Pragmatic | The leaking PDS

Deserving poor receive only 10% of intended benefits from the public distribution system

Imagine a water supply system which is supposed to deliver water in a tap for a particular household. For every 100 litres of water supplied, the targeted household however receives only 10 litres of water. 19 litres is taken by the neighbour who though is not supposed to use water from this tap, but claims to be dependent on this tap. Another 43 litres is stolen from the pipeline illegally, while the supplier has to use 28 litres of water to just run the pipeline.

This is the story of India’s Public Distribution System [PDS] as brought out by an Asian Development Bank Working Paper, How Can Food Subsidies Work Better? Answers from India and the Philippines [pdf here]. PDS aims to deliver highly subsidised food grains to the poor but the deserving poor received only 10% of intended benefits from the system. Nearly 19% of the subsidy goes to the non-poor, illegal diversion consumes 43% while the excess administrative expenses eat away the balance 28%.

The government of India intends to use this highly inefficient PDS system to deliver a Right to Food for everyone in India. Based on the draft submitted by the National Advisory Council, the empowered group of ministers on food has approved a draft Right to Food bill which will cost the government Rs 95,000 crore at current rates. The draft bill is to be agreed upon by the states, before being approved by the union cabinet on its way to become an act of parliament.

No state government is going to oppose this Right to Food bill, especially if the Centre is going to fund it fully. Firstly, popular and overt pro-poor policies make for good electoral politics in a developing country like India and a political party would have to be suicidal to oppose this plan. Secondly, fair price shops of the PDS are one of the biggest means of dispensing patronage for the political parties ruling the states. The greater is money pumped into the PDS, the greater is the opportunity with the ruling parties in the state to oblige their political agents by granting them rights to run the fair price shops.

Does the NAC not know that 73% of wheat and 40% of rice under the PDS in India is illegally diverted? Stopping that pilferage should be its top-most priority if it genuinely wants to help the poor.

The NAC’s obsession with using the leaky PDS system when the pressing need is to improve the efficiency of the subsidy delivery system defies all logic. A case of perhaps what Einstein defined as “Insanity: doing the same thing over and over again and expecting different results”!

It is time to bring back some sanity here. Let us fix the leaking pipeline first. It could be that we may not even need to push more water into it then.

DISCLAIMER: This is an archived post from the Indian National Interest blogroll. Views expressed are those of the blogger's and do not represent The Takshashila Institution’s view.