Business Today

Old diet, new recipe

Sebastian P.T.        Print Edition: Aug 5, 2012

"I want it back," says Sharada Begum. The 67-year-old woman is a member of one of the 100 households of Raghubir Nagar, a resettlement colony in west Delhi, chosen to participate in a pilot scheme that aimed to turn the public distribution system (PDS) on its head.

Through all of 2011, these households had Rs 1,000 transferred every month to a woman member's bank account in lieu of rice, wheat, sugar and kerosene at subsidised rates from fair price shops, as they had been getting. Funded by the United Nations Development Programme (UNDP), this Delhi government project aimed at testing the viability of giving food subsidy to those below the poverty line - all the Raghubir Nagar beneficiaries had 'below the poverty line' (BPL) ration cards - while circumventing the notoriously leaky PDS.

The scheme was inspired by similar such efforts in South America, particularly Brazil's Bolsa Familia programme (see Learn It from Rio), which have been fairly successful. Similar 'cash transfer' schemes have been tried out in other parts of the country in the past decade, notably the centrally funded Dhanalakshmi programme being implemented in more than half a dozen states since 2008/09, which provides cash to families against evidence that they have been taking good care of their girl children - immunizing them, sending them to school and so forth. There is the much-discussed Bihar government scheme that gives high school children money to buy bicycles. But the Raghubir Nagar initiative was the first in an urban setting to provide cash in lieu of PDS entitlements.

There is no doubt that, in many parts of the country, the PDS is in a shambles. There is "large scale corruption resulting from diversion and leakages of foodgrain," says the 2009 report of the Justice D.P. Wadhwa Committee, set up to examine PDS. The Planning Commission, in an estimate, has said 58 per cent of subsidised foodgrain does not reach the intended beneficiaries, while another estimate maintains that 36 per cent is simply siphoned off the supply chain.

Women demanding better PDS in Jahangirpuri
Women demanding better PDS in Jahangirpuri, Delhi
Raghubir Nagar residents too face the same problem. Sharada Begum complains she and her husband never get their quota of 25 kg of subsidised foodgrain and five kg of subsidised sugar every month. Supplies were also frequently late. "If we depended entirely on the fair price shops, we would starve," she says. She is delighted with the cash transfer scheme, and wishes it had never been stopped. Her family comprises her husband and herself, along with her married son and his family. (Three daughters have been married off and live separately.) Her husband, Abdul Jabbar, 71, a retired dye maker, has a troublesome stomach ailment. "While the scheme was on, we could buy good-quality grain and other food items from the market," she says. "The leftover money came in handy to buy medicines for my husband."

M.S. Swaminathan, Agricultural Scientis
The removal of PDS or substitution of grain by cash will affect farmers adversely: M.S. Swaminathan
Other beneficiaries echo her sentiments. "The time saved was the biggest relief for me," says Anjana, 40, a widowed nurse who supports two college going children. "I just do not have the time to keep going repeatedly to the fair price shop to check if supplies have arrived," she says. "The scheme was a great help but I wish the amount had been higher, say Rs 1,500 a month," says Leela, 64.

Many state governments have seen the benefits of this new route to an old goal. "Our success with cash transfer schemes shows it can hugely reduce corruption," says Bihar Deputy Chief Minister Sushil Kumar Modi. The Delhi government is likely to launch three more pilot projects soon.

The Cons
But that is not the complete picture. While Sharada and Anjana at least have pucca houses, Reshma, 35, also from Raghubir Nagar, lives in a slum. But she refuses to participate in the scheme. She articulates a fear often expressed by planners and social workers who oppose cash transfers. "The money will get spent on things other than food," she says. "We don't want cash." Opponents of cash transfer say the Delhi government's precautionary step of deposit-ing it in the woman's bank account is not enough to ensure her control over how it is spent. "The men will snatch the money and use it for drinking and gambling," says Jagadish Bharti, another resident.

K.V. Thomas, Union Food Minister
If we shift to cash transfers, who will see to it that the MSP is maintained? K.V. Thomas
"There is little the woman can do. The children will starve." There is also the fear that, in these inflationary times, those accepting cash transfers could get short-changed if the amount transferred is not regularly increased.

There are also major implications for the wider economy if cash transfers move from pilot projects to being the norm. What will happen to the PDS, built over decades? Should it be abandoned simply because of its deficiencies? Why not instead try to reform it by plugging its leaks? And what will the government do with the mountain of foodgrain it procures every year, if it does not distribute it through PDS? In 2011/12, for instance, of the 28.33 million tonnes of wheat procured, 80 per cent was allocated to PDS. If the government stops procuring at a minimum support price (MSP) every year, won't foodgrain prices crash, hitting farmers? Many may give up farming, affecting food production.

"Personally speaking and not as a minister, I am not in favour of cash transfers," says K.V. Thomas, Union Food Minister. "If we shift to cash transfers, who will see to it that MSP is maintained?"

Sushil Modi, Deputy CM, Bihar
Our success with cash transfer schemes shows it can hugely reduce corruption: Sushil Modi
Experts agree. "The removal of PDS or the substitution of grain by cash will affect farmers," says noted agricultural scientist M.S. Swaminathan. "If interest in procurement goes down, production will suffer. We will not be able to implement the legal entitlement to food enshrined in the Food Security Bill. We will revert to a ship-tomouth existence, dependent on imports." Investment in essential postharvest infrastructure like storage will also be hit, he adds. N.C. Saxena, a National Advisory Council member, is just as emphatic. "Large-scale substitution of PDS by cash transfers is not feasible, as foodgrain purchased from farmers through the MSP mechanism needs an outlet for distribution."

Other analysts note that transplanting a scheme successful in Brazil on the Indian soil may not give the same results since the conditions in the two countries are different. "Poverty rates are much higher in India," says Reetika Khera, a development economist at IIT Delhi, who has studied Brazil's Bolsa Familia programme closely. "Nearly 70 per cent of Indians live in rural areas, while in Brazil it is only 14 per cent.

Brazil has almost universal literacy and very low levels of under-nutrition among children. Cash transfers can be useful in the case of pensions, fertiliser subsidy and the like. But not as food subsidy." Besides, Brazil has not abandoned food transfers, but continues with them alongside the cash transfer scheme.

Perhaps a mix of both cash transfers and the traditional PDS would be the best solution. As Tamil Nadu and Chhattisgarh have shown, PDS is not beyond repair and can function efficiently if there is the will to make it work.
LEARN IT FROM RIO

Bolsa Familia (family stipend) is a conditional cash transfer programme launched in 2003. It is targeted at families with monthly per capita income of less than 140 Brazilian reais and covers 44 million of Brazil's 184 million people. The programme is designed by the federal government and implemented by the municipalities.

Families get 50 to 95 Brazilian reais per month, with the grant sent to the women head through a bank card. But this is only if conditions on education and health are met. For instance, children must be enrolled in schools with minimum attendance of 85 per cent for those aged six to 15 years and 75 per cent for those aged 16 to 17 years. For children under seven years, the vaccination calendar has to be followed.

Prenatal care and monitoring of lactating women is mandatory. The results have been impre-ssive. In 2006, income inequality was at its lowest in 30 years. In the three years since the scheme was started, 14 million people escaped poverty that translated into a 31.4 per cent decline. There was an increase in food spend, children's clothing, school attendance, while there was a decline in risk of child malnutrition and school dropouts.


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