Targeted Public Distribution System: Lessons from Food Deficit State In India

Network of Asia-Pacific Schools and Institutes of Public Administration and Governance (NAPSIPAG) Annual Conference 2005 BEIJING, PRC, 5-7 DECEMBER 2005 THEME: THE ROLE OF PUBLIC ADMINISTRATION IN BUILDING A HARMONIOUS SOCIETY Workshop on Public Administration Strategies that Help or Hinder Societal Harmony Targeted Public Distribution System: Lessons from Food Deficit State In India Dr. Jaya S Anand Associate Professor Institute of Management in Government Kerala, India 1

I. INTRODUCTION This paper examines the impact of targeted Public Distribution System in the State of Kerala (in India). The paper examines the strengths and weaknesses of Targeted Public Distribution System (TPDS) and how the strategy has failed to achieve the objectives envisaged, thereby widening the rich-poor disparities leading to societal disharmony. Field experiences show that the targeting has led to division of the society into Below Poverty Line (BPL) and Above Poverty Line (APL) with the introduction of dual type of ration cards. This underscores the fact that public administration strategies when carried out in the wrong way, even with the best intentions can pave way for greater inequality and thus to more poverty. II. CONCEPT OF TARGETING The targeting of welfare programmes is a subject of world-wide interest and the debate for and against targeting among economist and advisors is going on. The term targeting refers to identifying eligible or (needy) individual and screening out the ineligible for the purpose of transferring resources typically by defining the eligibility criteria (Devereux 1999). The basic idea behind targeting in all welfare programmes falls under 3 general headings (Gebrehiwot,2001). Humanitarian reasons: So that the really needy are assisted and the less needy do not benefit unfairly. Resource and efficiency reasons: So that the scarce resources are used in such a way that they have the greatest impact on the problem to be addressed and Development reasons: So that dependency and economic disincentive effects (at all levels from household to the national) are minimized. For those whose primary concern is equity, such targeting holds at the prospects of channelising maximum benefits to the most vulnerable group, while for those focusing on saving money (Govts, funding agencies), it is likely to be considerably cheaper option than blanket distribution or general food subsidies. The World Bank and IFPRI have all come out strongly in favour of targeted intervention to promote food security and mitigate the social costs of economic adjustment on the poor (Vivian 1995). III. TARGETING THE PUBLIC DISTRIBUTION SYSTEM IN INDIA The PDS is the key element of the food security system in India particularly for the poor. It is an instrument for ensuring availability of certain essential food grains, (mainly rice, wheat, sugar and kerosene) at affordable prices. Households are given a ration card that entitles them to buy fixed ration of these commodities The Government through the Food Corporation of India (FCI) procures and stocks food grains, which are released every month for distribution through the PDS network across the country. The responsibility of implementing, monitoring and enforcing legal provision is with the respective State Governments. Earlier, Public Distribution System was a general entitlement scheme to all consumers without any targeting. However, the Government of India in 1997 introduced targeting in the PDS in the form of targeted PDS. The main features of TPDS has been the introduction of targeting or specifically, the division of the entire population into below poverty line (Below Poverty Line) and above poverty line (APL) categories based on the poverty line defined by the Planning Commission. Food grains are now allotted at two sets of prices, a highly subsidized price for the poor and near open market price for others. The targeting it was hoped could play a more meaningful role by translating the macro level self-sufficiency in 2

food grains achieved by the country into macro level by ensuring food availability to the poor households(ministry of Civil Supplies,1997).. Two more schemes were introduced in PDS later on, one in 2000, the Antyodaya Anna Yogana Scheme (AAY), which provides rice and wheat at very nominally price to the poorest of the poor, and the other Annapoorna Scheme, which provides monthly free rice for those above the age of 65 years who are not receiving any pension. General Situation in Kerala. Kerala is a relatively small state (area 38000 sq km population 30 million), in the south-west corner of India. Kerala s development experience has been what HDR 1996 would call a course of lopsided development with its remarkable human development achievements well comparable with developed countries and an unmatchable economic growth. Food security in Kerala also present a unique picture.. Kerala is known as a 'food deficit' state in India because of the wide gap in the consumption and production of foodgrains especially rice, which is the staple diet of the population. The area and production of rice since the mid -seventies had been witnessing steep decline owing to several factors like sharp rise in the prices of fertilizers and wages, non-availability of labour and preference for more remunerative cash crops. It may be noted that the area under rice, the staple food crop of Kerala has drastically declined from 8.75 lakhs he in 1970-71 to 3.5 lakh he in 1999. Kannan (2000) in his working paper on 'Food Security in a Regional Perspective: A view from food deficit' Kerala, mentions about the extent of this deficit, which has increased overtime. Kerala's deficit in rice, which was 55 percent in the mid-seventies, has increased steadily and stands at more than 75% of its requirement in 2000. At present, hardly 10% of the food grain requirement is met from the State (Economic Review,2004) Trends in food production of Kerala thus show an alarming situation and this coupled with unemployment can seriously enhance the States vulnerability to food security. The Expert Committee (Govt. of Kerala,1990) which examined this issue remarked that it is not possible for the State to become self sufficient in food and hence emphasized the need for achieving food security rather than food self sufficiency. Food Security in this context assumes great significant as it refers to the ability to ensure access to food to its population through a variety of means. The Public Distribution System (PDS) in Kerala is a government mechanism to ensure food security system so as to reduce the vulnerability of the state in food security arising out of external shocks such as a decline in production, and movement restriction. It is well known that Kerala had one of the best run and most effective PDS with a near universal coverage. To quote the High Level Committee Report (Government of India, 2003) in Kerala, in the mid ninetees, around 95% of households were covered by PDS & the monthly entitlement of grains satisfied the minimum cereal requirements as recommended by Indian Council of Medical Research. The offtake of rationed articles from PDS had also been quite high than in most other states: However, the shift in the Government policy and targeting of PDS restricting subsidy to Below Poverty Line (BPL) families since 1996-97 has opened the Pandora's box. The serious implications including the flaws in targeting and division of the entire community into Above Poverty Line (APL) and BPL has made the system ineffective and the cry for revamping Public Distribution System is now by and large supported by the entire society. IV. OBJECTIVES AND METHODOLOGY The study seeks to examine a) the extent to which the consumers particularly the vulnerable depend on PDS for food grains, 3

b) the effectiveness of targeting and to identify the flaws in TPDS like errors of exclusion of the eligible poor etc. The study is empirical and had used. both primary and secondary data extensively for analyzing the objectives laid down Initially an exploratory study was conducted by survey of secondary date available, by holding Focus Group Discussions with officials of implementing departments namely Food Corporation of India and Dept. of Food and Civil Supplies and private traders. The objectives relating to the effectiveness of targeting and public distribution system were examined through field survey, focus group discussion with implementing officials and private intermediaries involved in the chain of delivery system (like authorized wholesale dealers and retail dealers) and also the beneficiaries in selected urban and rural areas(grouped as those included in the BPL and APL list) using an interview schedule. 150 households were purposively selected and studied for this. V. RESULTS AND DISCUSSION The findings of the study show that Targeted PDS has unilaterally increased the price of foodgrains and other essential commodities to the poor and the non-poor. This has seriously affected the vulnerable that depend solely on this system. The system crippled and has become unviable and majority of the people have moved to the open market. The major issues have been studied and presented in detail below. Decline In Offtake and Allotment It is observed that the offtake of rationed articles has come down considerably after the introduction of targeting.. Even the official statistics show that off take of rice in APL category is almost nil.. A cursory look at the field reveals that the consumers in higher income bracket do not buy their allotted quota while the low income group face many problems related to quantity, poor quality food grain, inadequate and untimely allotment, etc.(often deliberately done by intermediaries) The decline in offtake,, among APL can be attributed to higher price along with low quality of grains distributed through PDS when compared with open market. The preference for better quality products, higher wage rate and purchasing power prevailing in the State (when compared to other States) and the remittances from abroad have influenced the buyers. The propaganda by private dealers, regarding the poor quality (in fact the quality of rice, wheat etc has improved) the reduced margin, poor and unhygienic conditions of ration shops, poor quality of service, existence of private shops under the same roof (which is often owned by ration shop dealers) and general perception among higher income strata that PDS is for the poor, made the people move to the open market. The very general perception that for the same quality rice, different prices are to be paid has resulted in dissatisfaction in the entire society. However, a detailed analysis reveals that the offtake in AAY, Annapoorna scheme and BPL has been hundred percent. A striking observation which we could make is that the BPL cardholders are not receiving their entire entitlement at the reduced price. The stock register showed that the allotment was fully lifted by the shopowners,but this has not reached the eligible targeted card holders in full.. It is interesting to note that ration shops had adequate stock for distributing grains at higher price to the needy. In many cases, the food grains were siphoned off to other consumers/traders at higher rates. Dealers complained of inadequate allotment whereas discussion with FCI revealed that on an average buffer stock for 80 days at rate 35 kg per card is maintained and the issue of partial allotment did not exist. This contradictory statement throws light on some serious lapses in the distribution system. Though the Government claims that 35 Kg of rice is allotted to all categories, in practice the dealers and the cardholders are not receiving their entire entitlement. Discussion with the officials revealed that Central Government survey had identified 25% of the population as BPL based on the official poverty line as estimated by the Planning Commission in 1993-94. However according to the Kerala Government s estimate (based on survey), this is 42%. The subsidy for the additional 17 percent was met from the state 4

exchequer till 2001. However, this was discontinued and after that the Central allotment of 25% is being distributed among the 42% BPL population. We feel that this dilution has led to a situation wherein the eligible and deserving poor are atleast partially denied physical access of their entitlement. Targeting and BPL identification The main flaw is that in the approved list of BPL families(targeted beneficiaries) certain non eligible have found place whereas the real eligible beneficiaries have been left out. It has been found that the criteria for inclusion in BPL list are solely economical which is often understated. There are complaints that persons having political patronage have found a place in BPL list. A large number of the very poor are in the APL category and are thus denied physical access and their right for subsidized food grains from PDS. The list, which was prepared in 1997, is not periodically revised and updated so as to weed out those who have come up above the poverty line in due course. Though the Civil Supplies Department and Poverty Eradication Mission had conducted a survey in 2001, the list has not yet been officially accepted or released. While income of the family is the sole criteria in Planning Committee s estimate, other noneconomic criteria evolved by Kudumbasree (Poverty Eradication Mission of the Govt) can be adopted for targeting and identifying the poor). The services of Women Groups may be used for annual updation of APL/BPL list. Unless the process of identification of the poor is transparent and foolproof, the TDPS may not serve its real purpose. The introduction of Antyodaya Scheme in 2002(further culling out poorest of the poor from the BPL list)has amounted to further targeting within the existing identified list,thereby adding further chaos and confusion in the society. As rightly pointed out by Swaminathan, targeting can result in greater social division.. Segregating households on the basis of income can lead to division among the poor, social tensions and polarization. Such division can exacerbate existing forms of caste and gender oppression.(swaminathan,2002) Entitlement of Food Grains As per the earlier policy, ration scales were at fixed quantities per person or unit whereas now irrespective of size and need, a family is entitled to a uniform quantity of 35 kg per month per household.this has opened avenues for malpractices and corruption. During the field visit it was observed that for BPL households with small family size, the entitlement of 35 kg was more than their requirements, while in some areas like tribal areas and coastal pockets, this quota was not often sufficient. The earlier system of fixing quota based on family size was more realistic. This assumes greater significance in Kerala context, where the central allotment of (25%) is distributed among 42% of BPL families. Quality Issue Regarding the issue of quality of grains, definitely there is general feeling that the quality has improved compared to pre 1997 period. During our visit to godowns the food samples examined were quite superior whereas the grain at retail shops was not of the same quality in certain cases. There seems to be leakages/malpractices at some level/all levels in the chain of distribution. Often the local people interviewed are also of the view that food grains released from FCI godown often do not reach the target group in same quality and quantity. Neither the Department nor the Government has a mechanism to oversee that this is done. There seems to be mismatch between demand and supply regarding the quality of rice preferred by the cardholder. While the urban mass preferred raw rice and wheat, people in rural areas demanded boiled rice. However the women of interviewed households revealed that non-timely availability of preferred 5

quality of rationed item was the main reason for their purchase from the open market. Even the dealers are not very sure (they say so) regarding the time when the preferred quality would be available. The FCI claims that they have sufficient stock of both raw and boiled rice, which is distributed, based on the approved request presented by fair price shopkeepers. Here it is suggested that an assessment may be made and allotment done based on regional preferences. The weekly indent form (submitted by dealers) may be suitably modified so that the requirements of raw/boiled rice and wheat based on the cardholders preferences in the area can be separately indicated. A computerised inventory management and distribution system after assessing the district wise demand for raw and boiled rice may be introduced to ensure that micro level allotment and distribution of rational articles (at the district/regional level) is fair and equitable. Though the grains released from FCI pass the test of QC stipulated by FCI (like broken rice, moisture content etc restricted to certain percentage) it does not actually qualify the real taste preferences of Keralites. Quality being a major issue, we suggest the following options- some short and long term strategies (1) Augment domestic production especially rice (2) Allocate food subsidy as cash to the State and give autonomy to States in implementation so that specific regional needs can be taken care of. (3) Procuring paddy from local farmers at Minimum Support Price, centralized processing and distributing through ration shops Monitoring and Involvement of Civic/Local Bodies The key stone in the PDS is the fair price shop and the kingpin of the system is the retail dealer. The entire success of the system depends on how efficiently and effectively the shops are run.hence supervision is extremely important Though from time to time, various guidelines were issued to restructure the system, many of them have either remained in papers or have not been implemented successfully. The Central Government in 1999 had issued guidelines and emphasized on the need for constituting Vigilance Committees with involvement of Panchayat Raj Institutions at all levels to ensure greater public participation (Planning Committee 2004). The Vigilance Committees are yet to be formed and empowered to monitor the functioning of fair price shops(fps). During our field visits, we had seen that in areas where there is 'healthy participation of local bodies/ngos, the system has proved to be extremely beneficial for the poor and the needy. Their involvement have made the operations of FPS more transparent and accountable thereby reducing leakages and corruption by effective monitoring of the PDS. Awareness Among Cardholders Kerala is a cent percent literate State. Still in many cases, the AAY cardholders are not even aware of their entitlement or the price. Due to irregular and inadequate allotment/stock and the (false) propaganda that allotment is insufficient to cardholders, the ration dealers often dictate terms as to the price and quantity. Some dealers admitted that they adjusted commodities from the non-buyers and made available rice etc to the poor. However the field survey revealed that this was done at higher prices. Though a model Citizens Charter was prepared in 1997 by the Central Ministry for adoption by the State,it has not yet materialised. This charter stipulates essential information such as entitlements, procedure for the issue of ration cards, the right of the public for information and so on. It is high time that citizen's charters are published and exhibited. Publication of the charter will help create awareness among the public about their rights and will make the staff and FPS dealers more efficient thereby weeding out corruption. 6

VI. CONCLUDING REMARKS The sustainability of Public Distribution System is now a matter of concern. To quote the High Level Committee report the introduction of targeting has not reduced the expenditure on the food subsidy while it has at the same time weakened the impact of price stabilization and weakened the overall system. The study reveals that inspite of inherent weaknesses and growing customer dissatisfaction, the participation rate of middle and low income group on PDS is still more than 72%(as per our study).. It may be noted that the real poor and those excluded from the list still depend on the Public Distribution System every month for subsidized food grains. The role played by PDS in providing free ration in times of crisis the. like Tsunami etc., has also been acclaimed. This throws light on the fact that subsidized food distribution system to the needy is of paramount significance in the food deficit State Kerala. With the difference between the BPL and market prices much larger now,(more than Rs 5/- per Kg) there is certainly a stronger incentive to divert supplies to the open market and make quick profit. As Mooij (1999) observed in the study on Bihar, 'it was difficult for the PDS dealers to make profits without being corrupt. The commission they get is quite low and the dealers seems to have shifted the burden of increased transportation costs, handling/holding costs to the poor in form of reduction in quality and improper billing.. Such a leakage coupled with exclusions in targeting implies that the entire subsidy does not always reach the poor. The multiplicity of schemes in the system and a huge range of actors (more than 5) in implementing the PDS has severely undermined the capacity of the system to serve the needs of the poor. (Jenkin 2002) Reverting to a system of allocating grains at uniform price with universal coverage may not be feasible in the present context as the Government may find it difficult because of the fiscal squeeze. As suggest by experts like Madhura Swaminathan, geographical targeting with focus on slums, tribal and coastal areas having high concentration of poor is a better option. The participatory Community-based targeting with the help of Kudumbasree women groups can well be tried and tested out in Kerala,so long it is apolitical. This can ensure that the entire food requirements of the poor are met from the PDS itself and the elite and the traders do not exploit them. However many aspects indicated in the guidelines issued by the Central Government are not yet operationalised. Overall what is needed is the immediate implementation of guidelines issued by Central Government rather than the formulation of new policy directions or guidelines. Constitution of Vigilance Committees at various levels, publicizing citizens charter, effective supervision at all levels, sensitizing the targeted poor on their entitlements and price of commodities and revision of APL/BPL list need to be taken up by the Government on a priority basis, if the desired objectives of TPDS are to be achieved. There is a need for more consistent set of policies designed to cater to the specific needs of the State. These would range from strategies that promote the growth of the agricultural sector to a more community oriented Public Distribution System involving all major actors in the distribution channel. It also needs to address new kinds of challenges on the human development front in Kerala i.e., security for the growing population of the aged. References Devereux Stephen (1999) Targeting transfers: innovative solutions to familiar problems IDS Bulletins Vol 30, No 2 1999-60-74 7

Government of Kerala, 'Economic Review', (2004) - State Planning Board, Kerala http://fcamin.nic.in/hlc_app4.htm. Gebrehiwot, Yosef,(2001):Targeting Food aid to the Rural Food Insecure: Evidence and lessons from Ethiopia, Working Paper Series No 329,Institute Of Social Science, New Delhi. Goetz, Ann Maria,Rob Jenkins (2002), 'Civil Society Engagement and India's Public Distribution System: Lessons from the Rationing Kruti Samiti in Mumbai, World Development Report 2003/04 Workshop, Oxford. Government of India (1997) Ministry of Civil Supplies, Consumer Affairs and Public Distribution, Focus on the Poor, Guidelines for the Implementation of the TPDS. Kannan, KP, (2000), Food Security in a Regional Perspective : A view form Food Deficit' Kerala, working Paper NO. 304 Centre for Development Studies, Kerala Sen, A (1995): The Political Economy of Targeting in Van De Walla, D & K Nead (Ed). Public spending and the poor, Baltimore John Hopkins University Press, 11-24. Swaminathan, Madhura (2003): The Dangers of Narrow Targeting: As assessment of the TPDS in Dev,M., Kannan, KP and Ramachandran, N (eds), Towards a Food Secure India, Institute for Human Development, India. 8