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PDS: Reform or Reject? by Rukmini Shrinivasan

Some interesting findings emerging on the Public Distribution System.

A recent study of 100 villages in nine states says that leakages in the Public Distribution System are being plugged and diversion of grain has reduced, except in Bihar. The bad news, the researchers say, is that there are serious deficiencies in the BPL list.

The study was conducted in 106 randomly selected villages in two districts each of Andhra Pradesh, Bihar, Chhattisgarh, Himachal Pradesh, Jharkhand, Orissa, Rajasthan, Tamil Nadu, and Uttar Pradesh. It covered 1,227 BPL and Antyodaya households, and was coordinated by development economists Reetika Khera and Jean Dreze.

The study found that with the exception of Bihar, all states are experiencing a turnaround in the performance of the PDS thanks to state-level initiatives and most families are getting the bulk if not all of their entitlement. “The days when up to half of the PDS grain was ‘diverted’ to the open market are gone,” the researchers say.

The study found that the sample households in Andhra Pradesh, Orissa, Chhattisgarh, Himachal Pradesh and Tamil Nadu were getting over 90% of their quota. In Bihar, however, sample households reported getting only 45% of their quota.

State          Avg purchase of grain
               by sample households as
               a % of total quota


Andhra Pradesh  99
Orissa          97
Chhattisgarh    95
Himachal        93
Pradesh
Tamil Nadu      92
Rajasthan       87
Uttar Pradesh   77
Jharkhand       71
Bihar           45
All nine        84
states

Source: Survey led by Khera and Dreze, 2011

This study echoes findings by Khera published in May this year based on National Sample Survey data which showed that there was substantial variation in the performance of states. Khera groups states into three categories: “functioning”, which includes all four southern states, Maharashtra, Himachal Pradesh and Jammu and Kashmir; “reviving”, which includes Orissa, Chhattisgarh, Madhya Pradesh, Uttarakhand and Uttar Pradesh; and “languishing” which includes Haryana, Punjab, Rajasthan, Bihar, Jharkhand, West Bengal, Assam and Gujarat.

It is this variety of experience that needs to inform the PDS debate. When I interviewed (free registration for full article) renowned labour economist Guy Standing two weeks ago, he made a strong push for cash transfers, condemning the PDS as “chronically inefficient”. Khera’s EPW article shows that the Indian state with the lowest leakage of grain – 4.4% - is Tamil Nadu, the only state with a universal PDS, and one that Standing admits not to knowing about. So the intellectual leap that many like Standing are making, from a PDS caricatured as inefficient to cash transfers, is not one I can get on board with if it does not stop to accommodate the Tamil Nadu and Chhattisgarh experience.

Khera and Dreze say that in states where the PDS was working better, respondents were opposed to cash transfers because of concerns over price rises and difficulties with bank payments. Only in parts of UP and Bihar was there substantial interest in cash transfers

Of course social welfare is not about efficiency alone, and it could be argued that it should also incorporate choice. I do feel that communities should have a greater say in what sort of food they would like to eat; the rice/ wheat diet enforced by the centrally planned PDS does not take into consideration the way India really eats. But here too, I do not see cash as the immediate corollary; as the economist Himanshu pointed out to me in an interview, the food subsidy is for a specific purpose, i.e. improving nutrition. It is not meant to combat poverty. A cash transfer, on the other hand, could potentially combat poverty, but that should not be confused with the nutrition debate.

The biggest problem, Khera and Dreze say, is that the BPL list is seriously deficient. As I’ve said before, targeted schemes are the ones with the worst track record in reaching the poor. The stand out performance in the PDS of Tamil Nadu and Chhattisgarh, with universal and near-universal access respectively, only reinforces this.