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Centre takes steps to convert PDS to cash transfers -Nitin Sethi & Surabhi Agarwal
-Business Standard

The Union government has remained equivocal in public about the Shanta Kumar report and whether the National Democratic Alliance intends to follow up and change the National Food Security Act. But at least on one count it has moved fast to implement the report - converting the subsidised food supply into cash transfers under the Direct Benefits Transfer Scheme. The food ministry has written to the Union Territories to shift from physical supply of subsidised foodgrain to cash transfers. It is also readying plans to pilot this shift in some states, focusing first on urban areas.

Business Standard reviewed letters written by the Union food ministry to the state and Union Territory governments on the issue. The letter sent on February 10 reads, "Government is looking forward to implement DBT for food grains initially in Union Territories and few districts of the states on pilot basis."

The Shanta Kumar committee, meant to reform the management of the Food Corporation of India, had gone much further ahead and recommended that the government should progressively move away from distributing food and towards cash transfers. It had also recommended that the subsidy for food should be restricted to a maximum of 40 per cent of the population instead of the existing minimum 67 per cent limit under the National Food Security Act. Since then, food ministry officials have claimed off the record the government would not go for the 40 per cent cut-off limit but they have not publicly clarified the government's stand on all the recommendations of the high-level panel set up by the NDA government.

The first evidence that the government is moving fast on implementing other parts of the report comes from letters written by the food ministry to the states on converting the physical distribution of subsidised grain to cash transfers.

NDA has offered the states and the Union Territories three ways to convert the subsidised food supply to cash transfers. One option provided is that cash is transferred to the bank accounts of beneficiaries every month and they are left to purchase the foodgrain from the market. In the second option, the ration shops would be provided grains at near market prices or at minimum support price (that the farmers get for their produce). The people will be then asked to buy this grain at the market rates and the difference between the central issue price (the rate at which the Centre releases subsidised grain to the state for PDS) and the market price would be deposited in the beneficiaries' accounts. In the third option, the governments would continue to provide the subsidised grain but the authentication of beneficiaries would be done through Aadhaar and an electronic database.

Sources said the government was keen to move the Union Territories and urban areas towards the first option as it was difficult to ensure supply of grains in rural India without state intervention.

The issue of substituting cash for foodgrain has been a political hot potato since the UPA regime days and continues to be so in the present NDA government. "The decisions are more political in approach," said a government official privy to the plans.

Some states, such as Andhra Pradesh have linked their PDS mechanism to Aadhaar cards but only for authenticating beneficiaries not for converting cheap foodgrain supply to cash transfers.

The NDA government has asked that states TO completely digitise their data of beneficiaries - referred to as priority households or BPL households - and then link the Aadhaar numbers of the beneficiaries with these cards.

In its letter, the ministry has said, "The complete digitisation of beneficiary data and Aadhaar seeding is a precondition."

The ministry has held one video-conference on the issue with the states and Union Territories and also held a meeting of the UT administration with the DBT authorities to fast-pace the process. The Union Territories were told in February to identify which of the three options they would go with and have a comprehensive plan ready to implement the conversion of food grains supply to cash transfers by the end of the month. All the states have been asked to provide monthly reports to the Centre on how they are implementing these changes.