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Economy Jan 17, 2013

How TN is demolishing the centre’s cash transfer argument

By G Pramod Kumar

Tamil Nadu's message to union finance minister P Chidambaram on Wednesday that cash transfers instead of PDS amount to escaping from public responsibility is a line that all chief ministers, including from the Congress ruled states, should take.

Not based on populism or vote-bank politics, but evidence from the field.

Tamil Nadu's finance minister O Panneerselvam had adequate reasons for his reservations. His state has a universal PDS system and doesn't categorise people into BPL (below poverty line) and APL (above poverty line) when it comes to food security and hunger, as against the policy of the Centre.

Its PDS, despite all the inherent ills such as corruption, diversion and inefficiency, is a working model. The crowd at its shops ahead of this year's Pongal festival was a testament of its utility to people.

Tamil Nadu has been a leader in universalising food distribution. Now, at least three other states are moving towards universal PDS, while three others want to make it more inclusive. Recently, Chattisgarh government passed its own right-to-food bill that in effect universalises its PDS.

The Centre, given a chance, wants to do away with it and dole out cash.

Tamil Nadu has been a leader in universalising food distribution.Image Firstpost.

This is where the Centre's policy is at variance with what the states want or what the people want. Despite the initial hawkishness on cash transfer as the all encompassing panacea, the UPA government has gone more or less silent on the issue when it comes to PDS. However, if the states do not exert pressure, it might still take the trick out of its neo-liberal bag.

One of the key arguments for cash transfer instead of PDS is the reportedly limited use of the system by poor people and other defects such as pilferage, poor quality and services that deter the beneficiaries. The logic of supplies falling in to the wrong hands was used for targeting the beneficiaries - the introduction of APL and BPL categories -and restricting their entitlements.

Stating that half of the PDS-grains between 1971 and 2001 had been diverted and there were systemic problems with the system, the Planning Commission sounded absolutely certain that the PDS wouldn't work.

The states, as well as advocates of universal PDS, in fact, have sufficient reasons to prove the Planning Commission and the Centre wrong.

Writing in People's Democracy (the mouthpiece of the CPM), Archana Prasad presents evidence to show that coverage and efficiency improve as the system moves towards universaliation.

Based on a 2011 survey by economist Reetika Khera, she says that the expanded coverage in some states "has increased the efficiency of the PDS as it has reduced the diversion of PDS stocks." Based on the national sample survey data, she says that "the diversion went down from 52 per cent in 2004-2005 to 11 per cent in 2009-2010, whereas in Orissa it went down from 70 to 30 per cent in the same period."

Interestingly, the supporters of the cash-for-food, particularly Congress states such as Delhi, quote national sample survey data that suit them such as the incomplete coverage of the system. Instead of expanding the system to reach all the needy, when it actually starts working dramatically better, the Congress wants to abandon it altogether.

The biggest problem that deters the PDS is corruption, pilferage, diversion, poor weighing systems, irregular timings etc. What the system needs is reforms and not abandonment. Studies have shown that wherever the PDS is working well, people prefer food grains to cash. Contrary to what Sheila Dixit tells us, majority don't want cash, but a reformed and better PDS.

The Wadhwa Committee, as mandated by the Supreme Court, recommends strong state intervention in running the PDS shops and weeding out corruption to make it efficient and more useful to people. A glance of its reports on different states shows that the biggest challenge is the corrupt and inefficient way the PDS systems are run. The way to move forward is to reform.

When PDS When it reaches more people, there will be increased public pressure for efficiency and accountability, and it starts working better.Firstpost

The data is clear on the correlation between universalisation and efficiency. When it reaches more people, there will be increased public pressure for efficiency and accountability, and it starts working better.

Here are two relevant summaries of the Wadhwa Committee reports on Tamil Nadu and Kerala, which offer an interesting contrast between reality and myth. Tamil Nadu has a state-run universal PDS and Kerala, which seems to be pilot testing most of the central government policies, has a targeted scheme wherein the fair price shops are run by private entities.

On Tamil Nadu:

"The State Government of Tamil Nadu follows Universal Public Distribution System in place of Targeted Public Distribution System envisaged by the Government of India. The State Government has done away with the identification of APL and BPL families to avoid errors of exclusion of eligible and vulnerable families. However, State has identified AAY beneficiaries. The Universal Public Distribution System ensures food security to every family cooking separately. It is left to the choice of the families to opt for the type of cards they can hold based on their need and preferences."

On Kerala:

"That PDS in Kerala is best in the country is a myth. The system is as corrupt as in any other States which the Committee visited and submitted reports. It was however, stated before the Committee that the State was best when there was distribution of PDS on Universal Rationing System basis. It must however be noted that Kerala is deficit State in terms of production of foodgrain. PDS is of great relevance and importance in the State. It is thus, all the more necessary that PDS in the State is strengthened. Committee has suggested that in order to combat corruption and for strengthening PDS there has to be zero tolerance approach. Everything appears to be fine on paper but its implementation is faulty. The whole system has to be revamped."

There is overwhelming evidence universalisation is one of the ways to make the PDS work. More over, poverty is dynamic and there is a no guarantee that a person who is APL today doesn't slip into BPL. Hence this categorisation is against the logic of social protection.

Tamil Nadu has shown the way with a universal system followed by Himachal where APL groups pay a slightly higher price. Andhra Pradesh has 80 percent coverage, while Orissa, Rajasthan and Jharkhand want to make it more inclusive.

And the Centre has its own logic. Its pundits should realise that mathematical models and skewed reading of data often don't tell the complete story. The real story is with the millions of people in the field.

by G Pramod Kumar

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