue of ration cards, and the distribution of foodgrains to the vulnerable sections through FPSs. PDS seems to have failed in serving the second objective of making foodgrains available to the poor. If it had, the consumption levels of cereals should not have fallen on averageas it has consistently over the last two decades.
With a view to improving its efficiency, the PDS was redesigned as TDPS with effect from June 1997. The TPDS envisages identifying the poor households and giving them a fixed entitlement of foodgrains at subsidized prices. Under the TPDS, higher rates of subsidies are being given to the poor and the poorest among the poor. The APL families are also being given foodgrains under TPDS but with lower subsidy. The scale of issue under TDPS for Antyodaya cardholders began with 10 kg per family per month, which has been progressively increased to 35 kg per family per month with effect from April 2002.
FUNCTIONINIG
Both the central and state governments shared the responsibility of regulating the PDS. While the central government is responsible for procurement, storage, transportation, and bulk allocation of food grains, state governments hold the responsibility for distributing the same to the consumers through the established network of Fair Price Shops (FPSs). State governments are also responsible for operational responsibilities including allocation and identification of families below poverty line, issue of ration cards, supervision and monitoring the functioning of FPSs.Under PDS scheme, each family below the poverty line is eligible for 35kg of rice or wheat every month, while a household above the poverty line is entitled to 15kg of foodgrain on a monthly basis.
A BPL card holder should be given 35kg of foodgrain and the card holder above BPL should be given 15kg of food grain as per the norms of PDS. However, there are concerns about the efficiency of the distribution process.
Public distribution shop
A public distribution shop also known as Fair Price Shop (FPS), part of India's Public Distribution System established by Government of India, is a kind of shop in India which is used to distribute rations at a subsidized price to the poor. As of date there are about 4.99 lakh Fair Price Shops (FPS) across India.
Locally these are known as "ration shop" and chiefly sell wheat, rice, kerosene and sugar at a price lower than the market price. However, other essential commodities may also be sold. These are also called Fair Price Shops. For buying items from this shop one must have a ration card. These shops are operated throughout the country by joint assistance of central and state government. No doubt the item from these shops are much cheaper but are of poor quality. Ration shops are now present in most localities, villages towns and cities. India has 478,000 shops constituting the largest distribution network in the world.
The introduction of rationing in India dates back to the 1940s Bengal famine.this rationing system was revived in the wake of acute food shortage during the early 1960s, prior to the Green Revolution.
LIMITATIONS
Major Deficiencies of TPDS
* As identified by various studies, the major deficiencies of the TPDS include:
* High exclusion and inclusion errors,
* Non-viability of FPSs,
* Failure in fulfilling the price stabilization objective, and
* Leakages.
(I) HIGH EXCLUSION AND INCLUSION ERRORS
The Programme Evaluation Organizations (PEOs) Study (2005) establishes large-scale exclusion and inclusion errors in most States.It also questions the BPL methodology used for identification of households at State level. There are two problems here. One is the criterion used for allocation of foodgrains by the Central Government to States. The Central Government allocates foodgrains to States based on a narrow official poverty line. There is a need to look at this allocation criterion to States. If we go by the official poverty ratio criterion, only 28% of the population is eligible under PDS at all-India level in 200405. However, food-insecure households may be much higher than the official poverty ratios. For example, undernutrition among children and households is much higher than this figure. The use of BPL estimates to determine Central allocations should be revisited because there is a significant mass of households just above the poverty line.
A second problem is the use of BPL method for identifying households by the States. This identification differs from State to State. For example, some of the south Indian States do not follow the official poverty ratio for limiting the ration cards. In Andhra Pradesh, more than 70% of the households have ration cards. This is one of the reasons for high inclusion errors in Andhra Pradesh.
(II) VIABILITY OF FPSs
An important institutional concern is that of the economic viability of FPSs, which appears to have been badly affected by the exclusion of APL population from the PDS (which happened after PDS became TPDS in 1997). The virtual exclusion of the APL population has led to a big decline in offtake. With fewer ration cards to serve, lower turnover, and upper bounds on the margins that can be charged to BPL consumers, the net profits of FPS owners and dealers are lower under the TPDS than before. Since there are economies of scale here, for instance, with respect to transport, the distribution of smaller quantities is likely to make many shops unviable. When FPSs are economically viable, there are fewer incentives to cheat.
Some of the steps suggested by the High-level Committee (HLC) on Long Term Grain Policy to revive the retail network were the following:
Relax restriction on eligibility to be a licensed FPS;
make NGOs and village-level retailers eligible toundertake licensed PDS distribution, and in particular, encourage women;
remove restrictions on the range of commodities that can be sold in a FPS
allow registered associations of FPS dealers to purchase the grain allocated directly from the FCI.
(III) REGIONAL ALLOCATION AND PRICE STABILIZATION OBJECTIVE
One of the objectives of the PDS has always been to ensure price stabilization in the country by transferring grain from cereals-surplus to cereals deficit regions. Targeted PDS has reduced the effectiveness of this objective. This is because under TPDS, the demand for cereals is no longer determined by State Governments (based on their requirements and in practical terms on past utilization) but on allocations decided by the Central Government (based on poverty estimates prepared by the Planning Commission). The new system of allocation, as pointed out by the HLC, has led to imbalances between actual allocations and allocations necessary to meet the difference between cereals production and requirement.
(IV) LEAKAGES AND DIVERSION
Undoubtedly, in many parts of India, the current system of delivery has weaknesses resulting in leakages at different stages. As the Programme Evaluation Organization, PEO Study (2005) points out, the share of leakages in offtake from the Central Pool is abnormally high, except in the States of West Bengal and Tamil Nadu. Further, in terms of leakages through ghost BPL cards, there are fewer problems in Andhra Pradesh, Haryana, Kerala, Punjab, Rajasthan and Tamil Nadu than in other States. At the FPS level, leakages were found to be high in Bihar, Punjab, and Haryana.
The study goes on to identify the factors associated with relatively low leakages at the FPS level and concludes that general awareness of the beneficiaries, high literacy and strong grass root-level organizations (particularly PRIs) have helped States like West Bengal and Himachal Pradesh in minimising FPS level leakage, while in the case of Tamil Nadu, it is the elimination of private retail outlets. It has been documented that strong political commitment and careful monitoring by the bureaucracy are the key elements of the success of PDS in Tamil Nadu.
Leakages cannot be lowered by finer targeting using official poverty criterion. They require political commitment and participation of the people in the delivery process. The nexus between officials, the mafia, and ration shop dealers must be broken in order to reduce leakages. Monitoring and accountability of TPDS (food security watch) should be improved in a significant way. The TPDS needs to be strengthened by means of the effective use of IT including introduction of a unique ID-based smart card system.
Coverage of Commodities Supplied through TPDS
If nutrition security is one of the considerations of TPDS, the government may explore the possibility of including more commodities under TPDS. For example, cereals such as jowar, bajra, and also pulses could be introduced in TPDS because of nutritional considerations. The consumption of pulses is low for the poor. Operational details of supplying these commodities, particularly, pulses have to be worked out. It is true that presently the country has a shortage of these commodities. However, the introduction of these commodities may encourage production of these crops especially in dry land areas. The National Food Security Mission has identified pulses as an area of focus.
Performance Evaluation of TPDS
* Only 22.7% FPSs are viable in terms of earning a return of 12% on capital.
* The offtake by APL cardholders was negligible except in Himachal Pradesh, Tamil Nadu, and West Bengal.
* The offtake per BPL card was high in WB, Kerala, Himachal Pradesh, and Tamil Nadu.
* The offtake by the poor under TPDS was substantially higher than under universal PDS.
* There are large errors of exclusion and inclusion and ghost cards are common.
* High exclusion errors mean a low coverage of BPL households. The survey estimated that TPDS covers only 57% BPLfamilies.
* Errors of inclusion are high in Andhra Pradesh, Karnataka, and Tamil Nadu. This implies that the APL households receive
* An unacceptably large proportion of subsidized grains.
* Leakages vary enormously between States. In Bihar and Punjab, the total leakage exceeds 75% while in Haryana and UP, it is between 50 and 75%.
* Leakage and diversion imply a low share of the genuine BPL households of the distribution of the subsidized grains.
* During 200304, it is estimated that out of 14.1 million tonnes of BPL quota from the Central Pool, only 6.1 million tonnes reached the BPL families and 8 million tonnes did not reach the target families.
* Leakage and diversion raised the cost of delivery. For every 1 kg that was delivered to the poor, GoI had to issue 2.32 kg from the Central Pool.
* During 200304, out of an estimated subsidy of Rs 7258 crore under TPDS, Rs 4123 crore did not reach BPL families.
* Moreover, Rs 2579 crore did not reach any consumer but was shared by agencies involved in the supply chain.
Fallouts of P.D.S.
* The Public Distribution System of India is not without its defects. With a coverage of around 40 crore BPL(Below Poverty Line) families, a review of the PDS has discovered the following structural shortcomings and disturbances:
* Growing instances of the consumers receiving inferior quality food grains in ration shops.
* Deceitful dealers replace good supplies received from the F.C.I (Food Corporation of India) with inferior stock and sell FCI stock in the black market.
* Illicit fair price shop owners have been found to create large number of bogus cards to sell food grains in the open market.
* Many FPS dealers resort to malpractice, illegal diversions of commodities, hoarding and black marketing due to the minimal salary received by them.
* Numerous malpractices make safe and nutritious food inaccessible and unaffordable to many poor thus resulting in their food insecurity.
REVAMPING
The GoI has taken following measures to strengthen TPDS and check diversion of foodgrains meant for TPDS:
CITIZENS CHARTER
A Citizens Charter has been issued in November 1997 for adoption by the State Governments to provide services in a transparent and accountable manner under PDS. Instructions have been issued for involvement of PRIs in identifications of BPL families and in Vigilance Committee.
PDS (CONTROL) ORDER, 2001
The Order, inter alia, covers a range of areas relating to correct identification of BPL families, issue of ration cards, proper distribution, and monitoring of PDS-related operations. Contraventions of the provisions of the Order are punishable under the Essential Commodities Act, 1955.
Clearly, these do not seem to have had much impact, since the NSSO estimates of 2006 suggest that the extent of leakage and diversion of grain has only increased.
In addition, a number of Plan Schemes have been introduced.
(I) CONSTRUCTION OF GODOWNS
The Scheme was conceived during the Fifth Five Year Plan to build and increase the storage capacity available with FCI for storage of foodgrains.
(II) INTEGRATED INFORMATION SYSTEM FOR FOODGRAINS MANAGEMENT (IISFM)
The main objective of the IISFM project in the FCI, initiated in 200304, is to put in place an online MIS that would give the stock position in any depot at any given point of time.
(III) STRENGTHENING OF PDS
Food Credit Cards/Computerization of PDS Operations
A new scheme Computerization of PDS Operations with a token provision of Rs 5 crore was introduced in 200607. The computerization of PDS operations would be an improvement on the existing system of ration cards, that is, the present manual system of making entries, etc. The new system will have personal details of all members of the family including their entitlement and the entire network of PDS from taluk to State level will be linked. With this kind of system in place, the objectives of Food Credit Card Scheme of checking diversion of foodgrains and eliminating the problem of bogus ration cards are expected to be met.
Curbing Leakages/Diversion of Foodgrains Meant for TPDS
This is a new scheme introduced during the Eleventh Five Year Plan to strengthen the PDS. The scheme aims at taking effective measures to curb diversion and leakages through Global Positioning System, Radio Frequency Identification Device, etc.
Eleventh Five Year Plan Generating Awareness amongst TPDS Beneficiaries about their Entitlement and Redressal Mechanism and Monitoring
A mass awareness campaign on the rights and entitlements of TPDS beneficiaries is proposed through newspaper advertisements, bill boards, posters, printing of annual calendar on the themes of TPDS, and audio-visual publicity measures such as short spots/quickies, audio jingles/radio spots, TV serials/documentaries.
Training and Awareness of Negotiable Warehouse Receipt System
This is a new scheme for the Eleventh Five Year Plan. The warehousing receipts at present do not enjoy the fiduciary trust of depositors and banks, as there is fear of not being able to recover the loans in events such as fraud or mismanagement on behalf of the warehouse or insolvency of depositor. The legal remedies are also time consuming and inadequate. In this context, it is proposed to develop a negotiable warehouse receipt system for commodities including agricultural commodities. The negotiable warehouse receipt system will result in increase in the liquidity in the rural areas, encouragement of scientific warehousing of goods, lower cost of financing, etc.
(IV) VILLAGE GRAIN BANK SCHEME
The Village Grain Bank Scheme, which was hitherto with the Ministry of Tribal Affairs, has been transferred to the Department of Food and Public Distribution. The objective of the scheme is to establish Grain Banks in chronically food-scarce area and to provide safeguard against starvation during the lean period. The scheme is also to mitigate drought induced migration and food shortages by making foodgrains available within the village during such calamities. During 200607, there was a budget provision of Rs 50 crore for setting up 8591 Village Grain Banks in food-scarce areas.
(V) AADHAR
Identification of households to be denoted status and distribution to granted PDS services has been highly irregular and diverse in various states. The recent development of Aadhar UIDAI cards has taken up the challenge of solving the problem of identification and distribution of PDs services along with Direct Cash Transfers.
Further Innovations Needed to Strengthen TPDS and the Way Forward
One of the long-standing criticisms of the TPDS has been that offtake of PDS cereals (rice and wheat) by States from FCI does not match with NSS estimates of PDS consumption of those same grains (as we noted earlier). The difference between the two shows the extent of leakage of PDS wheat and rice. This leakage was 28% for wheat and rice together in 199394, but it had risen to 54% by 200405a very significant increase in leakage. These facts clearly show that TPDS is in urgent need of reform.
These facts are further underlined by Annexure 4.1.4, which demonstrates the massive leakage of the fiscal subsidy to the non-poor on the one hand and the ineffective targeting of the poor by the cardholder-based TPDS system.
Annexure 4.1.5 drives home the point about the poor targeting by TPDS benefits. It estimates the benefits in rupees per household of PDS grain beneficiaries [calculated as PDS quantity consumed* (PDS PriceAverage Market Price)]. It shows that the benefits to the household are dependent upon whether you have a card or not (and which card you have APL, BPL, or Antyodaya), and not on whether you are poor or non-poor. In fact, it demonstrates that there is very little difference between the benefits (in Rs/household) of poor and non-poor households when one compares poor BPL cardholders with nonpoor BPL cardholders, or when comparing poor AAY cardholders with non-poor AAY cardholders.
Other Measures Needed to Reform
INTRODUCTION OF FOOD STAMPS
If markets are integrated, food stamps system may be introduced, which is supposed to be more effective than the present system. On food stamps/ coupons, the HLC has observed as follows: In the long run, as markets get better in tegrated, the PDS function need not remain restricted to designated FPS and a food coupon system valid even outside PDS outlets may become possible. Food coupons may allow wider choice of consumers in terms of commodities and outlets. In the Committees view, this is a course which should be followed with considerable caution in view of the experience of other countries, and the possibility of counterfeiting. However, the more important reason food stamps have not been successful elsewhere has been the erosion in the value of the coupons where it was fixed in nominal terms. If the coupon system is to succeed the PDS suggested above, the value of the coupon should be indexed to food inflation. The coupon system should not lead to a dilution of the Central Government commitment to food security.
Way Forward
NSS 61st Round enables an assessment of how effectively PDS and other food based schemes such as MDM, ICDS, and Food for Work are able to reach the poor. This shows that in more self-selecting schemes such as MDM, ICDS, and Food for Work, the total number of beneficiaries is similar to the number currently benefiting BPL or AAY status and indeed these self-targeted schemes are somewhat better reaching the poor than the assignment of BPL cards. Thus the leakages of physical grain could be reduced without greater fiscal cost and with somewhat better targeting towards the poor by redirecting subsidies currently in the PDS to better funding of the other schemes (i.e. the MDM, the ICDS).
However, a one-size-fits-all approach to food and nutrition management is mistaken. As there are large differences in the efficiency of implementation of the PDS among the States, it may be
desirable to introduce State-specific designs and implementation strategies rather than continuing
with a uniform design. Separate designs and implementation strategies may be thought of for areas with high concentration of the poor.
Since some distinction needs to remain between the poor and non-poor, the nature of exclusion/ inclusion errors suggests that it is much better to define poor for PDS purposes as much larger than current Planning Commission estimates of the number of poor, and exclude altogether the residual non-poor. If the current allocation of 35 kg per household per month continues, the present PDS offtake (rice + wheat) of about 40 million tones would meet PDS requirements of nearly 10 crore households, that is, roughly 60% more households than those defined to be poor by current official poverty estimates.
The effectiveness of the system can also be improved by better management with the help of IT. Computerization of PDS operations and introduction of a unique ID-based Smart Card System would help in addressing the issues related to bogus ration cards, diversion of foodgrains, etc. The Eleventh Plan will therefore focus on improving the delivery mechanisms and the monitoring arrangements based on IT.
There is also a need to make concerted efforts for minimizing the operational costs of the FCI from the present high levels through better management practices so that major part of the food subsidy actually accrues to the beneficiaries.
Attention should also be given to streamlining and standardizing the State level taxes on procurement of foodgrains. Decentralized procurement will be further encouraged and extended to other States with potential for procurement. It is also necessary to strengthen both domestic and international trade in foodgrains by means of appropriate changes in trade policies.
Neeraj Gaur
This a copy paste work from 11th fyp document. There is no info in the 12th fyp document but 11th fyp gave a good description. Coincidentally UPSC syllabus happens to be in the same flow as the article is in the document. I have deleted the old data since it is useless. This deserves no appreciation, its a shameless copy paste but probably the best description of PDS, far better than Wikipedia.
PUBLIC DISTRIBUTION SYSTEM
India had built the largest, though not necessarily the strongest, PDS in the world. Public Distribution System (PDS) hailed as a means of distribution of essential commodities to a large number of people forms an important constituent of the strategy for poverty eradication and intends to serve the undernourished. With a network of more than 400,000 Fair Price Shops (FPS), the Public Distribution System (PDS) in India is perhaps the largest distribution machinery of its type in the world. PDS is said to distribute each year commodities worth more than Rs 15,000 crore to about 16 crore families. This huge network can play a more meaningful role if only the system is able to translate into micro level a macro level self-sufficiency by ensuring availability of food grains for the poor households.
Why an priority issue -
1. Decline in purchasing power of poor because of structural imbalances in the economy:
2. Rising capital intensity,
3. lack of land reforms,
4. failure of poverty alleviation programmes,
5. growing disparity between towns and villages, and like that.
1. production problems in less endowed regions,
1. Huge pile-up inside Food Corporation of Indias (FCI) godowns,
1. If consumption of the poor does not increase there would be serious demand constraints on agriculture and could make the growth target of 4.5% per annum unachievable.
Implementation of TPDS
As per the mandate of PDS, the Union Government is responsible for the procurement, transportation and bulk allocation of food grains whereas the State government looks after the allocation, identification of Below Poverty Line (BPL) families and issue of ration cards, as well as monitoring the distribution process. Off late, the Gram panchayats have also been involved to improve the functioning of PDS to verify the entries of items of PDS made in the stock registers of the fair price shops of the State Food and Supplies Department. But in the whole set up of overlapping responsibilities, PDS is no ones baby. It has been left to operate on the whims and fancies of the depot holders; and with the lack of awareness and empowerment within the community, the situation is further deteriorated.
CRITICISM OF PDS
PDS was criticised on a wide front:
1. its failure to serve the population Below Poverty Line (BPL),
2. for its perceived urban bias,
3. negligible coverage in States with a high density of rural poor and
4. lack of transparent and accountable arrangements for delivery.
EFFECT
Given that backdrop, the Government acted to streamline PDS during the Ninth Five Year Plan period by issuing special cards to BPL families and selling to them foodgrains through PDS outlets at specially subsidised prices (with effect from June, 1997).
TARGETED PDS
Under the new Targeted Public Distribution System (TPDS)
* A BPL card holder should be given 35kg of foodgrain and the card holder above BPL should be given 15kg of food grain as per the norms of PDS.
* This is likely to benefit about six crore poor families, to whom a quantity of about 72 lakh tonnes of food grains per year is earmarked.
BENEFICIARIES
* The identification of the beneficiaries is done by the States, based on state-wise poverty estimates of the Planning Commission.
* The thrust is to limit the benefit to the truly poor and vulnerable sections:
* landless agricultural labourers,
* marginal farmers,
* Rural artisans/craftsmen,
* potters, tappers,
* weavers,
* blacksmiths,
* carpenters in the rural areas;
* similarly those covered by TPDS in urban areas are - slum dwellers and
* people earning livelihood on a daily basis in the informal sector like the porters and rickshaw pullers and
* hand cart pullers,
* fruit and flower sellers on the pavements, etc.
Other problems associated with the scheme are:
* The poor do not have cash to buy 20 kg at a time, and often they are not permitted to buy in instalments.
* Low quality of foodgrains inferior quality
* Weak monitoring, lack of transparency and inadequate accountability of officials implementing the scheme
* Price charged exceeds the official price by 10% to 14%.
* Illicit fair price shop owners have been found to create large number of bogus cards to sell food grains in the open market.
* Many FPS dealers resort tomalpractice, illegal diversions of commodities, hoarding and black marketing due to the minimal salary received by them.
* Numerous malpractices make safe and nutritious food inaccessible and unaffordable to many poor thus resulting in their food insecurity.
* Identification of households to be denoted status and distribution to granted PDS services has been highly irregular and diverse in various states. The recent development of Aadhar UIDAI cards has taken up the challenge of solving the problem of identification and distribution of PDs services along with Direct Cash Transfers.
* Regional allocation and coverage of FPS are unsatisfactory and the core objective of price stabilization of essential commodities has not met.
To improve the current system of the PDS, the following suggestions are furnished for:
1. Vigilancesquad should be strengthened to detect corruption, which is an added expenditure for taxpayers.
2. Personnel-in-charge of the department should be chosen locally.
3. Margin of profit should be increased for honest business, in which case the market system is more apt anyway.
4. F.C.I. and other prominent agencies should provide quality food grains for distribution, which is a tall order for an agency that has no real incentive to do so.
5. Frequent checks & raids should be conducted to eliminate bogus and duplicate cards, which is again an added expenditure and not fool proof.
6. The Civil supplies Corporation should open more Fair Price shops in rural areas.
7. The Fair Price dealers seldom display rate chart and quantity available in the block-boards in front of the shop. This should be enforced.
NAME- CHITRALEKHA
REFERENCES- 1) http://www.smsfoundation.org/
2) Economic & Political Weekly
3) wikipedia
Why an priority issue -
1. Decline in purchasing power of poor because of structural imbalances in the economy:
2. Rising capital intensity,
3. lack of land reforms,
4. failure of poverty alleviation programmes,
5. growing disparity between towns and villages, and like that.
1. production problems in less endowed regions,
1. Huge pile-up inside Food Corporation of Indias (FCI) godowns,
1. If consumption of the poor does not increase there would be serious demand constraints on agriculture and could make the growth target of 4.5% per annum unachievable.
Implementation of TPDS
As per the mandate of PDS, the Union Government is responsible for the procurement, transportation and bulk allocation of food grains whereas the State government looks after the allocation, identification of Below Poverty Line (BPL) families and issue of ration cards, as well as monitoring the distribution process. Off late, the Gram panchayats have also been involved to improve the functioning of PDS to verify the entries of items of PDS made in the stock registers of the fair price shops of the State Food and Supplies Department. But in the whole set up of overlapping responsibilities, PDS is no ones baby. It has been left to operate on the whims and fancies of the depot holders; and with the lack of awareness and empowerment within the community, the situation is further deteriorated.
CRITICISM OF PDS
PDS was criticised on a wide front:
1. its failure to serve the population Below Poverty Line (BPL),
2. for its perceived urban bias,
3. negligible coverage in States with a high density of rural poor and
4. lack of transparent and accountable arrangements for delivery.
EFFECT
Given that backdrop, the Government acted to streamline PDS during the Ninth Five Year Plan period by issuing special cards to BPL families and selling to them foodgrains through PDS outlets at specially subsidised prices (with effect from June, 1997).
TARGETED PDS
Under the new Targeted Public Distribution System (TPDS)
* A BPL card holder should be given 35kg of foodgrain and the card holder above BPL should be given 15kg of food grain as per the norms of PDS.
* This is likely to benefit about six crore poor families, to whom a quantity of about 72 lakh tonnes of food grains per year is earmarked.
BENEFICIARIES
* The identification of the beneficiaries is done by the States, based on state-wise poverty estimates of the Planning Commission.
* The thrust is to limit the benefit to the truly poor and vulnerable sections:
* landless agricultural labourers,
* marginal farmers,
* Rural artisans/craftsmen,
* potters, tappers,
* weavers,
* blacksmiths,
* carpenters in the rural areas;
* similarly those covered by TPDS in urban areas are - slum dwellers and
* people earning livelihood on a daily basis in the informal sector like the porters and rickshaw pullers and
* hand cart pullers,
* fruit and flower sellers on the pavements, etc.
Other problems associated with the scheme are:
* The poor do not have cash to buy 20 kg at a time, and often they are not permitted to buy in instalments.
* Low quality of foodgrains inferior quality
* Weak monitoring, lack of transparency and inadequate accountability of officials implementing the scheme
* Price charged exceeds the official price by 10% to 14%.
* Illicit fair price shop owners have been found to create large number of bogus cards to sell food grains in the open market.
* Many FPS dealers resort tomalpractice, illegal diversions of commodities, hoarding and black marketing due to the minimal salary received by them.
* Numerous malpractices make safe and nutritious food inaccessible and unaffordable to many poor thus resulting in their food insecurity.
* Identification of households to be denoted status and distribution to granted PDS services has been highly irregular and diverse in various states. The recent development of Aadhar UIDAI cards has taken up the challenge of solving the problem of identification and distribution of PDs services along with Direct Cash Transfers.
* Regional allocation and coverage of FPS are unsatisfactory and the core objective of price stabilization of essential commodities has not met.
To improve the current system of the PDS, the following suggestions are furnished for:
1. Vigilancesquad should be strengthened to detect corruption, which is an added expenditure for taxpayers.
2. Personnel-in-charge of the department should be chosen locally.
3. Margin of profit should be increased for honest business, in which case the market system is more apt anyway.
4. F.C.I. and other prominent agencies should provide quality food grains for distribution, which is a tall order for an agency that has no real incentive to do so.
5. Frequent checks & raids should be conducted to eliminate bogus and duplicate cards, which is again an added expenditure and not fool proof.
6. The Civil supplies Corporation should open more Fair Price shops in rural areas.
7. The Fair Price dealers seldom display rate chart and quantity available in the block-boards in front of the shop. This should be enforced.
NAME- CHITRALEKHA
REFERENCES- 1) http://www.smsfoundation.org/
2) Economic & Political Weekly
3) wikipedia
Much Awaited Food Security Bill
- The National Food Security Bill (NFSB) was originally introduced in Parliament in December 2011. The bill was cleared by a parliamentary committee in January. Lok Sabha on 8th May 2013 failed to pass because of opposite party not supporting the much-hyped National Food Security Bill which seeks to ensure access to adequate quantity of quality food at affordable prices to people.
- Food security means the easy availability and access of food at all times in sufficient quantity in a safe and nutritious form to meet the dietary requirements and food preferences for an active, healthy and productive life.
- The government may soon pass the National Food Security Bill to give millions more people cheap food, fulfilling an election promise of the ruling Congress party that could cost about $23 billion a year and take a third of annual grain production.
The Bill seeks to provide for food and nutritional security in human life cycle approach, by ensuring access to adequate quantity of quality food at affordable prices to people to live a life with dignity and for matters connected therewith and incidental thereto.
Just like two faces of coin it The Food Security Bill is also mixture of good and bad taste.
Brighter Side of Coin
Right to food to become a legal right- The proposed bill aims to provide legal right over subsidized food grain to 67 per cent of the population.
The bill provide uniform allocation of 5 kg food grain (per person) at fixed rate of Rs. 3 (rice), Rs. 2 (wheat) and Rs. 1 (coarse grains) per kg to 75 per cent of the rural population and 50 per cent of the poor in urban India about 800 million people.
Continuance of Antyodaya Anna Yojana (AAY) Protection to 2.43 crore poorest of poor families under the Antodaya Anna Yojana (AAY) to supply of 35 kg food grains per month per family would continue.
Nutritional support to pregnant women without limitation are among other changes proposed in the bill. The bill will extend subsidized food to pregnant women and children under the age of 16. It is positive that it is including those who really need nutritious food The Bill proposes meal entitlements to specific groups. These include: pregnant women and lactating mothers, children between the ages of six months and 14 years, malnourished children, disaster affected persons, and destitute, homeless and starving persons.
For children in the age group of 6 months to 6 years, the Bill guarantees an age-appropriate meal, free of charge, through the local anganwadi. For children aged 6-14 years, one free mid-day meal shall be provided every day (except on school holidays) in all schools run by local bodies, government and government aided schools, up to Class VIII. For children below six months, exclusive breastfeeding shall be promoted.
Endeavors to empower woman- The eldest woman in the household shall be entitled to secure food from the PDS for the entire household.
Bill seeks to utilize already existing infrastructures like PDS and aganwadis. This has prevented further wastage of money to develop the infrastructures.
Darker side of Coin
Credibility of PDS system- The government intends to use the Public Distribution System for delivering subsidies to the poor. The PDS is already used to deliver food subsidies to the poor but around 51% of the food delivered that way is currently lost to leakages. It is sold on the open market for a higher price.
The government is also considering using direct cash transfers. In cases where the government is not able to make food available in the PDS then they will give cash payments to be used for food directly into peoples bank accounts. I think here bill is deviating from its purpose. Bill is to provide access to food not money in lieu of food.
The cost of food grains is rising globally then how would government be able to provide subsidized food to 70% Indian population?
What are we going to do in a drought or a flood? The production of rice and wheat might come down dramatically. If we are entering the global market then the global price would shoot up along with the subsidy bill. If this situation prevails and climate change takes, place what is going to happen?
Effect on farmers and producers- The very low prices of the subsidized food will distort the market and farmers who cant sell to the government-assured program will lose out on the open market because prices will be forced down. Hence the person who are not poor at present but will become poor in days to come.
How to be implemented? Things are not very clear how it will be initiated. Every district will have a grievance officer who will deal with complaints about implementation at the local level. We dont know how that will function but they have the authority to punish people who are not giving out the food. Still the commission under this bill is yet to be set.
Failure to define the beneficiaries are some of the shortcomings of the bill. Also, the scheme does not define the beneficiaries properly. The bill says that States will provide the list of the poor but they have no such records. So, whether it will reach the right persons is hypothetical.
Division among three groups priority, general and excluded and adopting a complex, impractical and politically contentious inclusive criteria that too to be provided at later stage.
Not enough resources- Moreover, to implement this scheme, the total estimated annual food grains requirements will be 61.23 million tones and is likely to cost Rs.1,24,724 crore. Given the rising costs of the scheme and rising population, its sustainability is under question. This is a mega program and will require a huge food subsidy. The cost of it will go up from 0.8% of Gross Domestic Product to around 1.1% of GDP. This is a serious increase in a situation where the government does not have enough resources as it is.
Based on schemes which are already in trial stages- It will be linked to the Aadhar scheme which provides every citizen with a unique identification number thats linked to a database that includes the biometrics of all card-holders. Aadhar scheme and direct cash transfer both are in their trial stages. So burdening an still developing programme will lead to total failure.
Implementing this bill could widen the already swollen budget deficit next year, increasing the risk to its coveted investment-grade status. The government has already budgeted 900 billion rupees for the scheme in the current fiscal year ending March 2014. If the bill is passed, it will need to come up with as much as 1.3 trillion rupees in 2014/15, adding to a total subsidy burden that already eats up about 2.4 percent of gross domestic product.
Critics say the food bill is little more than an attempt to help Congress, reeling from corruption scandals, win re-election in a vote expected by next May.
Critics argue that eradication of malnutrition needs more than just removal of hunger. Food security is necessary but not sufficient for nutrition security.
Polishing the darker side
We should have learned lessons from the Mahatma Gandhi National Rural Employment Guarantee Act (which provides 100 days of work to the poor at 100 rupees a day) and strengthened it to make it more effective to help the very poorest. Those who are part of that program should be targeted for this subsidy.
Or we could link it to education as they did in Bangladesh where school children and their families were given access to subsidized food.
The bill should have included subsidized rates for pulses which for many of the poorest are their only source of protein and highly nutritious. The price of pulses has gone up, making them out of reach for many.
We need to reduce the leakages from the distribution system and make it transparent. This bill has transparency provisions but do not provide how this transparency shall be achieved.
Community based agricultural programs and teaching about sustainable farming shall enhance production in the country. And this in turn would bring down the prices of various essential commodities and people can be self sufficient themselves. Reliance on government programs would reduce and this would give people a feeling of security and not fear of dependence.
For reducing loopholes in PDS system government must take lessons from Chattisgarh government where after the delivery is made to PDS branch, all the beneficiaries get a message though mobiles about the same, so they know about it and reach to PDS branch on time.
Conclusion-
This bill is a good initiative but not a sufficient measure. A more better food security bill can be there. But still something is better than nothing.
Name Shreegopal Totala
- Food security means the easy availability and access of food at all times in sufficient quantity in a safe and nutritious form to meet the dietary requirements and food preferences for an active, healthy and productive life.
- The government may soon pass the National Food Security Bill to give millions more people cheap food, fulfilling an election promise of the ruling Congress party that could cost about $23 billion a year and take a third of annual grain production.
The Bill seeks to provide for food and nutritional security in human life cycle approach, by ensuring access to adequate quantity of quality food at affordable prices to people to live a life with dignity and for matters connected therewith and incidental thereto.
Just like two faces of coin it The Food Security Bill is also mixture of good and bad taste.
Brighter Side of Coin
Right to food to become a legal right- The proposed bill aims to provide legal right over subsidized food grain to 67 per cent of the population.
The bill provide uniform allocation of 5 kg food grain (per person) at fixed rate of Rs. 3 (rice), Rs. 2 (wheat) and Rs. 1 (coarse grains) per kg to 75 per cent of the rural population and 50 per cent of the poor in urban India about 800 million people.
Continuance of Antyodaya Anna Yojana (AAY) Protection to 2.43 crore poorest of poor families under the Antodaya Anna Yojana (AAY) to supply of 35 kg food grains per month per family would continue.
Nutritional support to pregnant women without limitation are among other changes proposed in the bill. The bill will extend subsidized food to pregnant women and children under the age of 16. It is positive that it is including those who really need nutritious food The Bill proposes meal entitlements to specific groups. These include: pregnant women and lactating mothers, children between the ages of six months and 14 years, malnourished children, disaster affected persons, and destitute, homeless and starving persons.
For children in the age group of 6 months to 6 years, the Bill guarantees an age-appropriate meal, free of charge, through the local anganwadi. For children aged 6-14 years, one free mid-day meal shall be provided every day (except on school holidays) in all schools run by local bodies, government and government aided schools, up to Class VIII. For children below six months, exclusive breastfeeding shall be promoted.
Endeavors to empower woman- The eldest woman in the household shall be entitled to secure food from the PDS for the entire household.
Bill seeks to utilize already existing infrastructures like PDS and aganwadis. This has prevented further wastage of money to develop the infrastructures.
Darker side of Coin
Credibility of PDS system- The government intends to use the Public Distribution System for delivering subsidies to the poor. The PDS is already used to deliver food subsidies to the poor but around 51% of the food delivered that way is currently lost to leakages. It is sold on the open market for a higher price.
The government is also considering using direct cash transfers. In cases where the government is not able to make food available in the PDS then they will give cash payments to be used for food directly into peoples bank accounts. I think here bill is deviating from its purpose. Bill is to provide access to food not money in lieu of food.
The cost of food grains is rising globally then how would government be able to provide subsidized food to 70% Indian population?
What are we going to do in a drought or a flood? The production of rice and wheat might come down dramatically. If we are entering the global market then the global price would shoot up along with the subsidy bill. If this situation prevails and climate change takes, place what is going to happen?
Effect on farmers and producers- The very low prices of the subsidized food will distort the market and farmers who cant sell to the government-assured program will lose out on the open market because prices will be forced down. Hence the person who are not poor at present but will become poor in days to come.
How to be implemented? Things are not very clear how it will be initiated. Every district will have a grievance officer who will deal with complaints about implementation at the local level. We dont know how that will function but they have the authority to punish people who are not giving out the food. Still the commission under this bill is yet to be set.
Failure to define the beneficiaries are some of the shortcomings of the bill. Also, the scheme does not define the beneficiaries properly. The bill says that States will provide the list of the poor but they have no such records. So, whether it will reach the right persons is hypothetical.
Division among three groups priority, general and excluded and adopting a complex, impractical and politically contentious inclusive criteria that too to be provided at later stage.
Not enough resources- Moreover, to implement this scheme, the total estimated annual food grains requirements will be 61.23 million tones and is likely to cost Rs.1,24,724 crore. Given the rising costs of the scheme and rising population, its sustainability is under question. This is a mega program and will require a huge food subsidy. The cost of it will go up from 0.8% of Gross Domestic Product to around 1.1% of GDP. This is a serious increase in a situation where the government does not have enough resources as it is.
Based on schemes which are already in trial stages- It will be linked to the Aadhar scheme which provides every citizen with a unique identification number thats linked to a database that includes the biometrics of all card-holders. Aadhar scheme and direct cash transfer both are in their trial stages. So burdening an still developing programme will lead to total failure.
Implementing this bill could widen the already swollen budget deficit next year, increasing the risk to its coveted investment-grade status. The government has already budgeted 900 billion rupees for the scheme in the current fiscal year ending March 2014. If the bill is passed, it will need to come up with as much as 1.3 trillion rupees in 2014/15, adding to a total subsidy burden that already eats up about 2.4 percent of gross domestic product.
Critics say the food bill is little more than an attempt to help Congress, reeling from corruption scandals, win re-election in a vote expected by next May.
Critics argue that eradication of malnutrition needs more than just removal of hunger. Food security is necessary but not sufficient for nutrition security.
Polishing the darker side
We should have learned lessons from the Mahatma Gandhi National Rural Employment Guarantee Act (which provides 100 days of work to the poor at 100 rupees a day) and strengthened it to make it more effective to help the very poorest. Those who are part of that program should be targeted for this subsidy.
Or we could link it to education as they did in Bangladesh where school children and their families were given access to subsidized food.
The bill should have included subsidized rates for pulses which for many of the poorest are their only source of protein and highly nutritious. The price of pulses has gone up, making them out of reach for many.
We need to reduce the leakages from the distribution system and make it transparent. This bill has transparency provisions but do not provide how this transparency shall be achieved.
Community based agricultural programs and teaching about sustainable farming shall enhance production in the country. And this in turn would bring down the prices of various essential commodities and people can be self sufficient themselves. Reliance on government programs would reduce and this would give people a feeling of security and not fear of dependence.
For reducing loopholes in PDS system government must take lessons from Chattisgarh government where after the delivery is made to PDS branch, all the beneficiaries get a message though mobiles about the same, so they know about it and reach to PDS branch on time.
Conclusion-
This bill is a good initiative but not a sufficient measure. A more better food security bill can be there. But still something is better than nothing.
Name Shreegopal Totala
Food Security:
Food Security:
Overview:
1. Global Hunger Index(GHI) : India ranks 67/81 countries in worst Food security category
2. Achievement of food grain security at the national level(by 70s) didn't percolate down to households (Domestic Production of food grains far exceed our nation's food demands).
3. Dimensions of FS according to FAO(Food and Agricultural Organization):
1. Availability (aspect of production)
2. Accessibility (Physical Access - aspect of distribution - TPDS) & Affordability (Economic Access - purchasing capacity of people - MGNREGA)
3. Absorption/Assimilation (Nutritional aspect which includes sanitation, health infra.) - Which aims at turning Food intake into Nutritional outcomes
4. Acceptability (Culturally accepted food)
5. Stability (in all the above 5 aspects)
4. FS at different levels: Global, National, Household, Individual. Household and Individual FS can be attained by gender sensitisation and empowering women community as they are the ones who mainly manage household level food distribution.
5. Food security Problem is less to do with food and more with health, technology adaptation, global cooperation, cultural constraints, Governance structures.
6. Urban Areas are more vulnerable:
6. They are dependent for food supplies on surrounding areas; If the infrastructure is damaged, they became unsustainable on food security front.
7. Undocumented poor (refugees); Identification of the poor for targeting is difficult.
7. FAO predicts one-third of all food produced in the world gets wasted amounting to a loss of $750B a year
8. Food in developing countries is wasted mostly due to poor harvesting techniques (Eg: Cereals in Asia, Latin America)
9. In high-income areas the primary cause of waste is careless consumer behaviour(Eg: Meat in Wealthy regions)
MSPs:
Overview:
1. 1966-67 : Introduced for the first time for Wheat in the wake of Green Revolution and extended harvest to save farmers from depleting profits
2. MSPs announced for 25 crops currently at the beginning of each season
Objectives:
1. to stabilise the prices of major food items
2. to ensure the remunerative prices for the farmers (protect the interests of farmers in the event of over-production)
Features:
1. Public action of linking Producers(through procurements at MSP) & Consumers (distribution at affordable prices)
2. Govt. recently modified the procedure of MSP to include thecost of crop insuranceand thus ensuring better prices for farmers.
3. High MSP of Wheat and Rice has encouraged farmers to grow them more and more.
Functioning:
1. MSP is announced well ahead of the sowing season on the recommendations of Commission for Agricultural costs and Prices(CACP)
2. Central govt. is responsible for procurement, storage, transportation, and bulk allocation of food grains. Central govt. organises purchase operations through Public, Cooperative and other designated agencies (NAFED- National agri. cooperative marketing federation of India for oil seeds and pulses ,FCI, Cotton cooperation of India).
3. Central govt. has centrally designated agencies to undertakePSS(Price support Scheme)operations. The losses incurred,if any, are fully reimbursed by the govt.
4. It also implementsMIS(Market intervention scheme)on the request of states/UTs for horticultural and agri. commodities, generally perishable in nature that are not covered under PSS.States/UTs bear 50% of the losses,if any.(25% in the case of NE states). H/W the loss is restricted to 25% of the total procurement value. Profit, if any, earned by the procuring agencies is retained by them. The MIS is implemented in order to protect the growers of these commodities from making distress sale in the event of bumper crop when the prices tend to fall below the economic level/cost of production
Buffer Stocks:
Overview:
1. Central pool with FCI : TPDS, Open market intervention to stabilize prices, to meet emergencies in the case of droughts/crop failures
2. Buffer norms are the minimum food grains the centre should havein the central pool at the beginning of each quarter
3. Need for better Buffer Stock Management :
1. Despite being leading agricultural producer, it is only 10th largest global player (1.6% of the trade);
2. Fill the deficit with Grains : Exporting the surplus grains will bridge CAD and fiscal deficit; Need to act fast since global food prices are on decline; Proposal for creating regional stocks(say South Asia) after global food crisis; can earn $30-40B with predictable trade policy
4. Only for 2 crops : Rice and Wheat
PDS:
Procurement:
Functioning :
* Both central govts and state govts shared the responsibility of regulating PDS.
* Central govt. to procure, Transport, Storage,Bulk allocation to States as per the agreed norms and quantities
* State govt. is responsible for distributing the grains to consumers through the established network of Fair price shops and operational responsibilities(allocation and identification of BPL families, issue of ration cards, supervision and monitoring the functioning of FPS-Fair Price shops). 5 Lakh FPS through out India
* 1997 : Dual Pricing structure was introduced under TPDS : CIP (Central Issue Prices) : prices at which the Food Corporation of India (FCI) sells grain for the PDS to State governments
* Price for APL families = Economic cost (Costs of Procurement, Distribution, Storage)
* for BPL families = 50% of the economic cost (Economic costs - CIP is the subsidy borne by the Central govt.)
* Defects of PDS :
* Large scale Exclusion & Inclusion errors; Unable to accomplish timely revision of Beneficiaries list
* Ration card duplication(removal of Ghost ration cards) and leakages.Unclaimed ration(due to temporary migration) in states like AP is not carried over.
* Leaky nature of APL (Entitlements of APL by its nature is unclear and unstable. They are not entitlements, but adhoc handouts. Most of the APL quota goes straight to the black market). BPL quota is distributed properly to a largest extent even in districts like Korapat(Odisha), Chitrakoot (UP).
* Leakages to the tune of avg. 55% . But recent NSSO data shows that it came down to 30%; The National Sample Survey Ofce data shows that the leakages in PDS reduced from 54% in 2004-05 to 44% in 2007-08 and further down to 35% in 2011-12.
* Items covered under PDS : Rice, Wheat, Sugar, Kerosene constitute 86% of the PDS sale. Pulses less than 0.2% of PDS sale
* PDS not working well in states like Bihar b/c of leakages andlack of revenues to pay out of their pockets, which is different from the case of mineral rich states like Jharkhand and Chattisgarh.
* Many of the states fail to pick up the allocated food monthly from the central pool and distribute it to the seriously needy
* Economic viability of FPS so that tendency of leakages are reduced by resorting to malpractices.
* Leakages during transportation from Godown to FPS. States are advised to do door step delivery.Food Security Bill Proposes Doorstep Dilevery of Foodgrains and end to end Comupterisation of PDS
* Disparities between states : TN with 31000 fair price shops and Jharkhand with 14000; Justice Wadhwa cmt. suggested that there should be a FPS with-in a 3km radius for everyone.
* Bihar : PDS Rice is smuggled to Nepal for the purpose of manufacturing liquor
* Recent Initiatives: (Initiatives taken by state govts. proved to be more effective)
* To enable the last mile tracking whether the grains reached the beneficiaries some states adopted methods like issuing food coupons . The release of grain to a dealer is linked to the number of coupons he deposits after collecting them from cardholders when they buy their rations. Eg: Rajasthan and Bihar. It has been successful in Rajasthan.
* Smart cards, UID platform, ePOS(Point-of-sale) in pilot stages.
* Reduction in PDS prices : AP, Chattisgarh, TN, Odisha ,KA, Kerala, MP, Jharkhand, RJ
* Expanded coverage : in above mentioned states
* Introduction of pulses : HP, AP,CH, TN
* Edible oil : AP,HP,TN
* Transparency :
* GPS equipped trucks & easy-to-identify yellow trucks for delivery of PDS
* Painting of names of all beneficiaries on public and private walls to prevent "duplicates"
* Grievance redressal mechanisms
* TN and Chattisgarh computerised the database of Ration cards to track purchases.
Food Security Bill:
Overview:
1. Grain procurement is already around 60M tonnes and it has been going up steadily in the last 20 years at about 5% per year
2. Carrying costs of grain is double the cost of their production (costs INR 5 to transfer the worth of benefit INR 1)
3. 1990-2007 : Population growth at 1.9% ; Food grain production at 1.2%; But with recent initiatives, rate of growth in production surpassed the rate of growth in population
Estimates:
1. Grain availability
1. Food Production in India = 200 M tonnes (Last year 236 M tonnes)
2. Marketing surplus after Self-consumption of small farmers = 140 M tonnes
3. Commission of Agricultural costs and prices estimates of Requirements to Food Security Bill = 60 M tonnes (30% of the total production) - Half of the world's trade
4. Available to private market = 80 M tonnes
5. Crisis of Plenty : As per the requirements of the bill, by the end of July Govt stocks need to be 52MT ; But the actual stocks are expected to be around 88MT in which case, 38MT will be sitting as a dead weight; Total economic cost of 38MT is projected as Rs 75,000 Crore ; In a way food inflation is created by government; Year-on-Year inflation : Rice 17% and Wheat 20% (Gross Failure in Food Management); Shows that we are very tolerant of inaction and delays;
2. Subsidy Burden (According to official govt. estimates)
6. Existing burden to cover 45% of the population = 95,000 crore (1,09,000 crores in reality)
7. Extra burden to cover 67% of the population = 35000 crore if it manages a revamped delivery system with minimum leakages.
8. Existing PDS : Major cost component is into storage of the grain; with the roll-out of FSB these costs can be drastically cut.
9. Higher taxes of the states distorting markets Eg: PJ,HR,AP; Punjab taxes as high as 14.5%; Subsidy of 95000 crore in total food security, atleast 8000-10000 crore are taxes in the name of poor;
10. The foodgrains to be allocated to the PDS under the Act will be 54.9 million (mn) tonnes; Further,about 6.5 mn tonnes are now allocated for other welfare schemes
11. Assuming a subsidy of Rs 21.5 per kg, then for 61.4 mn tonnes, this comes to about Rs 1.32 lakh crore a year or about 1.3% of the gross domestic product (GDP) at current market prices
12. Other estimates:
1. Bhalla's estimations : Rs 3 lakh crore or 3% of GDP
2. CACP : 6.8 lakh crore over three years (roughly Rs 2.3 lakh crore a year)
3. Prachi Mishra from the nance ministry :annual incremental cost of the NFSA will be anywhere between Rs 44,411 crore to Rs 76,486 crore in 2013-14
3. Beneficiaries:
13. 35% of the national wide might be excluded (current beneficiaries of Dalits and Backward sections in certain western areas like Punjab, W.UP will be excluded with this criteria)
14. coverage under NFSA has been delinked from poverty estimates and therefore the hitherto followed system of APL and BPL beneficiaries would no more be relevant.
4. Storage: (total Central procurement & Storage (doesn't include PDS))
15. Present Storage capacity(Public Sector) : 82 M tonnes (2009-10 : 55M tonnes); the warehousing capacity available in India in public, cooperative and private sectors is about 109 mt and an additional 35 mt of are housing capacity is estimated to be required during the Twelfth Plan for the storage of major crops.
16. Upgrading our storage structures(wastage of only 0.02%) by involving Private players(72 Lakh tonnes in last 2 years with their help) in big way : April-June, 2013- 1Lakh tonnes of food grains worth INR 236.32 crore were lost in "Transit, Storage and due to theft".Private Entrepreneurs Guarantee (PEG) schemeto create storage facilities
17. we are also thinking of going beyond traditional Godown structures by introducing 'Silos'
5. Need to stabilise production and distribution systems when you are committing Food supply as a right ; In 2002-03 itself, production fell by 38MT in a single year;
18. Storage and Railway wagons
19. Agricultural Min says that 100,000 crore in agriculture to stabilise production and it has to done in the first 3 years of FSB
20. CACP estimates it as 200,000 crore/year
6. State Coverage :
21. Assam, Bihar and Jharkhand will have coverage of about 85% of the population in rural a reas under the NFSA
22. UP, Odisha and Madhya Pradesh around 80-82%
Beneficiary Identification:
1. based on socio-economic and caste census.
2. Automatic exclusion and Inclusion (some proposed parameters) {It is opinion, not Saxena cmt parameters}
1. Urban : 3 types based on the vulnerabilities
1. Residential : Homeless-obviously poor; Slum-dwellers : High chances of being poor
2. Occupational : Rickshaw pullers, Construction Labour, Domestic help, Beggars
3. Social : households with no able-bodied male aged 18 to 60
2. Rural : some socio-economic categories : Single Women, Disabled people, old people,.
3. Complexities involved in the identification of beneficiaries based on caste survey
4. Exclusion criteria should be state specific; Eg: "pacca house" as an exclusion criteria : It is a sign of wealth in in plain, not necessarily in hills
Features:
1. Upto 75% of the rural population and upto 50% of the urban population will have uniform entitlement of 5 kg foodgrains per month per person at highly subsidized prices of Rs. 3, Rs. 2, Rs. 1 per kg.for rice, wheat, coarse grains respectively . These are national coverage ratios to be adjusted state-wise so that the coverage is higher in poorer states.
2. The poorest of poor households would continue to receive 35 Kg foodgrains per household under AAY
3. Eldest Women of the household above 18 years to be head of the household for the purpose of issue of ration cards.
4. special focus on the needs of poorest of the poor, women and children.(Lactating mother will also receive maternity benefit of at least of Rs. 6000/-(INR 1000 for 6 months). Children in the age group of 6 months to 14 years will be entitled to take home ration or hot cooked food as per prescribed nutritional norms.)
5. In case of non-supply of foodgrains now people will get Food Security Allowance.
6. States to get assistance for intra-State transportation and handling of foodgrains
7. Eldest women is recognised as the head of the household
8. Grievance redressal
1. Increased role of PRIs, Women's SHGs
2. District Grievance redressal officers, State Food commission - provides for grievance redressal mechanism(at the district level) and penalty for non compliance by public servant or authority
3. Social audits and vigilance committees
4. PDS related records to be placed in public domain
5. Call centres & Helplines
9. Doorstep delivery of foodgrains to the TPDS outlets;
10. Application of information and communication technology tools including end-to-end computerisation in order to ensure transparent recording of transactions at all levels, and to prevent diversion;
11. Leveraging aadhaar for unique identification, with biometric information of entitled beneficiaries for proper targeting of benefits under this Ordinance.
12. Full transparency of records;
13. Diversification of commodities distributed under the Public Distribution System over a period of time;
14. Support to local public distribution models and grains banks.
15. The Center has proposed a committee of State Food Secretaries under the chairmanship of Union Food Secretaries to sort out issues of sharing expenditure towards intra-State transportation and handling of foodgrains, margins to fair price shop dealers and other implementation issues to ensure speedy implementation of National Food Security Act(NFSA).
Challenges:
1. Can we still uphold the right in the case of weak monsoon and subsequent fall in food production?
2. Need to streamline the PDS system and plugin the leakages and pilferage before making the food supply universal.
3. If the approach still is identification of a beneficiary, how will it be different from current scenario? Rigid targetting may only lead to exclusion of genuine BPL families and vulnerable APL families
4. Already some states are believed to have well developed PDS, this bill may seem retrograde.
5. Direct Benefit transfer - how will it adjust for the price fluctuations and the delay in payments will not be in sync with current inflation scenario.
6. Storage, Transport(planning to bring rail infra into the supply chain); Expansion of decentralised procurement.
7. Danger of over-centralisation of the PDS under the bill, at a time when many state governments are making good progress with reforming the PDS on their own
8. Better existing models:
1. TN already has universal PDS
1. FSB - Targetted coverage ; TN Model - Universal coverage
2. FSB - Rural population(75%), Urban Population(50%); TN - Rice free of cost to 1.8Crore families
3. FSB - Rice(INR 3/kg), Wheat(3/Kg), Millets(3/Kg); TN - Rice entitlements 12kg/month(min) - 20kg/month(max)
4. FSB - AAY beneficiaries to get 35kg/month; TN - AAY to get 35kgs/month
5. FSB - Food security allowance to be provided in case of non-supply; TN - Sugar to rice-drawing holders 500gms to max 2kg, edible oil and pulses at subsidised rates under special PDS
2. TN has 50% of the population in Urban areas => under FSB 25% of TN population will not be eligible for food entitlements.
9. India need to convince WTO that it is not violating AoA(Agreement on Agriculture) by this bill
10. Moving from household based entitlements(25kg/household) to percapita entitlements (5kg/person) . Could be disruptive if it is imposed overnight from the top. Could face resistance from the public.
3. AP and TN already has put in use Per-capita entitlements model
4. Population totals are better defined and better known than household counts and therefore better suited for determining state-wise allocations.
5. only 10% of the rural families have more than 7 members.// But this scheme of per-capita entitlements is done at a lower price than earlier, so it is more equitable
6. Adding a name to the ration card when a child is born tends to be difficult and enrollment is an issue even in the better governed states.
7. Could be disruptive in the states where per-household model works well (Chattisgarh, Odisha, HP,RJ)
8. Opinion:
6. Equity can be ensured without forcing states to adopt per-capita approach; Eg: by considering every nuclear family as a separate household(as in NREGA)
7. Central govt. could allocate grains on the basis of entitled population, and let states decide which approach to use.
11. The percentage of beneficiaries may vary from state to state(This would be based on caste & Socio-economic census) .Southern states' PDS will be affected b/c of this bill, since their existing quota will have to be diverted to other states unless our export of food grains to Europe to feed their cattle are curtailed or we import food grains from Vietnam or Thailand
9. Estimation of 18 states losing and 17 states and UTs gaining the quota (since it is based on population figures) - Losing states : TN, Kerala, Tripura; Gaining States: UP,Bihar, Gujarat
10. Estimated cut of 31.24L tonne to losing states and higher out-go of 110.28L tonnes to gaining states at subsidised rates (CIP)
11. Provision of additional grains at MSP
12. Leakages need to be plugged through (9-point strategy)
12. de-privatisation of ration shops (Community ownership of FPS SHGs )
13. end-to-end computerization - also a proposal of new independent agency manned by professionals to computerize PDS.
14. Aadhar - biometrics (authentication, portability)
15. Social audit
16. Leakages are minimum in AAY category, but high in APL category b/cAPL is not a fixed quota.
13. No clarity on cost-sharing formula b/n Centre and states.
14. Political consensus on these issues:
17. Cash transfers in lieu of food grains
18. Protection of present grain allocations to states
19. Framing of rules and guidelines
20. Ready-to-eat meals and fortified foods('energy dense' foods).
21. Role of Contractors and Manufacturers in ICDS
15. Demands of amendments on these issues
22. Raising the percapita entitlement from 5kg to 7kg
23. Inclusion of Pulses and Edible oil in PDS basket
24. Removing caps on percentage of eligible beneficiaries.
Dimensions:
1. the implementation of the legislation promises economy-wide benefits.
1. the guarantee of subsidised food grains, which constitutes a significant proportion of the consumption basket for most people, will have the immediate effect of increasing their disposable income. This is not trivial, given that the growth of consumption expenditure has doubled between 2009 and 2012
2. the provision can play the role of an economic stabiliser because food prices determine the floor wage level, which is why they are termed a wage good. The guarantee would thus not only help in controlling food prices but also stabilise wages. Indeed, it is perplexing that industry lobbies are attacking the provision of an enhanced social wage, from which they stand to benefit significantly.
3. if the fiscal deficit is run in an imaginative way, even more can be achieved. For instance, coupling the food guarantee to the MGNREGA can help in the construction of a countrywide network of godowns for the Food Corporation of India
2. a cash transfer scheme would negate much of the potential economy-wide benefits that would accrue from the implementation of the food security legislation.
3. Greater dependency of Centre on states to procure on their behalf ; High time centre and states rationalise tax structure (GST ); States monopoly in grain trade; 1972 : Centre tried to take over the grain trade, but political set up didn't allow this to happen;
Direct Benefit Transfer:
Prerequisites:
1. Financial inclusion with each beneficiary to have a bank or post office account
2. each bank and PO in India to have Internet Connectivity
3. to have an Aadhar number
4. each bank/PO account to be seeded with the Aadhar number
Benefits:
1. provides range of options. But vulnerable become more prone to market fluctuations ; So need to link DBT with nutritional outcomes (ie Conditional cash transfers), or food stamps (to buy Veg, Fruits, Micronutrients), or Mixed transfers.
2. Our strategy of DBT is essentially an attempt to streamline PDS. It talks about cash transfer of subsidy, not the total food grain ie When centre issues food grain to states at CIP, it bears food subsidy which is to be transferred to beneficiaries rather than to states directly and states are supplied grains at Economic cost. Beneficiary has to pay For Eg: Rs 3+ subsidy transferred to buy one Kg of Rice. It is qualitatively different from subsidy in cash given in-lieu of food grain. (Analyse its impact in terms of range of real choices(not spurious ones) it offers and transparency )
Case studies:
1. Brazil's "Bolsa familia" (food vouchers + PDS) solved 40% of its hunger problem
by A.Sunil Kumar
References: The Hindu and random articles in google
Overview:
1. Global Hunger Index(GHI) : India ranks 67/81 countries in worst Food security category
2. Achievement of food grain security at the national level(by 70s) didn't percolate down to households (Domestic Production of food grains far exceed our nation's food demands).
3. Dimensions of FS according to FAO(Food and Agricultural Organization):
1. Availability (aspect of production)
2. Accessibility (Physical Access - aspect of distribution - TPDS) & Affordability (Economic Access - purchasing capacity of people - MGNREGA)
3. Absorption/Assimilation (Nutritional aspect which includes sanitation, health infra.) - Which aims at turning Food intake into Nutritional outcomes
4. Acceptability (Culturally accepted food)
5. Stability (in all the above 5 aspects)
4. FS at different levels: Global, National, Household, Individual. Household and Individual FS can be attained by gender sensitisation and empowering women community as they are the ones who mainly manage household level food distribution.
5. Food security Problem is less to do with food and more with health, technology adaptation, global cooperation, cultural constraints, Governance structures.
6. Urban Areas are more vulnerable:
6. They are dependent for food supplies on surrounding areas; If the infrastructure is damaged, they became unsustainable on food security front.
7. Undocumented poor (refugees); Identification of the poor for targeting is difficult.
7. FAO predicts one-third of all food produced in the world gets wasted amounting to a loss of $750B a year
8. Food in developing countries is wasted mostly due to poor harvesting techniques (Eg: Cereals in Asia, Latin America)
9. In high-income areas the primary cause of waste is careless consumer behaviour(Eg: Meat in Wealthy regions)
MSPs:
Overview:
1. 1966-67 : Introduced for the first time for Wheat in the wake of Green Revolution and extended harvest to save farmers from depleting profits
2. MSPs announced for 25 crops currently at the beginning of each season
Objectives:
1. to stabilise the prices of major food items
2. to ensure the remunerative prices for the farmers (protect the interests of farmers in the event of over-production)
Features:
1. Public action of linking Producers(through procurements at MSP) & Consumers (distribution at affordable prices)
2. Govt. recently modified the procedure of MSP to include thecost of crop insuranceand thus ensuring better prices for farmers.
3. High MSP of Wheat and Rice has encouraged farmers to grow them more and more.
Functioning:
1. MSP is announced well ahead of the sowing season on the recommendations of Commission for Agricultural costs and Prices(CACP)
2. Central govt. is responsible for procurement, storage, transportation, and bulk allocation of food grains. Central govt. organises purchase operations through Public, Cooperative and other designated agencies (NAFED- National agri. cooperative marketing federation of India for oil seeds and pulses ,FCI, Cotton cooperation of India).
3. Central govt. has centrally designated agencies to undertakePSS(Price support Scheme)operations. The losses incurred,if any, are fully reimbursed by the govt.
4. It also implementsMIS(Market intervention scheme)on the request of states/UTs for horticultural and agri. commodities, generally perishable in nature that are not covered under PSS.States/UTs bear 50% of the losses,if any.(25% in the case of NE states). H/W the loss is restricted to 25% of the total procurement value. Profit, if any, earned by the procuring agencies is retained by them. The MIS is implemented in order to protect the growers of these commodities from making distress sale in the event of bumper crop when the prices tend to fall below the economic level/cost of production
Buffer Stocks:
Overview:
1. Central pool with FCI : TPDS, Open market intervention to stabilize prices, to meet emergencies in the case of droughts/crop failures
2. Buffer norms are the minimum food grains the centre should havein the central pool at the beginning of each quarter
3. Need for better Buffer Stock Management :
1. Despite being leading agricultural producer, it is only 10th largest global player (1.6% of the trade);
2. Fill the deficit with Grains : Exporting the surplus grains will bridge CAD and fiscal deficit; Need to act fast since global food prices are on decline; Proposal for creating regional stocks(say South Asia) after global food crisis; can earn $30-40B with predictable trade policy
4. Only for 2 crops : Rice and Wheat
PDS:
Procurement:
Functioning :
* Both central govts and state govts shared the responsibility of regulating PDS.
* Central govt. to procure, Transport, Storage,Bulk allocation to States as per the agreed norms and quantities
* State govt. is responsible for distributing the grains to consumers through the established network of Fair price shops and operational responsibilities(allocation and identification of BPL families, issue of ration cards, supervision and monitoring the functioning of FPS-Fair Price shops). 5 Lakh FPS through out India
* 1997 : Dual Pricing structure was introduced under TPDS : CIP (Central Issue Prices) : prices at which the Food Corporation of India (FCI) sells grain for the PDS to State governments
* Price for APL families = Economic cost (Costs of Procurement, Distribution, Storage)
* for BPL families = 50% of the economic cost (Economic costs - CIP is the subsidy borne by the Central govt.)
* Defects of PDS :
* Large scale Exclusion & Inclusion errors; Unable to accomplish timely revision of Beneficiaries list
* Ration card duplication(removal of Ghost ration cards) and leakages.Unclaimed ration(due to temporary migration) in states like AP is not carried over.
* Leaky nature of APL (Entitlements of APL by its nature is unclear and unstable. They are not entitlements, but adhoc handouts. Most of the APL quota goes straight to the black market). BPL quota is distributed properly to a largest extent even in districts like Korapat(Odisha), Chitrakoot (UP).
* Leakages to the tune of avg. 55% . But recent NSSO data shows that it came down to 30%; The National Sample Survey Ofce data shows that the leakages in PDS reduced from 54% in 2004-05 to 44% in 2007-08 and further down to 35% in 2011-12.
* Items covered under PDS : Rice, Wheat, Sugar, Kerosene constitute 86% of the PDS sale. Pulses less than 0.2% of PDS sale
* PDS not working well in states like Bihar b/c of leakages andlack of revenues to pay out of their pockets, which is different from the case of mineral rich states like Jharkhand and Chattisgarh.
* Many of the states fail to pick up the allocated food monthly from the central pool and distribute it to the seriously needy
* Economic viability of FPS so that tendency of leakages are reduced by resorting to malpractices.
* Leakages during transportation from Godown to FPS. States are advised to do door step delivery.Food Security Bill Proposes Doorstep Dilevery of Foodgrains and end to end Comupterisation of PDS
* Disparities between states : TN with 31000 fair price shops and Jharkhand with 14000; Justice Wadhwa cmt. suggested that there should be a FPS with-in a 3km radius for everyone.
* Bihar : PDS Rice is smuggled to Nepal for the purpose of manufacturing liquor
* Recent Initiatives: (Initiatives taken by state govts. proved to be more effective)
* To enable the last mile tracking whether the grains reached the beneficiaries some states adopted methods like issuing food coupons . The release of grain to a dealer is linked to the number of coupons he deposits after collecting them from cardholders when they buy their rations. Eg: Rajasthan and Bihar. It has been successful in Rajasthan.
* Smart cards, UID platform, ePOS(Point-of-sale) in pilot stages.
* Reduction in PDS prices : AP, Chattisgarh, TN, Odisha ,KA, Kerala, MP, Jharkhand, RJ
* Expanded coverage : in above mentioned states
* Introduction of pulses : HP, AP,CH, TN
* Edible oil : AP,HP,TN
* Transparency :
* GPS equipped trucks & easy-to-identify yellow trucks for delivery of PDS
* Painting of names of all beneficiaries on public and private walls to prevent "duplicates"
* Grievance redressal mechanisms
* TN and Chattisgarh computerised the database of Ration cards to track purchases.
Food Security Bill:
Overview:
1. Grain procurement is already around 60M tonnes and it has been going up steadily in the last 20 years at about 5% per year
2. Carrying costs of grain is double the cost of their production (costs INR 5 to transfer the worth of benefit INR 1)
3. 1990-2007 : Population growth at 1.9% ; Food grain production at 1.2%; But with recent initiatives, rate of growth in production surpassed the rate of growth in population
Estimates:
1. Grain availability
1. Food Production in India = 200 M tonnes (Last year 236 M tonnes)
2. Marketing surplus after Self-consumption of small farmers = 140 M tonnes
3. Commission of Agricultural costs and prices estimates of Requirements to Food Security Bill = 60 M tonnes (30% of the total production) - Half of the world's trade
4. Available to private market = 80 M tonnes
5. Crisis of Plenty : As per the requirements of the bill, by the end of July Govt stocks need to be 52MT ; But the actual stocks are expected to be around 88MT in which case, 38MT will be sitting as a dead weight; Total economic cost of 38MT is projected as Rs 75,000 Crore ; In a way food inflation is created by government; Year-on-Year inflation : Rice 17% and Wheat 20% (Gross Failure in Food Management); Shows that we are very tolerant of inaction and delays;
2. Subsidy Burden (According to official govt. estimates)
6. Existing burden to cover 45% of the population = 95,000 crore (1,09,000 crores in reality)
7. Extra burden to cover 67% of the population = 35000 crore if it manages a revamped delivery system with minimum leakages.
8. Existing PDS : Major cost component is into storage of the grain; with the roll-out of FSB these costs can be drastically cut.
9. Higher taxes of the states distorting markets Eg: PJ,HR,AP; Punjab taxes as high as 14.5%; Subsidy of 95000 crore in total food security, atleast 8000-10000 crore are taxes in the name of poor;
10. The foodgrains to be allocated to the PDS under the Act will be 54.9 million (mn) tonnes; Further,about 6.5 mn tonnes are now allocated for other welfare schemes
11. Assuming a subsidy of Rs 21.5 per kg, then for 61.4 mn tonnes, this comes to about Rs 1.32 lakh crore a year or about 1.3% of the gross domestic product (GDP) at current market prices
12. Other estimates:
1. Bhalla's estimations : Rs 3 lakh crore or 3% of GDP
2. CACP : 6.8 lakh crore over three years (roughly Rs 2.3 lakh crore a year)
3. Prachi Mishra from the nance ministry :annual incremental cost of the NFSA will be anywhere between Rs 44,411 crore to Rs 76,486 crore in 2013-14
3. Beneficiaries:
13. 35% of the national wide might be excluded (current beneficiaries of Dalits and Backward sections in certain western areas like Punjab, W.UP will be excluded with this criteria)
14. coverage under NFSA has been delinked from poverty estimates and therefore the hitherto followed system of APL and BPL beneficiaries would no more be relevant.
4. Storage: (total Central procurement & Storage (doesn't include PDS))
15. Present Storage capacity(Public Sector) : 82 M tonnes (2009-10 : 55M tonnes); the warehousing capacity available in India in public, cooperative and private sectors is about 109 mt and an additional 35 mt of are housing capacity is estimated to be required during the Twelfth Plan for the storage of major crops.
16. Upgrading our storage structures(wastage of only 0.02%) by involving Private players(72 Lakh tonnes in last 2 years with their help) in big way : April-June, 2013- 1Lakh tonnes of food grains worth INR 236.32 crore were lost in "Transit, Storage and due to theft".Private Entrepreneurs Guarantee (PEG) schemeto create storage facilities
17. we are also thinking of going beyond traditional Godown structures by introducing 'Silos'
5. Need to stabilise production and distribution systems when you are committing Food supply as a right ; In 2002-03 itself, production fell by 38MT in a single year;
18. Storage and Railway wagons
19. Agricultural Min says that 100,000 crore in agriculture to stabilise production and it has to done in the first 3 years of FSB
20. CACP estimates it as 200,000 crore/year
6. State Coverage :
21. Assam, Bihar and Jharkhand will have coverage of about 85% of the population in rural a reas under the NFSA
22. UP, Odisha and Madhya Pradesh around 80-82%
Beneficiary Identification:
1. based on socio-economic and caste census.
2. Automatic exclusion and Inclusion (some proposed parameters) {It is opinion, not Saxena cmt parameters}
1. Urban : 3 types based on the vulnerabilities
1. Residential : Homeless-obviously poor; Slum-dwellers : High chances of being poor
2. Occupational : Rickshaw pullers, Construction Labour, Domestic help, Beggars
3. Social : households with no able-bodied male aged 18 to 60
2. Rural : some socio-economic categories : Single Women, Disabled people, old people,.
3. Complexities involved in the identification of beneficiaries based on caste survey
4. Exclusion criteria should be state specific; Eg: "pacca house" as an exclusion criteria : It is a sign of wealth in in plain, not necessarily in hills
Features:
1. Upto 75% of the rural population and upto 50% of the urban population will have uniform entitlement of 5 kg foodgrains per month per person at highly subsidized prices of Rs. 3, Rs. 2, Rs. 1 per kg.for rice, wheat, coarse grains respectively . These are national coverage ratios to be adjusted state-wise so that the coverage is higher in poorer states.
2. The poorest of poor households would continue to receive 35 Kg foodgrains per household under AAY
3. Eldest Women of the household above 18 years to be head of the household for the purpose of issue of ration cards.
4. special focus on the needs of poorest of the poor, women and children.(Lactating mother will also receive maternity benefit of at least of Rs. 6000/-(INR 1000 for 6 months). Children in the age group of 6 months to 14 years will be entitled to take home ration or hot cooked food as per prescribed nutritional norms.)
5. In case of non-supply of foodgrains now people will get Food Security Allowance.
6. States to get assistance for intra-State transportation and handling of foodgrains
7. Eldest women is recognised as the head of the household
8. Grievance redressal
1. Increased role of PRIs, Women's SHGs
2. District Grievance redressal officers, State Food commission - provides for grievance redressal mechanism(at the district level) and penalty for non compliance by public servant or authority
3. Social audits and vigilance committees
4. PDS related records to be placed in public domain
5. Call centres & Helplines
9. Doorstep delivery of foodgrains to the TPDS outlets;
10. Application of information and communication technology tools including end-to-end computerisation in order to ensure transparent recording of transactions at all levels, and to prevent diversion;
11. Leveraging aadhaar for unique identification, with biometric information of entitled beneficiaries for proper targeting of benefits under this Ordinance.
12. Full transparency of records;
13. Diversification of commodities distributed under the Public Distribution System over a period of time;
14. Support to local public distribution models and grains banks.
15. The Center has proposed a committee of State Food Secretaries under the chairmanship of Union Food Secretaries to sort out issues of sharing expenditure towards intra-State transportation and handling of foodgrains, margins to fair price shop dealers and other implementation issues to ensure speedy implementation of National Food Security Act(NFSA).
Challenges:
1. Can we still uphold the right in the case of weak monsoon and subsequent fall in food production?
2. Need to streamline the PDS system and plugin the leakages and pilferage before making the food supply universal.
3. If the approach still is identification of a beneficiary, how will it be different from current scenario? Rigid targetting may only lead to exclusion of genuine BPL families and vulnerable APL families
4. Already some states are believed to have well developed PDS, this bill may seem retrograde.
5. Direct Benefit transfer - how will it adjust for the price fluctuations and the delay in payments will not be in sync with current inflation scenario.
6. Storage, Transport(planning to bring rail infra into the supply chain); Expansion of decentralised procurement.
7. Danger of over-centralisation of the PDS under the bill, at a time when many state governments are making good progress with reforming the PDS on their own
8. Better existing models:
1. TN already has universal PDS
1. FSB - Targetted coverage ; TN Model - Universal coverage
2. FSB - Rural population(75%), Urban Population(50%); TN - Rice free of cost to 1.8Crore families
3. FSB - Rice(INR 3/kg), Wheat(3/Kg), Millets(3/Kg); TN - Rice entitlements 12kg/month(min) - 20kg/month(max)
4. FSB - AAY beneficiaries to get 35kg/month; TN - AAY to get 35kgs/month
5. FSB - Food security allowance to be provided in case of non-supply; TN - Sugar to rice-drawing holders 500gms to max 2kg, edible oil and pulses at subsidised rates under special PDS
2. TN has 50% of the population in Urban areas => under FSB 25% of TN population will not be eligible for food entitlements.
9. India need to convince WTO that it is not violating AoA(Agreement on Agriculture) by this bill
10. Moving from household based entitlements(25kg/household) to percapita entitlements (5kg/person) . Could be disruptive if it is imposed overnight from the top. Could face resistance from the public.
3. AP and TN already has put in use Per-capita entitlements model
4. Population totals are better defined and better known than household counts and therefore better suited for determining state-wise allocations.
5. only 10% of the rural families have more than 7 members.// But this scheme of per-capita entitlements is done at a lower price than earlier, so it is more equitable
6. Adding a name to the ration card when a child is born tends to be difficult and enrollment is an issue even in the better governed states.
7. Could be disruptive in the states where per-household model works well (Chattisgarh, Odisha, HP,RJ)
8. Opinion:
6. Equity can be ensured without forcing states to adopt per-capita approach; Eg: by considering every nuclear family as a separate household(as in NREGA)
7. Central govt. could allocate grains on the basis of entitled population, and let states decide which approach to use.
11. The percentage of beneficiaries may vary from state to state(This would be based on caste & Socio-economic census) .Southern states' PDS will be affected b/c of this bill, since their existing quota will have to be diverted to other states unless our export of food grains to Europe to feed their cattle are curtailed or we import food grains from Vietnam or Thailand
9. Estimation of 18 states losing and 17 states and UTs gaining the quota (since it is based on population figures) - Losing states : TN, Kerala, Tripura; Gaining States: UP,Bihar, Gujarat
10. Estimated cut of 31.24L tonne to losing states and higher out-go of 110.28L tonnes to gaining states at subsidised rates (CIP)
11. Provision of additional grains at MSP
12. Leakages need to be plugged through (9-point strategy)
12. de-privatisation of ration shops (Community ownership of FPS SHGs )
13. end-to-end computerization - also a proposal of new independent agency manned by professionals to computerize PDS.
14. Aadhar - biometrics (authentication, portability)
15. Social audit
16. Leakages are minimum in AAY category, but high in APL category b/cAPL is not a fixed quota.
13. No clarity on cost-sharing formula b/n Centre and states.
14. Political consensus on these issues:
17. Cash transfers in lieu of food grains
18. Protection of present grain allocations to states
19. Framing of rules and guidelines
20. Ready-to-eat meals and fortified foods('energy dense' foods).
21. Role of Contractors and Manufacturers in ICDS
15. Demands of amendments on these issues
22. Raising the percapita entitlement from 5kg to 7kg
23. Inclusion of Pulses and Edible oil in PDS basket
24. Removing caps on percentage of eligible beneficiaries.
Dimensions:
1. the implementation of the legislation promises economy-wide benefits.
1. the guarantee of subsidised food grains, which constitutes a significant proportion of the consumption basket for most people, will have the immediate effect of increasing their disposable income. This is not trivial, given that the growth of consumption expenditure has doubled between 2009 and 2012
2. the provision can play the role of an economic stabiliser because food prices determine the floor wage level, which is why they are termed a wage good. The guarantee would thus not only help in controlling food prices but also stabilise wages. Indeed, it is perplexing that industry lobbies are attacking the provision of an enhanced social wage, from which they stand to benefit significantly.
3. if the fiscal deficit is run in an imaginative way, even more can be achieved. For instance, coupling the food guarantee to the MGNREGA can help in the construction of a countrywide network of godowns for the Food Corporation of India
2. a cash transfer scheme would negate much of the potential economy-wide benefits that would accrue from the implementation of the food security legislation.
3. Greater dependency of Centre on states to procure on their behalf ; High time centre and states rationalise tax structure (GST ); States monopoly in grain trade; 1972 : Centre tried to take over the grain trade, but political set up didn't allow this to happen;
Direct Benefit Transfer:
Prerequisites:
1. Financial inclusion with each beneficiary to have a bank or post office account
2. each bank and PO in India to have Internet Connectivity
3. to have an Aadhar number
4. each bank/PO account to be seeded with the Aadhar number
Benefits:
1. provides range of options. But vulnerable become more prone to market fluctuations ; So need to link DBT with nutritional outcomes (ie Conditional cash transfers), or food stamps (to buy Veg, Fruits, Micronutrients), or Mixed transfers.
2. Our strategy of DBT is essentially an attempt to streamline PDS. It talks about cash transfer of subsidy, not the total food grain ie When centre issues food grain to states at CIP, it bears food subsidy which is to be transferred to beneficiaries rather than to states directly and states are supplied grains at Economic cost. Beneficiary has to pay For Eg: Rs 3+ subsidy transferred to buy one Kg of Rice. It is qualitatively different from subsidy in cash given in-lieu of food grain. (Analyse its impact in terms of range of real choices(not spurious ones) it offers and transparency )
Case studies:
1. Brazil's "Bolsa familia" (food vouchers + PDS) solved 40% of its hunger problem
by A.Sunil Kumar
References: The Hindu and random articles in google
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