A system in peril

Kerala's public distribution system, the best in the country, is seriously affected by the shift in Central government policies on the allocation and pricing of foodgrains and increasing deficit in rice production in the State.

R. KRISHNAKUMAR in Thiruvananthapuram

CYRUS ROSY has lived all her 60 years in the small fishing village of Kottupuram near Thiruvananthapuram. She said that until a few years ago, every evening the local ration shop (now 'public distribution centre') had been a hub of activity, as women fis h-vendors spent their day's earnings there. They were assured of their weekly allotment of "good quality" rice, wheat, sugar and kerosene; they bought these in instalments, "as and when they could during the week". The prices were "reasonable" and lower than those charged by the private provision stores that line the main road, which leads to the local church. For the majority of the 473 ration card-holders in the village, the ration shop, ARD 510, was the first stop when they returned from work.

Not any more, said Rosy. "I have a family of five - husband and three young daughters. We buy our weekly quota of subsidised rice, but even dogs refuse to eat it. Why should we buy such poor quality rice when we get better rice from the nearby store at 5 0 or 60 paise more a kg?"

Seeing Rosy's agitated gestures, a crowd gathered in front of the shop. A young woman said: "Our men won't be able to go to the sea if they eat this rice. We feed it to the chickens. We buy only sugar and kerosene. They sell wheat at Rs.8.90 a kg but we get it cheaper in the market."

A youth looked away from the two salesmen inside the ration shop and said loudly: "Kerosene is never measured to the litre, nor do we get our full quota." (Kerosene is a premium commodity in fishing villages.)

"Nobody wants such poor-quality foodgrain," a salesman admitted. "This shop runs at a loss. Before they changed the system, we used to sell nearly 33 quintals a week. Now it has come down to 50 kg."

Of the 473 cardholders attached to the shop, 201 belong to the Below Poverty Line (BPL) category. Despite its poor quality, several people buy the BPL rice, because it is priced much below the market price. "It is not fit for human consumption. There has been virtually no sale of rice meant for the Above Poverty Line (APL) category. The entire stock sits here and rots and when we cannot bear the smell any longer, we sell it, priced at Rs.13.90 a kg, to some hotel or the other at Rs.7.50 a kg. Rice of th e same quality is available in the local market at Rs.8.50 a kg, and the ration shop owner has to bear the loss. The sale of sugar and kerosene has also been restricted, adding to the shop owner's woes."

The ration shop at Kottupuram is a comparatively better off one, because nearly half of its customers come under the BPL category and buy foodgrains from the shop every week. Many of the retail ration outlets elsewhere in Kerala have only a negligible nu mber of people in the BPL category. A ration shop (ARD 251) owner, G. Kumaraswamy told Frontline: "Only 100 of the 700 cards allotted to my shop belong to people in the BPL category. They alone buy foodgrains. There is negligible sale of APL rice, which is supposedly 'A' grade. In the past two months no one has come to buy APL rice on which there is no subsidy."

If there was a public distribution system (PDS) that should have become a model for the entire country, it was the system that existed in food-deficit Kerala. The 14,272 retail ration outlets (as of April 2000) formed the backbone of the chronically food -deficit State's public distribution system - the most important instrument of food security for its people, and the poorer sections in particular.

The system in several other States failed to serve the population below the poverty line, had an urban bias, had negligible presence in areas with high concentrations of the rural poor, lacked transparency and accountability, suffered from large-scale le akages and failed to provide adequate nutritional support to the people. Kerala, on the other hand, had developed a commendable and near-universal public distribution system.

Kerala's PDS was evolved in the 1960s in response to the hard struggles waged by its people in the context of the extreme scarcity conditions created by its dependence on other States for food (Frontline, October 31, 1997). The Central government had failed to meet food security needs of the State, especially in the pre-Green Revolution years. Several States had imposed arbitrary restrictions on foodgrain movement, and private traders had used the opportunity to make their pile.

"Kerala is perhaps the most vulnerable among the States to any short-term or long-term foodgrain deficit at the national level," says K.P. Kannan of the Centre for Development Studies, Thiruvananthapuram. "This is borne out by the experience of Kerala si nce its formation in 1956 to the mid-1970s, when India experienced shortfalls in foodgrain production and consequently restrictions on the movement of foodgrains. The food problem had then become an important factor in the coalition politics of the State as well as in its relationship with the Central government. The response was the setting up of the universal PDS and because it was 'universal', it continued to get better political support."

In fact it was the sight of the comprehensive network of ration shops that often soothed Kerala's worries about the availability of food. According to the State government, today, on an average, there is one ration outlet for every 400 households and one within 2 km of every household. The PDS covers 97 per cent of the State's population and provides rice, wheat, sugar and kerosene on a ration scale that satisfies the minimum daily cereal requirement (370 gm) of a person (as recommended by the Indian Co uncil of Medical Research). As of April 2000, there were 61,95,536 families with ration cards in the State.

Being a consumer State in respect of other commodities as well, Kerala also developed a second tier of public distribution outlets, a chain of 'Maveli' provision stores, super markets, mini super markets and 'Maveli' medical stores (see interview with Fo od Minister E. Chandrasekharan Nair). These work outside the Central Government-FCI-ration shop system; rice and wheat products, sugar, pulses, vegetables and a range of consumer goods are procured independently from the market for distribution through t hem at reasonable prices.

Kerala's PDS, especially its first tier, succeeded in all its objectives - to provide basic food items to the vulnerable populations at reasonable prices, to put a leash on private trade, to maintain price stability, to be a system of rationing during sc arcity - and thus compensated for the State's insufficiency in the production of foodgrains, especially rice, the staple food. Kerala's deficit in rice production, which was 50 to 55 per cent from the early 1950s to the mid-1970s, has now increased to 80 per cent. This accompanied by the shift in the Central government's policies regarding the allocation and pricing of foodgrains, has dealt a severe blow to the chain of ration shops. Despite additional subsidies sought to be provided by the State govern ment, the State has started witnessing the first signs of a gradual dismantling of its celebrated PDS.

"Given the fact that Kerala's fiscal deficit is growing, the contours of the emerging economics of the State's PDS are only beginning to be realised. The Kerala government may soon have to make the hard choice between continuation of the existing PDS wit h universal coverage involving unsustainable subsidies or restricting the PDS to the poor with serious implications of enhancing Kerala's vulnerability to food security," Kannan said.

The Centre recognises only 25 per cent of the State's population as being in the BPL category. But the State Government treats 42 per cent as being in the BPL category (as identified for the implementation of the Integrated Rural Development Programme, o r IRDP, schemes) and has decided to bear the subsidy burden for an additional 17 per cent. In Kerala, each cardholder in the BPL category is eligible for 20 kg of rice a month at the rate of Rs.6.40 a kg. An additional 10 kg is provided to the BPL catego ry at Rs.10 a kg, with an additional subsidy of Rs.2 provided by the State government. To people in the APL category, the State provides 20 kg of 'A grade' rice with a subsidy of Rs.2 at Rs.10 a kg (known as APL-Subsidy) and the rest of the quota of 'A g rade' rice at Rs.12.40 a kg (APL-Normal).

"The rations shops have now lost attractions of lower price and good quality of grain. Unsold stocks are building up. As of March 31, 2000, ration dealers in Kerala had a balance stock of 58,000 tonnes, most of which, even after five months, has not been sold and is rotting. The State government has now asked us to convert the APL-Subsidy rice, which we bought at a higher price, and sell it to the BPL card holders. But in a large number of ration shops, the number of BPL card holders is very small," say s N. Thanu Pillai, working president, Kerala State Retail Ration Dealers' Association.

According to the Ration Dealers' Association, which claims a membership of over 9,000, on an average a ration shop now sells only 1,400 kg of rice, 600 kg of wheat, 400 kg of sugar and 2,000 litres of kerosene a month. Before the current prices were fixe d, a shop sold 10,000 kg of rice, 2,000 kg of wheat, 800 kg of sugar and 3,000 litres of kerosene a month.

Sasidharan, owner of a ration shop (ARD 121) in the heart of Thiruvananthapuram city, said that after the price hike, the sale of foodgrains had dropped by one sixth, of sugar by half and of kerosene by two-thirds in his shop.

State Controller of Rationing M.K. Balakrishnan told Frontline: "On a rough estimate, ration shops can break even if every month they are able to sell 20 tonnes of foodgrains, including rice and wheat, 1,000 litres of kerosene and five quintals of sugar. It is true that in most cases this is not happening."

Thanu Pillai said that 10 to 15 per cent of the retail dealers in the State had written to the local supply offices seeking either cancellation or suspension of their licences, as profitable operations had become impossible. (If a shop's licence is suspe nded for a while, the customers are to be attached to another ration shop nearby.) "But no dealer wants to take the additional responsibility of serving customers of another shop; neither has anyone applied for a new licence. On the other hand, a few ins tances of suicides by ration shop owners have been reported in the State because of increasing debt burden," he said.

According to Sasidharan, profits are a thing of the past. "The price of ration articles went up unchecked and affected sales. This in turn raised our costs, which included salary to employees, rent, printing and stationery expenses, electricity charges, licence fee charged by various government departments and transportation costs," he said.

The Ration Dealers' Association estimates the average monthly expenditure in a shop to be about Rs.2,800 and the profit to be a meagre Rs.220. The Association calculates the average loss in a ration shop in Kerala to be about Rs.2,580 a month.

However, one of the dealers and a State committee member of the Association said on condition of anonymity: "Such calculations alone will not convey the true picture. It is an open secret that there is some element of illegal practices in the system that has kept so many ration shop owners in business for so long. Even when the system of 'universal' delivery was in existence, there was self-targeting by the cardholders, especially the rich. At the end of the week, thus, a large number would not have bou ght their quota because they wanted to buy better quality commodities. Ration dealers however would show this as 'sold', in most cases with the knowledge of officials, and then divert it to the open market for a profit."

In many rural areas, the Association leader said, dealers indulged in other manipulations, such as providing poor quality articles and recording the sales as of the best quality. "It was this vicious circle of 'mild corruption with official connivance th at did not harm anybody' that actually kept ration shops in business for so long. After the price of ration articles were hiked to near-open market levels and their quality went down, the opportunity for running ration shops as a business proposition is lost. That is the real crisis," he said.

Then was it the diversion of foodgrains and the leakages that facilitated the functioning of the PDS system in Kerala? A senior Civil Supplies Department official said that before the new policy changes were implemented, it was more or less an accepted f act that about 20 per cent of the articles that reached retail outlets that found their out of the system. "But on the other hand, it ensured that the needy got what they wanted. You cannot ignore the excellent benefits that the PDS brought into a food-d eficit State. You cannot allow such a system to be destroyed because there was some diversion or leakage in the system."

Dinesh Sharma, Secretary, Civil Supplies, said: "Compared to the kind of leakages taking place in many States, the scale of leakages from the Kerala system is negligible. Will any cardholder in Kerala say he is being denied his allotted quota of ration a rticles?" According to Kannan, the universal nature of the Kerala PDS ensured that Kerala society was vigilant about large-scale aberrations in the system. "The universal system had better political and social support. With targeting comes the danger of loss of such support," he said.

Civil Supplies officials said one instance that shows large-scale diversion from the PDS systems in other States is the arrival of ration rice from Tamil Nadu, where PDS rice is heavily subsidised by the State Government. "In Idukki district, with a larg e population of Tamilian plantation labourers, for example, ration rice from Tamil Nadu is auctioned off on a large scale. Traders who buy it are able to sell ration rice in the open market in Kerala at a much lower price than in the ration shops in the State," an official said.

According to Balakrishnan, the total requirement of rice in Kerala is estimated to be nearly 40 lakh tonnes a year. The internal production is 7.27 lakh tonnes. Eighteen lakh tonnes was provided through the PDS. Now that has come down to six lakh tonnes. The rest of the requirement is being met by the open market. "That is the kind of transfer of trade to the open market that has taken place in Kerala as a result of the new policies," Balakrishnan said.

Officials refused to confirm the Dealers' Association's claim that 10 to 15 per cent of the dealers in the State have asked the local Civil Supplies authorities to cancel and/or suspend their licences. They said that the right procedure would be to 'surr ender' the licence. However, they said, the Dealers' Association might be referring to refusal by their members to lift the stock for sometime. Asked why the dealers are continuing to run a loss-making business, Balakrishnan said: "It is a reflection of the role that ration shops have played in ensuring food security for the people in Kerala that a shop owner still has a certain position in Kerala society. In many cases, people have been in the business for a long time. Many do not know any other work. It still provides employment to at least two persons, who are paid salaries ranging from Rs.500 to Rs.2,000. Ration shop owners can meet at least their own families' food requirements from the shop."