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The Supreme Court, on 28TH July 2020, criticised the government for the wastage of foodgrains, rotting in various government godowns. Earlier, an SC appointed committee headed by retired SC judge DP Wadhwa had described the public distribution system (PDS) as ‘inefficient and corrupt’ and run by a ‘vicious cartel of bureaucrats, fair price shop owners and middlemen’. The committee had also said that the government’s Rs 25,000 crore subsidy was being pocketed at many points by vested interests. In AP alone there are1.95 crore white ration cards supplying 3.25 lakh mt rice monthly.
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| The NAC and the government would be well-advised to consider reform of the PDS before going ahead with food security legislation. |
F.M. pointed out that before putting in place universal PDS, the present state of targeted PDS needs to be thoroughly reviewed and the Prime Minister has announced the setting up of a sub-committee with the State Chief Ministers to revamp the PDS at the recent NDC meeting. 040810
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Centre to expand PDS cover
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Eventhough fully aware of the faulty PDS, the Centre plans to expand FROM 2ND Oct 2010 the coverage of Below Poverty Line (BPL) population under the public distribution system (PDS) to 8.07 crore from the current 6.52 crore based on the acceptance of the Tendulkar Committee's poverty projections for 2011. There will be no revision of quota per family or of the central issue prices.
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This will entail an outgo of about 34 million tones of food grains annually and a food subsidy of about Rs. 54,000 crore annually on BPL account alone.
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| The poor would continue to get 35 kg of wheat at the subsidised rate of Rs. 4.15 a kg or rice at Rs 5.65 a kg. The 2.5 crore poorest of the poor (Antyodaya Anna Yojna) beneficiaries will also continue get their entitlement of wheat at Rs. 2 a kg or rice at Rs. 3 a kg. |
Radical alternative: There is, of course, one radical alternative that the government can consider instead of attempting piecemeal reform of the PDS, and that involves abolishing the PDS altogether. The goal of food security can also be achieved by transferring cash to the poorest households who can then use that money to buy from the free market. The UID programme can help target the poor more accurately. That has the potential to completely eliminate middlemen and corruption from the food distribution system. It would also help the agricultural economy by reducing government procurement, which only distorts the market. And it would certainly help reduce the kind of wastage the SC is so dismayed about. FE 290710
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| Conditional cash transfer program |
There is evidence that social programs suffer from high administrative costs, corruption, and an excessive number of uncoordinated and duplicated program elements—in other words,governments are spending money but are not achieving desirable results (Coady and Fan 2008).
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Yet there have been successes. Targeted largescale safety nets such as Mexico’s PROGRESA (now Oportunidades) conditional cash transfer program have done a great deal to boost health, nutrition, and children’s education, in addition to being a powerful poverty-reduction tool. PROGRESA aimed to develop the human capital of poor households by combining education, health, and nutrition interventions into one integrated package. Cash transfers were conditional on regular school attendance and visits to health care centers. Impact assessments show that PROGRESA has effectively reduced the severity of poverty among beneficiaries by 45 percent (Skoufias 2005), raised median caloric acquisition by 7 percent, and reduced the probability of child stunting.
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(Excerpts from “Halving Hunger’ by Shenggen Fan, IFPRI 2010”
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Counter point: Case for Universal PDS
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The main problem with targeting is that it is both unreliable and divisive. The first point is evident from many investigations into the distribution of BPL cards. The “exclusion errors” are enormous. For instance, among all rural households falling below the “poverty line” according to National Sample Survey data, almost half did not have a BPL card in 2004-05. Similar findings emerge from National Family Health Survey data.
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| Targeting is also divisive: it prevents the emergence of a cohesive public demand for a functional PDS. And vocal demand is very important for the success of the PDS. |
The “food subsidy” itself is already around Rs. 70,000 crore. One lakh crore rupees is just about 1.5 per cent of India's Gross Domestic Product. Is that an excessive price to pay to protect everyone from hunger?
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| Incidentally, India already spends more than that sum on things that are rather trivial compared with the right to food. The annual “revenue foregone” on account of tax exemptions is more than five lakh crore rupees, according to the Finance Minister's own “Foregone Revenue Statement.” This includes about Rs. 80,000 crore of corporate income tax foregone (some of it “on account of contributions to political parties”) and nearly Rs. 40,000 crore of foregone customs duties on “vegetables, fruits, cereals and edible oils.” Jean Dreze, T H 080710 |
39% of PDS kerosene is diverted by black marketers
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According to a study by the NCAER that was commissioned by the petroleum and natural gas ministry, 39% of PDS kerosene is diverted by black marketers, and of the total volume diverted, 18% is used to adulterate diesel. This diversion deprives needy families of the basic commodity and the NAC’s reported proposal will further negate the Parikh committee recommendations for rationality in the pricing of PDS kerosene, on which oil companies incur huge under-recoveries—around Rs 28,225 crore in 2008-09.
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Despite the increase in access to electricity in villages, as the Chaturvedi committee underlined, 24% of rural kerosene consumption goes to states that have achieved 100% electrification and do not need kerosene for lighting. FE Editorial 090610
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Stages of Surges in the Indian Economy
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| Till the 1970s, every Five Year Plan missed the target of about 5 per cent annual growth. Hardly anyone believed that the growth rate would cross the barrier of around 3.5 per cent. The 1980s brought with it some break from this pattern, but it was not sustainable; structural imbalances in both domestic and external sectors led to the crisis of 1990-91. |
| After a series of reform measures, a growth rate of 6-6.5 per cent was considered sustainable, with several estimates pointing in that direction till the end of 1990s. |
| The next break came at around 2003-04, thanks to the services revolution taking the growth rate to a higher level of about 8-9 per cent. |
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| Now, after having recovered rapidly from the global crisis in 2007-08 and 2008-09, India has raised hopes of reaching 10 per cent plus in the coming years. ‘Success of a decoupled economy’ BL 060810 |
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