Will food coupons work?

Several studies in India have shown that more than 40 per cent of foodgrain meant for the poor is pilfered on the way.

In order to ensure that food reaches the needy and the hungry across the country, the government has launched a series of steps to streamline the public distribution system (PDS). Among several initiatives being planned, especially in the light of the National Food Security Act under preparation, a scheme to provide food coupons is being tested on a pilot basis in Delhi, Bihar and Uttar Pradesh.

Several researchers had supported the idea. Kaushik Basu, chief economic advisor to Government of India, had also backed the proposal saying “the subsidy should be handed directly to the poor household instead of giving it to the PDS shop owner with the instruction it is transferred to the poor. This can be done by handing over food coupons to BPL households, which they can use as money to buy food from any store. The store owner can then take the coupon to any bank and change it back for cash.” On the face of it, it looks to be a more sensible and effective mechanism to deliver food to the hungry. But is it really so?  

Basu’s thesis was based on the American experience with food stamps. In fact, food stamp is an idea which originated from the United States, and is now being followed in several other countries with varying degrees of success. India too is trying to borrow the scheme from America, as an answer to the massive pilferage of foodgrains from the PDS. Several studies have shown that more than 40 per cent of foodgrain meant for the poor are pilfered on the way. Much of the foodgrains finds its way to neighbouring Nepal, Bangladesh and Burma. Rampant corruption in public distribution erodes the very basic purpose of ensuring food and nutrition security.   

Much has been said and written about the efficiency of the food stamp programme in the United States. I am not sure on what basis were these studies compiled, and whether someone had really gone and closely scrutinised the food distribution programme. The Supplemental Nutrition Assistance Programme (SNAP), as it is called in the US, uses food stamps to reach 46 million hungry – one in every seven Americans. And like everywhere else, the US government too has slashed the financial allocation for the food stamps programme by $4.5 billion this year.

Nevertheless, what we are looking here is how effective has the food stamp programme been in ensuring nutritional security. California-based organisation ‘Eat, Drink Politics’ has in a recent report come out with some startling revelations providing an insight into how the hunger programme adds to the profits of some of the big corporations and banks. Several giants like Coca-Cola, General Mills, Wal-mart and banks like JP Morgan Chase have reaped windfall from the food stamps programme.

I am therefore not surprised to see the ministry for food and consumer affairs trying to push for inclusion of private companies in public distribution in India under the garb of public-private partnership. Sooner than later, we will see private companies getting into food distribution on the American pattern in India.           

According to the report, “States are seeing unexpected increases in administrative costs, while banks and other private contractors are reaping significant windfalls from the economic downturn and increasing SNAP participation. Although a full national accounting of these contracts is not available from the US Department of Agriculture (which administers SNAP), we know that a handful of corporations fight doggedly for these deals, and they are not in the charity business.”

In just one year, Wal-mart received more than $ 33 million for nine supermarket centres in the province of Massachusetts, which is four times the money spent at farmers markets across the nation under the same programme. It also got half of the $1 billion spent in Okhalama state. ‘Eat, Drink Politics’ was unable to obtain data of the total money claimed by Wal-mart for feeding the entire country. JP Morgan Chase has been one of the biggest recipients of the financial allocations. In Florida alone, Chase has a five-year contract worth $ 83 million.

The US Department of Agriculture did not divulge how much money was paid to Coca-Cola and General Mills. But the researchers conclude that food corporations and industry giants have been lobbying hard to include junk foods like candy and soft drinks in the supplemental nutrition programme. Despite nine states restricting junk food purchases, these giants have been exerting pressure to allow the sales of unhealthy products.

Isn’t it therefore amusing to learn that Kaushik Basu had even provided details of the approaches needed to plug the loopholes in the coupon distribution and had suggested its integration with UID programme. If in the US, the food stamp programme ends up adding profits to the corporate balance sheets, isn’t it time that India looks at how to make it more effective in its own ingenious way rather than blindly aping the US experience? Whether it is the PDS or the food stamps programme, what has become crystal clear is that it is either big business or the corrupt middlemen in the distribution chain who laugh all the way to the bank.