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LATEST NEWS UPDATES | Decision soon on cash-for-food dole

Decision soon on cash-for-food dole

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published Published on Aug 21, 2010   modified Modified on Aug 21, 2010


The government will soon have to decide on the proposal of direct cash payments in lieu of food subsidy as a key committee of Parliament has asked the ministries concerned to decide quickly on the issue.

This cash payment through smart cards is increasingly being seen as an option to prevent leakage in the public distribution system (PDS), and certain variants of the system are already being experimented with by some states.

In September 2008, the department of food and public distribution had proposed payment of food subsidy in cash to the eligible beneficiaries instead of subsidised food. The subsidy amount was proposed to be paid into the bank accounts of the women heads of the households, giving them freedom to buy foodgrain from open market. This would have meant that the foodgrain distributed through the PDS could be priced at market rates, preventing diversion of the subsidised foodgrain. The proposal is pending with the finance ministry.

The standing committee on food, consumer food and public distribution has in its report urged the finance ministry and the department of food to take an early decision on the proposal. The economic cost of wheat sold through the PDS is Rs 1,544 a quintal, but the issue price to the poorest, the antyodaya families, is only Rs 200 a quintal. This huge differential creates a big incentive for pilferage of foodgrain allocated for the poor and sold in open market at higher price.

In a system of cash distribution of subsidy, the PDS food could be priced at the economic cost, leaving no incentive for diversion. The government’s food subsidy bill has jumped to Rs 58,242 crore in 2009-10 from Rs 23,828 crore in 2006-07.

Food coupons, a variant of the system, is being implemented by some states on pilot basis. Andhra Pradesh has issued bar-coded coupons for sale of rice and kerosene under the targeted PDS to ensure that there is no false accounting in distribution of essential commodities by the fair price shop (FPS) dealers. Bihar provides monthly food coupons to below poverty line and antyodaya anna yojana families for a year and food grain are distributed to families on the basis of such coupons.

The Economic Survey for 2009-10 also talks about the need to move towards a coupon system for delivering various subsidies.


The Economic Times, 21 August, 2010, http://economictimes.indiatimes.com/news/economy/policy/Decision-soon-on-cash-for-food-dole/articleshow/6384470.cms


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