The Targeted Public Distribution System proposed by the United Front Government will have the effect of weakening the social safety net for the poor and the economically vulnerable.
SUKUMAR MURALIDHARAN SUDHA MAHALINGAM in New Delhi
THE United Front Government's partiality for unending debate rather than the quick and ethical decision is once again manifest in the ongoing discussions on the public distribution system (PDS). In the contention between financial constraints, which have progressively hardened in the months following the Union Budget, and the proclaimed commitment to expanding and deepening the coverage of the PDS, it is the latter that seems to be coming off second best.
Insistent pressure from the Left constituents of the U.F. had won the token assent of the Government as far back as February. At a meeting of the U.F. Steering Committee just prior to the Budget session of Parliament, Finance Minister P. Chidambaram painted a grim picture of the burgeoning food subsidy bill and strongly urged an immediate upward revision of the Central Issue Prices (CIP) of rice and wheat.
His coalition partners remained unimpressed, particularly since the U.F. then was in continuing default on one of its early pledges. The supply of foodgrain at subsidised prices for the poor was a commitment made in the Common Minimum Programme (CMP) of the U.F., and most constituents tended to view a retreat as a moral and political hazard. Faced with the unrelenting attitude of most of his coalition partners, Chidambaram came out of his pre-Budget seclusion to attend another meeting of the U.F. Steering Committee. In a ceremonial bow to the strength of sentiment he witnessed, he promised to abide by the collective decision of the ruling coalition.
The broad outlines of the scheme had been framed in time for a Republic Day announcement. Under the Targeted Public Distribution System (TPDS), households below the poverty line were to be assured a monthly supply of 10 kg of foodgrain at a subsidised price - a quantum of supply fixed not with nutritional norms in mind, but the fiscal constraint. Yet, this was only one side of the story. Another phase of waffling followed over the price. Pleading financial stringency, Chidambaram insisted that the CIP of foodgrain, which constituted the benchmark against which the subsidy was to be computed, should be raised prior to the implementation of the TPDS - something akin to shifting the goalposts with the game already in progress.
The Left parties, as also the regional parties, made it clear that they would not endorse a scheme of targeting that conferred illusory benefits rather than authentic ones. Chidambaram was insistent that he simply did not have the financial wherewithal to bring into effect a system of the scope envisaged. The final compromise was to enhance marginally the CIP across the board and to provide a limited quantum of grain to the population below the poverty line at a subsidy. This meant an additional administrative responsibility on the official agencies involved in food distribution - to identify the households that fell below the poverty line and issue them special ration cards to draw their entitlements of subsidised grain.
With this argument disposed of, Chidambaram proceeded in triumph to his Budget presentation. Yet, whoever had taken his pleas of insurmountable financial stringency at face value found the underlying logic of his budgetary calculations rather baffling. Far from grappling with the problem of stagnant revenues and galloping expenditures, Chidambaram seemed recklessly to have gambled on certain unproven and implausible theories of tax buoyancy. Allocations for essential schemes showed few signs of extra generosity and unproductive heads of expenditure little mark of restraint.
In allocating Rs.7,500 crores for the food subsidy, Chidambaram held out the assurance that the matter remained open for consideration. "When the dual card system under the Targeted PDS takes effect throughout the country, if more funds are required, I shall provide the same," he declared: "I may not wear my heart on my sleeve, but my heart is in the right place."
The rhetorical flourishes were perhaps unnecessary, since elementary calculations would have indicated that the TPDS, as fashioned in the U.F. Steering Committee after much arduous debate, would be subjected to severe scrutiny and found wanting under the dual criteria of adequacy and equity. It was pointed out by critics, for instance, that a typical household would have a monthly grain requirement of 30 kg. Since only a third of the requirement would be met at subsidised rates, the rest would have to be purchased at a retail price which would reflect the recent increase in the CIP. This would imply that a wheat-dependent family would benefit every month to the extent of Rs.10, and a rice-dependent family (purchasing the common variety of the grain) even less. For all the agitation over the food subsidy burden entailed by the TPDS, its actual benefit to the poor was no more than marginal.
Further compounding the situation was the fact that sections of the population not classified as poor (called the "above poverty line", or APL population in official parlance) would be absolutely worse off. The poverty line, it is accepted, is not a rigid line of demarcation. Larger economic circumstances, weather conditions and official policy could have significant consequences at the margin, contributing on occasion to transitory losses of income and other forms of deprivation. With the TPDS being conceived in a mode of utter inflexibility, it would be incapable of adjusting to these contingent circumstances. A higher allocation for the food subsidy, clearly, was not merely a subject for debate - it was already indicated as a compelling necessity.
Despite superficial appearances and suggestive nomenclature, the TPDS, when it came into effect on June 1, was almost instantly perceived as off target. In the cause of targeting in favour of people below the poverty line, who on current reckoning account for 36 per cent of the country's population, it was virtually eliminating an entire category of the economically vulnerable from the coverage of the food security system. Worse still, it made the conferring of additional benefits on the poor contingent on this process of elimination being completed.
TILL such time as the 'APL' population is phased out of the PDS network, the 'BPL' (below the poverty line) cardholders will be entitled to no more than the monthly ration of 10 kg of foodgrain at a special price subsidy. This would be the principal basis for allocation of foodgrain to the various States from the central pool. States such as Kerala, Tamil Nadu and Andhra Pradesh, which have already set up fairly comprehensive - and in the case of Kerala at least, a near-universal - system of food security coverage, would find themselves penalised just for their early success.
After the allocations made from the central pool in accordance with the poverty ratio, a further entitlement would be fixed for each State in terms of its average offtake over the last 10 years. This has, most conspicuously, taken a toll of the entitlement of a State like Kerala, whose current offtake is 2.4 million tonnes. In terms of its average offtake of the last 10 years, however, the State would get no more than 1.77 million tonnes. With its poverty ratio of 25 per cent, Kerala's "targeted" allocation for the poor would be 184,000 tonnes, which would have to be met out of its total entitlement. This would have the immediate impact of taking a large section of the population out of the comprehensive coverage of the State's PDS, which has been acknowledged as a key contributor to its relative success on the social welfare front.
Understandably, the Kerala Government registered its strong sense of distress at the operation of the TPDS. Similar complaints have also been expressed by Haryana, West Bengal, Orissa and Karnataka, all of them affected in a similar manner by the kinks in the newly operationalised system. A quite contrary phenomenon would afflict States like Uttar Pradesh and Bihar, which have been among the most conspicuous laggards in the matter of food security sytems. Despite having lifted an average of no more than 527,000 tonnes from the central pool over the last 10 years, Bihar would be allocated 1.03 million tonnes under the TPDS for its poverty affected population alone. Uttar Pradesh, similarly, would get 1.145 million tonnes as entitlement for the poor alone, despite a maximum drawal over the last 10 years of around 700,000 tonnes. Considering the coverage and quality of administration of the PDS in these States, their allocations under the TPDS would be little less than an embarrassment of riches.
It must be assumed that Bihar and Uttar Pradesh will develop the network to absorb their additional allocations in good time. But for the States that stand to lose under the TPDS, there are no obvious remedies available. The Cabinet Committee on Economic Affairs has decided that any State which seeks to draw more than the last 10 years' average offtake for its PDS could do so at economic cost. Since this would be equal to the market price anyway, the State would have to raise the issue price of PDS foodgrain to meet this additional cost, unless it is willing to foot the bill from its own resources. The former would diminish the benefit of the subsidy to all the cardholders across the board, while the latter would impose a financial burden on the State government which it may be unwilling or unable to bear.
These pangs of transition are likely to be felt in the immediate future. A more knotty problem may be phasing out the non-poor population from the purview of the PDS, which may be viewed by most State governments as both infeasible and undesirable. A State like Kerala, which is not self-sufficient in foodgrain production and which drew as much as 18 lakh tonnes from the PDS, will then be left with an entitlement of no more than 180,000 tonnes, perhaps marginally enhanced to reflect the greater availability of grain in the central pool. The rest of the population, irrespective of the degree of vulnerability, would then be left to the vagaries of the market.
Considering all these factors, Union Minister of State for Food and Consumer Affairs Raghuvansh Prasad Singh leans to the viewpoint that the sensible option would be to confine the TPDS to States where no viable system of food security has yet been instituted (see interview). States where it is working satisfactorily should be allowed to draw an enhanced quota to enable them to service additional customers below the poverty line.
Other strategies have been advanced to cut through the conundrum that the TPDS faces. One of these advocates the enhancement of the quota for the population below the poverty line to 30 kg, with the additional 20 kg being supplied at prices prevailing prior to the CIP hike. This would involve, in the calculations of its proponents, an additional food subsidy bill of Rs.3,000 crores. In the event of the financial burden being deemed unsupportable, the additional allocation could be contained at 10 kg. A further provision could be made for the more vulnerable segments of the population that is above the poverty line, presumably at the pre-hike CIP.
Consideration of all these options requires, naturally, that the Finance Ministry retain a basic sensitivity towards the imperative of food security in a context of growing economic uncertainty. That is a far from settled proposition. In the six years since the accelerated economic reforms of the Manmohan Singh-P. Chidambaram tandem were launched, foodgrain prices have more than doubled. The burden of "price correction" - as it would be interpreted in the morally sanitised vocabulary of the partisans of liberalisation - has disproportionately been borne by the food economy. To expect a reversal of policy orientation at this stage may be naive. But if spontaneity of moral convictions does not accomplish the necessary shift in priorities, then intense political pressure might.