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Digitally Or Physically

Digitally Or Physically

In the run-up to the Lok Sabha elections, Congress Chief Rahul Gandhi came up with the idea of promising a minimum basic income. Modi too has something or the other to offer. In its interim budget, the government increasingly concentrated on cash transfers and direct benefit transfers for different social schemes run by the government. 

The recent addition to the list is the Pradhan Mantri Kisan Samman Nidhi (PM-KSN), which is expected to cover 120 million small and marginal farmers and provide a direct subsidy of Rs. 6,000 per year. The budget also announced that the first instalment of Rs. 2,000 shall be disbursed by February 20. All said, the government seems to have missed the date for want of clear data.

The scheme, intended to woo the farmers, with a budget outlay of Rs. 75,000 crore, has been criticised by many as the benefit works out to only Rs. 17 a day, which is too small to be called a benefit even.

In comparison to the Rs. 1.84 lakh crore allocated for food subsidy, which is 7.5 per cent higher than the previous budget, the new scheme seems to be a clear eyewash. However, it shows that food still remains a main issue for the Indian population even after more than seven decades of Independence. Out of the three subsidies provided by the Central government – food, fertiliser and petroleum – food has the largest share of 62 per cent.

In fact, the right to food law was promulgated in the form of National Food Security Act (NFSA) in 2013 during the fag end of the UPA rule. Of course, at that time too, the main agenda of the then UPA government was to somehow garner votes in the name of food. Intended to cover 75 per cent of the rural population and around 60 per cent of the urban population, the food subsidy programme remains one of the largest social security schemes in the world, implemented through the public distribution system (PDS). 

Even now, the PDS covers nearly 800 million people. The NFSA, which replaced the targeted public distribution system, expanded the beneficiaries significantly with a monthly entitlement of 5 Kg of food-grains at subsidised rates per person. For a family of five, the food grain entitlement would be 25 kg a month, which is certainly a good quantity for survival.

However, the Act has increased the food subsidy bill of the government. The Modi government has been trying various methods to keep the food subsidy bill in control. The first step came in the form of constitution of a high-level committee in August 2014. The committee recommended that the current coverage of 67 per cent of the population is on the higher side. It should be brought down to 40 per cent, which will cover only BPL families.

The recommendations also mentioned that instead of providing subsidised food-grains, the government should use direct benefit transfers for cash transfers initially in large cities with more than 10 lakh population and gradually extending the scheme to grain-surplus states. This will reduce the government’s bill for purchasing subsidised food-grains, its transportation and storage also. Moreover, it will reduce pilferage and the benefit will reach the intended beneficiaries only.

The government took the recommendations seriously and a pilot project was implemented in Chandigarh, Puducherry and the urban areas of Dadra and Nagar Haveli in 2015. Another pilot project was conducted in the Nagri block of Jharkhand in 2017. However, the pilot projects pointed out several new problems. As the government laid stress on linking Aadhar cards with ration cards and digitisation of the PDS system, many people from the deserving categories could not avail of the benefits, either because of mismatch of biometrics or several other reasons.

A media report highlighted the sorrowful state of a village in UP, where the sole fair price shop stopped functioning due to technical issues, affecting a majority of the people, who relied on subsidised food-grains. The system had its own challenges like inclusion of non-eligible people, exclusion of eligible people and many using ghost ration cards. 

Although the Aadhar cards helped in reducing the number of ghost ration cards, it has increased the problems for those, whose biometrics seldom match because of old-age and other issues. Some people had to travel to the ration shop several times to try their luck, losing on their daily wages, as 25 kg of subsidised food-grains is a lifeline for them.

While the government claims that 99 per cent people received cash transfers where the pilot projects were implemented and is keen on implementing DBT instead of subsidised food-grains, a survey conducted by the Abdul Latif Jameel Poverty Action Lab (J-PAL), commissioned by Niti Ayog had different findings altogether.  

The study recorded that two-thirds of the beneficiaries preferred cash instead of subsidised food-grains. People who came from a slightly better background wanted cash so that they could buy better quality food-grains. Some even wanted to add on to the diet and wanted more nutritious meals than what was given by the government. 

However, one-third of the people still wanted food-grains. Only 67 per cent of the people had some proof to show that they have received cash transfers. Taking into account the mixed response from the survey, J-PAL recommended the introduction of a choice-based PDS.

Considering the huge food subsidy bill, difficulties faced in cash-based transfers and distribution of food-grains, this idea of choice-based PDS seems revolutionary, where the beneficiaries had the choice of opting for food-grains or direct benefit transfer or even food vouchers.  

Many claim that as a majority of the ration shops, 3,37,000 out of 5,34,000 ration shops to be exact, now have e-point of sale (e-POS) machines, it would be easier to implement choice-based PDS. And over 18.71 crore ration cards have been linked with Aadhar, it would be easier to track whether the intended benefits are reaching the poor or not. 

No doubt, the new system will certainly help the poor in managing their household affairs more effectively. However, the most pertinent question still remains the same – whether India Inc is ready for such a transformative social reform.

One of the challenges which the government would face head on would be satisfying the beneficiary’s demands at that very instant when he/she comes to the fair price shop or ration shop or point of sale. The pilot project on cash transfers may have given some insights on how the entire mechanism must be revamped to ensure 100 per cent coverage but the places, where DBT was implemented, have a tendency to go back to the old system of distribution of food-grains.

For instance, Puducherry had decided to revert to in-kind delivery. The e-POS is also not a foolproof system as has been reported by many. It had led to inadvertent delays at many places while many have been excluded from the entire system. In such a scenario, it would certainly be an uphill task to ensure that 800 million people, who are still dependent on PDS, are served as per their need and choice.

In other words, it requires a huge investment in technology and introduction of a platform, where the user can express his/her choice for having food-grains or cash benefit. Such a platform should also give the user a choice to switch between these choices, depending upon his/her monthly needs. Say, for instance, “A” opts for having cash benefits in, say, January but “A” does not have money in the following month and opts for having food-grains. The system should not only be able to accommodate “A’s” choices but also ensure that the supply meets the demand or vice-versa.

As of now, such a transition seems to be in the realm of imagination. Not only this, the general public would also need to be educated equally. However, the second challenge seems to be a bigger one, which revolves around procurement of food-grains. As of now, the Food Corporation of India (FCI) has been procuring food-grains as per the Minimum Support Price based on the estimated requirement. However, it generally results in excess procurement of food-grains against the requirement. 

For instance, the FCI and other state agencies procured 69 million tonnes (MT) of food-grains in 2017-18. However, the off-take under NFSA was 54 MT and other welfare schemes were only 3.6 MT during the same year. In other words, the FCI not only had surplus grains but had to bear the increased cost of storage.

In case choice-based PDS is implemented, the food procurement agencies would never be able to estimate the exact requirement of food-grains. Suppose, more and more people opt for DBT, these agencies would be more and more strained on finances. And if the FCI is not able to procure grains, the farmers would suffer, as there would be no buyers and they would be forced to sell on reduced prices to the local intermediaries.

To make both ends meet, the government may have to devise an alternative mechanism to protect the farmers. Simply put, if one end of the rope is stretched too hard, the other end may slacken. To cut the story short, the government may have to plan another minimum income scheme as the recently announced PM-KSN is clearly inadequate to make up for the losses the farmers may bear, if the new PDS is introduced. But if the current food subsidy bill is too high and is sufficient to disturb the entire fiscal calculation, will India be able to bear the burden of the new farmer income subsidy bill?

Clearly, the government must exercise its choice of implementing the choice-based PDS prudently and wisely. A twist or a tweak in the existing PDS can not only disturb the poor and the marginalised but also lead to agrarian crisis.

(The writer is a company secretary and can be reached at

(Published on 04th March 2019, Volume XXXI, Issue 10)