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Resource centre on India's rural distress
 
 

People prefer PDS over cash transfers

What is government planning to do with the Public Distribution System (PDS)? The answer lies in an old adage: Give a dog bad name and hang him! The common impression is that the PDS is not working because of pilferage and hence it is taken as a foregone conclusion that it needs to be replaced with cash transfer.

Two empirical studies conducted recently, one of them by noted economists Jean Dreze and Reetika Khera and the other by the Delhi-based Rozi Roti Adhikar Abhiyan, tell us that the poor people indeed prefer food grains over cash transfer directly in their bank accounts. Many free-market economists have been rooting for direct cash transfers instead of a faulty PDS in ways that replace government responsibility with market mechanisms. However, their claims are based on the experiences of other countries while the studies mentioned above have been conducted among the poorest of India’s poor households. Many civil society organizations and rural NGOs believe that a reformed PDS on the lines of Chhattisgarh and Andhra Pradesh models might work better.

Dreze and Khera conducted their survey at two blocks each in two districts of the following nine states: Andhra Pradesh, Bihar, Chhattisgarh, Himachal Pradesh, Jharkhand, Orissa, Rajasthan, Tamil Nadu and Uttar Pradesh. Their survey was conducted in 12 households each in six villages of the two blocks mentioned above covering 1,227 BPL and Antyodaya households.

It was found that only about 18 per cent of these families of Antyodaya and BPL households spread over 106 villages preferred cash transfer over food grain while over 67 per cent preferred PDS grain through their ration shops. The cash transfer was given as an option mostly in areas where PDS was not working fine, particularly in Bihar, UP and Jharkhand. However in areas where PDS has improved over the past few years, people want to continue to take their PDS rations from ration shops and the proportion is as high as 91 per cent in Andhra Pradesh, 90 per cent in Chhattisgarh and 88 per cent in Orissa. (see the table 1 below and the url of the Dreze/ Khera study at the bottom)

The biggest finding of Dreze and Khera’s study is that rather than sick and useless, the PDS is working extremely well in the states where a combination of high market prices of grain, low prices offered by the PDS shops and the favourable political will of the state governments is resulting in more and more people using their entire quota of food grain offered under BPL and Antyodaya schemes. (Many states are also using technology like GPRS, GPS, SMSes and biometrics to stop pilferage. For details see http://www.im4change.org/news-alert/indian-states-use-tech
nology-to-build-accountability-3259.html).  

The Rozi Roti Adhikar Abhiyan (RRAA), Delhi, which is a network of about 30 organisations, conducted its study (4,005 households in Delhi) in the national capital’s slums in the backdrop of Delhi Government suggesting dismantling of the PDS in favour of smart cards. The study found that given the choice between a reformed and improved (“sudhar”) PDS or cash transfers in lieu of PDS foodgrains, over 90 per cent of the respondents in the sample said that they would prefer a reformed PDS over cash transfer, while 5 per cent chose cash transfers and another 3.6 per cent had no opinion. The number was even higher among the Antyodaya (91.7%), BPL (94.5%) and APL (90.1%) who would go for improved PDS. Only 3.6% of BPL respondents, 7% of APL respondents and 5.8 percent of Antyodaya respondents preferred cash transfers over reformed PDS (please check table 2).

The Delhi Government is also conducting its own pilot study in partnership with Self Employed Women’s Association (SEWA, http://www.sewa.org/) and India Development Foundation (IDF, http://www.idfresearch.org/) but the findings of this study are awaited. The Delhi Government move came after the Central Government constituted a task force headed by Nandan Nilekani to work out the modalities for the proposed system of direct transfer of food and kerosene subsidies into users’ accounts with the aid of Aaadhar identity cards.

Table 1: Cash versus food (BPL plus Antyodaya in Dreze/ Khera study)
Table 1
The survey was conducted with the help of well-educated University and college students trained for the purpose by the surveyors. The authors, Dreze and Khera, have also included in their survey various reasons given by people to prefer either cash or food as shown in the table below:

Table 2: Reason for preferring cash or food (Dreze and Khera study)
Table 2 1

Table 3: Preference between reformed PDS and cash transfers (RRAA Study)
Table 3 1


It is mainly the daily wage earning households (almost 92.4 per cent) who preferred PDS over cash, while 90.4 percent of the salaried preferred the same (for more check table 4).

Table 4: Occupation-wise choice between cash & reformed PDS (RRAA study)
Table 4

Further readings:

Survey on preference between PDS and cash transfers in Delhi by Rozi Roti Adhikar Abhiyan, Delhi, http://www.indiaenvironmentportal.org.in/reports-documents
/survey-preference-between-pds-and-cash-transfers-delhi   

PDS leakages: the plot thickens by Jean Drèze and Reetika Khera, The Hindu, 12 August, 2011,
http://www.thehindu.com/opinion/lead/article2351414.ece?ho
mepage=true   

PDS: Signs of revival by Reetika Khera, The Hindu, 12 June, 2011,
http://www.hindu.com/mag/2011/06/12/stories/2011061250110400.htm    

PDS: Reform or Reject? by Rukmini Shrinivasan, The Times of India, 27 July, 2011,
http://blogs.timesofindia.indiatimes.com/developmentdialog
ue/entry/pds-reform-or-reject    

Dreze urges PM to keep cash out of food security Bill by Sreelatha Menon, The Business Standard, 22 July, 2011, http://www.business-standard.com/india/news/dreze-urges-pm
-to-keep-cash-outfood-security-bill/443542/    

NFIW against cash transfers in lieu of foodgrains, The Hindu, 26 July, 2011,
http://www.thehindu.com/todays-paper/tp-national/article22
94129.ece  

How much will cash transfer cost? by Himanshu, Live Mint, 7 June, 2011,
http://www.livemint.com/2011/06/07204306/How-much-will-cas
h-transfer-co.html  

A Case for Reframing the Cash Transfer Debate in India by Sudha Narayanan, EPW, Vol XLVI, No. 21, 21 May, 2011, http://www.im4change.org/rural-news-update/a-case-for-refr
aming-the-cash-transfer-debate-in-india-by-sudha-narayanan
-8027.html  

Cash Transfers as the Silver Bullet for Poverty Reduction: A Sceptical Note by Jayati Ghosh, EPW, Vol XLVI, No. 21, 21 May, 2011, http://www.im4change.org/rural-news-update/cash-transfers-
as-the-silver-bullet-for-poverty-reduction-a-sceptical-not
e-by-jayati-ghosh-8026.html  

Give cash some credit by Guy Standing, The Indian Express, 28 May, 2011,
http://www.indianexpress.com/news/give-cash-some-credit/796426/  

Making food subsidies work better by Pradeep S Mehta, The Business Standard, 31 July, 2011, http://www.business-standard.com/india/news/pradeep-s-meht
a-making-food-subsidies-work-better/444365/  

Law vs governance, The Business Standard, 29 July, 2011, http://www.business-standard.com/india/news/law-vs-governa
nce/444174/  

Will the food security Bill ensure nutrition for the poor?, The Business Standard, 27 July, 2011, http://www.business-standard.com/india/news/willfood-secur
ity-bill-ensure-nutrition-forpoor/443932/  

'Rs 1,000 instead of grain terrible idea', The Hindustan Times, 19 May, 2011,
http://www.hindustantimes.com/Rs-1-000-instead-of-grain-te
rrible-idea/Article1-699599.aspx  

No grain but cash for Delhi poor by Tarun Nangia, Express News Service, 22 May, 2011, http://expressbuzz.com/thesundaystandard/no-grain-but-cash
-for-delhi-poor/276630.html  

NGOs oppose direct cash transfer to poor families, News One, 19 May, 2011,
http://www.inewsone.com/2011/05/19/ngos-oppose-direct-cash
-transfer-to-poor-families/51624  

Cash-transfer scheme: Pilot study in trouble, govt writes to cops, Express News Service, 20 May, 2011, http://www.indianexpress.com/news/cashtransfer-scheme-pilo
t-study-in-trouble-govt-writes-to-cops/793439/  

NGOs question Delhi move to give cash subsidies in place of foodgrains, The Hindu, 20 May, 2011, http://www.thehindu.com/todays-paper/tp-national/tp-newdel
hi/article2033843.ece  

Move to provide cash instead of foodgrains in Delhi questioned, The Business Standard, PTI, 19 May, 2011, http://www.business-standard.com/india/news/move-to-provid
e-cash-insteadfoodgrains-in-delhi-questioned-/135754/on  

Central Delhi to be test case for cash transfer by Sobhana K, The Indian Express, 5 May, 2011, http://www.indianexpress.com/news/Central-Delhi-to-be-test
-case-for-cash-transfer/786089/  

Madhya Pradesh's high-tech solution for PDS by Latha Jishnu and Jyotika Sood, Down to Earth, 15 September, 2011, http://www.downtoearth.org.in/content/madhya-pradeshs-high
-tech-solution-pds  

Don't replace subsidised food with cash: Swaminathan, The Economic Times, IANS, 18 August, 2011, http://economictimes.indiatimes.com/news/economy/policy/do
nt-replace-subsidised-food-with-cash-swaminathan/articlesh
ow/9645607.cms  

Direct disbursement of food subsidy in cash under examination, PTI, Live Mint, 31 August, 2011, http://www.livemint.com/2011/08/31155200/Direct-disburseme
nt-of-food-su.html  

Revamping PDS: a tale of two States by Mahim Pratap Singh, The Hindu, 12 August, 2011, http://www.thehindu.com/news/states/other-states/article23
50323.ece   
 
Dividing the poor by TK Rajalakshmi, Frontline, Volume 28, Issue 19, 10-23 September, 2011, http://www.frontlineonnet.com/stories/20110923281904200.htmCash transfers to poor a faulty move, says NGO, The Economic Times, 6 September, 2011, http://economictimes.indiatimes.com/news/economy/policy/ca
sh-transfers-to-poor-a-faulty-move-says-ngo/articleshow/98
84617.cms
 
Do Poor People in Delhi want to change from PDS to Cash Transfers? A Study conducted by SEWA Delhi, October 2009, http://www.sewabharat.org/Delhi%20cash%20transfers%20english.pdf
 
A PDS that works is better than cash transfers,  Infochange News & Features, July 2011, http://infochangeindia.org/agriculture/features/a-pds-that
-works-is-better-than-cash-transfers.html
 
No substitute for PDS by Kuber Nag, 3 September, 2011, The Hindu, http://www.thehindu.com/arts/magazine/article2420775.ece