Business Today

Plugging the grain drain

Karnataka launches unique clean-up drive against bogus ration cards and fake LPG connections.

K.R. Balasubramanyam | Print Edition: March 20, 2011

Mangsuli is a small village in Belgaum district of north Karnataka with 1,670 households. However, the number of ration cards in use here is more than twice that figure - 4,202. Mangsuli is not alone. At the southern end of the state, in Agasanapura village of Mandya district, the number of ration cards in use is 2,980 against 1,615 households.

The result is a bloated food subsidy bill. Every month, Karnataka forks out an extra Rs 100 crore in grain subsidy only because its numbers for people below the poverty line, or BPL, are flawed and far exceeds the Centre's estimate of 32 lakh families. The state foots the additional food bill for the 67 lakh households that are not on the Centre's list. A BPL card holder is entitled to 35 kg of grain every month at Rs 3 a kg for rice and wheat, and 4 litres of kerosene at Rs 13 a litre. The state government distributed 1.36 lakh tonne rice and 44,000 tonnes wheat each month to BPL families in 2010-11.

Shobha Karandlaje
Shobha Karandlaje, Minister for Food and Civil Supplies, Karnataka
States issuing BPL cards beyond the Centre's estimates have to bear the extra expenditure themselves. Few states can claim a near match between the number of cards in use and the actual number of BPL households. Yet, they do not risk a genuine clean-up effort either due to lack of political will or fear of upsetting their vote banks, or the inability to devise a foolproof filter.

Karnataka is now trying out a combination of logic and technology to get to the root of the problem. Every PDS card in urban areas is being linked to the consumer's electricity installation number, known as the RR number. In rural areas, the cards are being linked to the house tax assessment numbers recorded in the Rural Development department database.

Equally crucial is the problem of domestic gas connections being used for commercial purposes. LPG is available at Rs 360 for a 14.2-kg cylinder in the state. To check the misuse, the state Food, Civil Supplies and Consumer Affairs department issued advertisements in January asking all domestic LPG consumers to declare their RR numbers by February 28, failing which they would not get further supplies.

Amazingly, as against 70.66 lakh domestic LPG connections in Karnataka, just 38.10 lakh have declared their RR numbers so far. In Bangalore, which has 24.40 lakh LPG connections, only 15.87 lakh consumers have responded.

The state has had some success in the first round of its drive. "A consumer who took an LPG connection three decades ago and died later, lives forever in the official records. Someone else keeps taking the gas supply in his name," says Shobha Karandlaje, Karnataka's Minister for Food and Civil Supplies, who initiated the exercise and is holding ground against attempts to thwart it.

 State of affairs

  • Chhattisgarh handles PDS grain delivery with SMS alerts to people who register themselves for the service
  • PDS shops in Bihar have been asked to open bank accounts and pay the state food corporation through bank transfers
  • Haryana's Panchkula has become one of the first districts to give cash transfers instead of grains to BPL families
  • Karnataka has linked PDS cards to electricity meters or house tax assessment numbers
There are an estimated 40 lakh excess PDS cards in circulation, and yet, some 20 lakh eligible people are outside the PDS system, she adds. While Karnataka alone will benefit from the PDS clean-up, the campaign to weed out fake LPG connections will also help the oil marketing companies and the Centre, which eventually foots the subsidies bill - at the rate of Rs 356 a cylinder.

For Karnataka alone, the Centre ends up absorbing about Rs 251 crore annually in LPG subsidies. "Our assessment is 30 to 50 per cent of domestic cylinder connections are not genuine and are being used for commercial purposes for which no subsidy is given. We will have exact figures in about two months," says Karandlaje. Even if the drive is able to eliminate 30 per cent of the connections, the Centre will save over Rs 80 crore on Karnataka. With global crude oil prices rising, cooking gas prices can only go up, increasing the government's subsidy burden.

"This is a new journey for us in Karnataka. No one has tried this before and I am sure our experience will help other states also," says B.A. Harish Gowda, Secretary, Food and Civil Supplies, Karnataka. Next on the state's agenda is a drive to plug the leaks in the chain from warehouse to fair-price shops.

Since most pilferage takes place between these two points, often involving transporters, the government is planning to ask fair-price shop owners themselves to lift stocks from the warehouses and collect transport charges.

As poverty claims outpace poverty trends, states have little option but to bite the bullet and put their PDS houses in order. As Karnataka is trying to do.

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