In Bihar, the coupon system to distribute PDS grain fails to prevent corruption.
AT the Jamaluddin gram panchayat in Patna district on January 26, 2007, Chief Minister Nitish Kumar launched an ambitious reform of the public distribution system (PDS) in Bihar: a coupon system. He claimed that it would empower the poor and stop black-marketeering and that it was not a simple coupon but a powerful weapon in the hands of the poor.
Under the coupon system, families below poverty line (BPL) receive 12 food coupons every year, one for each month. They are distributed to cardholders in May and June in public by panchayati raj and government functionaries. Every month, the household exchanges one coupon for foodgrain (wheat and rice) with any licensed PDS dealer in their district. The dealer deposits the coupons with the administration and gets back the quantity of grain distributed by him, and the cycle continues.
Nitish Kumar claimed that the coupon system would stop black-marketeering because a dealer who sold grain in the open market would not get any coupons, and therefore, no grain for the next month. Further, if BPL households found that a dealer was not supplying grain or cheating them (say, by charging more, giving less, or mixing stones with the grain), they could go to another dealer. In other words, coupons would help track the flow of grain and create competition among dealers.
However, a survey of the PDS conducted in 12 villages of Katihar and Nalanda districts in May-June 2011 found that the perceived power of coupons to combat corruption had been undermined severely. Sometimes government officers were responsible for this, at other times the dealers were, and quite often, they were hand in glove with each other. In village after village, respondents hurled abuses at the dealers and complained that the PDS was not working.
In Mansahi block of Katihar district, the survey showed, dealers delivered between 21 and 23 kg of grain against coupons that entitled BPL households to 25 kg of grain. Antyodaya households got only 31 kg out of their entitled 35 kg. Dealers also overcharged them for the grain even though the coupons mentioned the price and quantity clearly. Many of the respondents said they were helpless and had to pay what the dealers demanded and take whatever they gave. Sab chor hain, paisa jyada lete hain aur anaaj kam dete hain (They are all thieves, all of them overcharge and give less grain), said a respondent. The competition process obviously had its limits.
In Barsoi block, also in Katihar, grain was distributed for just a few months in a year. Residents still had coupons for the months gone by, with the number ranging from a low of four to a high of 10. Some people had received their PDS rations only twice in the preceding year. Others showed us, often with anger and disgust, coupons dating back to 2007.
This does not appear to be the dealers' fault, though. Dealers in Barsoi complained that they had not been given grain in exchange for the coupons they had submitted. They were sure that grain had been siphoned off by marketing officers and district managers who controlled the godowns. In short, the powerful weapon in the hands of the poor had failed to empower them.
In Nalanda district, the survey team found, dealers had found a simple way of undermining the coupon system: they collected the coupons but did not deliver grain. In several villages, dealers would take coupons for two months and give grain for one.
One dealer had taken coupons for four months (February to May) in February itself. When confronted with proof of this, he said he had done this under pressure from the Block Marketing Officer. It turned out that they had sold in the open market the grain meant for March. The option of going to a dealer other than the designated one was not available in Nalanda: dealers refused grain if someone who was not allotted to them turned up. Here again, coupons had failed to create competition.
The survey found that dealers were involved actively in spreading misinformation. In one village, the dealer had told BPL cardholders that they were no longer entitled to grain and that it was for Antyodaya households only. In another case, there was a rumour that Bihar was sending kerosene to Japan for earthquake relief, making it scarce in ration shops: A nuclear plant has been destroyed there, so they need kerosene desperately.
These tricks work partly because of Bihar's failure in other critical domains, such as basic education: 84 per cent of the respondents were illiterate. While people were often aware of the quantity they were entitled to (perhaps because they were printed on the coupons in big size), they were not clear about the prices they were supposed to pay (also printed on the coupon, but in small size). Being illiterate and powerless, they could not use their coupons to demand their full entitlements from the dealers. Nor could they get the dealers' licences revoked easily.
Consequently, the overall survey findings from Bihar are depressing (especially when contrasted with other survey States). The monthly PDS purchase of BPL households in Bihar was on average just 11.2 kg compared with the entitlement of 25 kg. Even this appears to be an improvement: according to Reetika Khera's analysis of the National Sample Survey data, 90 per cent of the PDS grain was diverted in Bihar in 2004-05; it was down to 75 per cent in 2009-10.
In at least one of the five blocks we visited (Mansahi in Katihar), respondents felt that the system had improved. Their testimonies suggest that Mansahi used to be much like the other sample blocks where nothing got delivered for months. Now they get at least something every month, even if it is not the full entitlement.
However, the general situation in Bihar is still abysmal, though not irredeemably so. Indeed, Bihar would do well to learn from the experiences of Chhattisgarh and Orissa, where the PDS has achieved a remarkable turnaround in recent years, as well as from Tamil Nadu, Himachal Pradesh and Andhra Pradesh where the PDS has been in good shape for a long time. The survey, which was carried out in these States as well, showed a well-functioning PDS there, with most BPL households getting their full entitlements regularly.
Bihar's coupon system fails to prevent corruption for at least three reasons. First, government officials can still divert grain from godowns instead of delivering it to dealers. Secondly, dealers can sell grain in the open market after forcibly collecting the coupons. Finally, it is easy for dealers to give cardholders only a part of their entitlements while charging more. Thus, the coupon system is not the solution it was envisaged to be at best, it is a safeguard, but it does not obviate the need to do the homework that many States have done to streamline their PDS.
The lessons for a State like Bihar from other performing States include initiating de-privatisation of PDS shops, computerisation of records and regular monitoring, establishing effective grievance redress mechanisms, and reducing the prices of commodities provided through the PDS. Bihar currently focusses on targeting effectively, but despite considerable efforts by the State, the BPL list is unreliable, with large exclusion errors. These can be avoided only with a much expanded BPL list.
There are also important lessons for policymakers and politicians gung-ho about the ability of coupons, food stamps, smart cards or the unique identification number (UID) to root out corruption. In a context like Bihar's, it is easy for a PDS dealer to take coupons while delivering partial entitlements, or for that matter to get a thumb impression on a biometric device without delivering any grain.
Bihar's current PDS based on coupons seems to show signs of life for a few months in a year and in a few places for the rest, it is as good as dead. As mentioned earlier, it is easy to find respondents who have preserved coupons from 2007, perhaps hoping that they will be able to get grain against them or perhaps hoping that this will serve as evidence of a non-functioning system. After all, Nalanda is the electoral constituency of Nitish Kumar, who brought good governance to Bihar. However, the Chief Minister seems to have given up on the PDS, going by the claims he is making about cash transfers, which are similar to those he made about coupons four years ago.