World Bank for cash transfer to revamp PDS

The World Bank came out with the recommendation amid a controversy over a pilot study to assess suitability of cash-transfer as an alternative to supply of grains through PDS.
The study, funded by the United Nations Development Programme, is being carried out by Sewa Bharat in a village in west Delhi. But Paribartan, an NGO headed by eminent RTI activist Arvind Kejriwal, is protesting against the study.

The World Bank in its report titled “Social Protection for a Changing India” also warned of resistance from Food Corporation of India or similar agencies in the states and the fair price shop owners to reforms in the PDS. It notes that the FCI has been “inefficient” in handling grains under the PDS.

“The FCI alone employs around 4,50,000 people in India, and state food corporations a further number. This in itself is a strong lobby, which is likely to resist any changes in the PDS that implies either a potential role for the private sector in grain provision, or more fundamentally a shift in use of the PDS subsidy from food purchase and distribution to cash for poor households,” the World Bank noted.

John Blomquist, World Bank’s Lead Economist for Social Protection in India, observed that though the PDS absorbed almost 1 per cent of the GDP in India, its benefits for the poor had been limited due to high leakage and diversion of grains. “Only 41 per cent of the grains released by the government under the PDS reach the households, with some states doing much worse.”

The Planning Commission in 2001 estimated the nationwide leakage of grains meant for below poverty line families at 58 per cent.

UPA proposal

The international financial institution’s recommendation for a cash-based reform of the PDS appears to be in line with the Congress-led UPA Government’s thoughts, as Finance Minister Pranab Mukherjee had articulated in his budget speech in the Lok Sabha on February 28 last.

Left parties have opposed the move and advocated strengthening the PDS.
While preparing the draft Food Security Bill, the National Advisory Council headed by Congress president Sonia Gandhi, too, pondered over the proposal to move towards cash-transfer. “We discussed it (cash-transfer), but it was felt that the huge amount of food grains procured by the government would go waste if we switch to cash transfer.

We also need a good banking structure even in the remotest areas to make it work,” said N C Saxena of the NAC’s Working Group on Food Security.

“We need to wait 10-15 years before going for cash transfer,” he told Deccan Herald. It also notes that the reform in the PDS will have legal implications, with respect to Supreme Court’s orders and the proposed Food Security Bill.