JOIN USThe most serious mistakes are not being made as a result of wrong answers. The truly dangerous thing is asking the wrong questions”. The famous thought of Peter Drucker finds a suitable parallel in the present debate on alternate food subsidy interventions.
The questions raised should focus on the effectiveness of cash versus in-kind transfers in achieving the central objective of food security of vulnerable households. However, it is increasingly being seen that the focal point of the questions raised and discussions thereon is on the administrative feasibility, cost efficiency and relative strengths and weaknesses of both the cash and in-kind subsidy regimes. In the process, the central objective of these interventions gets sidelined.
The phased substitution of Public Distribution System (PDS) and administered pricing for fuels and fertilizers by Cash Transfers (CT) proposed in the Union Budget for 2011-12 has been one of the most debated issues in the recent times. While CT is not a new idea, it has gained momentum with the expansion of biomarker-based Unique Identity System (UID). Undoubtedly, CT would reduce market distortions, make administration easier, reduce transaction costs and facilitate a more personalised choice of consumption for the beneficiaries.
In this context, it would be prudent to examine the key element of food security system in India - the PDS. The core objective of PDS is to provide certain essential food grains at affordable prices to the vulnerable sections. Studies on Targeted Public Distribution System (TPDS) have brought to the fore gross irregularities in the identification of beneficiaries resulting in large exclusion of the needy and inclusion of the non-poor households. In her paper, “Programmes to protect the poor: Lessons from India”, Madhura Swaminathan pointed out a glaring anomaly in TPDS – In 13 out of 27 States (excluding Tamil Nadu), the proportion of poor households without a BPL/Antyodaya card was higher than the proportion with a BPL/Antyodaya card. My doctoral study on TPDS in Kerala also elaborates how policy and implementation issues of the targeted programme could derail a world renowned rationing system.
Despite the drawbacks of TPDS, CT is also envisaged on the same lines. The exclusion of the needy, hence, continues to be as potent a problem in CT (the only likely improvement is the reduction of ghost cards). Though reduction in leakage is hailed as a potential benefit of CTs, the new regime could prove to be more leakage prone as diverting cash would be rendered easier than diverting commodities. It is also doubtful if the slow bureaucratic decision making process could routinely bring CTs in line with the inflation trends. One of the most significant but less discussed issue is the in-equitability of CTs vis-à-vis the vast variation in retail prices of food grains across the country. A CT fixed uniformly for all beneficiaries, will implicitly benefit the poor in regions with lower market prices while being disadvantageous to the poor in regions with higher market prices. It is highly ironical that CT, a food subsidy intervention, does not guarantee food intake. The oft-repeated suggestion of directing cash to women to address the issue cannot be expected to provide desired results, given the predominantly patriarchal Indian society. The issue of identification of beneficiaries would be no less complicated for fuel and fertilizers. Given the above, CTs could only be a substitute for universal in-kind transfers or where beneficiaries can be easily identifiable.
In a country with 38 percent people below poverty line (officially accepted estimates) and with malnutrition worse than many Sub-Saharan countries, CTs (in the presently suggested form) seem to be grossly ill-equipped to make a significant dent on food insecurity and poverty. A superior alternative (though not a solution to the targeting problem) could be food vouchers or smart cards with purchases restricted to the prescribed commodities. It is worthwhile mentioning that CTs have been more successful in countries with an extensive public provision of services. The initiative is doomed to fail in India if it is seen as a substitute for public provisioning.
To conclude, the sense of urgency in overhauling the poverty programmes of the country is welcome, the replacement of it with a system, which seems ill-equipped to achieve the stated objectives, hardly deserves merit. Contrary to what German poet Johann Wolfgang von Goethe said, the solution of every problem must not be another problem.
(The writer is Associate Professor in the Centre for Poverty Studies and Rural Development, Administrative Staff College of India, Hyderabad.)
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