Business Today

Stamping out hunger?

The government plans an overhaul of the food subsidy regime through food coupons. But as global experience shows, it's not a perfect system either.

T.V. Mahalingam | Print Edition: May 2, 2010

The Economic Survey 2009-10 has recommended a food coupon system to replace the current public distribution system (PDS) in the country by 2012. Under the proposed system, instead of procuring food grain from PDS outlets, the poor will get food coupons or stamps which can be redeemed from these outlets. Over time, these coupons can be used in the open market as the PDS outlets will be phased out.

The idea is to overhaul the leaky "ration shop" network and put the purchasing power in the hands of the needy. India's food subsidy bill is pegged at Rs 55,578 crore for 2010-11, up from Rs 52,490 crore in 2009-10. Despite that, India ranks 66th among 88 nations in the global hunger index. Here are a few examples of other experiments in food stamps worldwide, and the problems they face.

The US
Flagged off in 1939, food stamps could be used at grocery stores to buy prepackaged edible foods. One in every nine Americans—35 million Americans—relied on food stamps in 2009, thanks to the economic recession. Since the mid-'90s, paper stamps have been phased out in favour of a debit card system called Electronic Benefit Transfer (EBT) where the government transfers the benefits to a debit card, which can be used at retail outlets.

There have been complaints about the delays and inaccurate processing of new application stamps.

Also, there have been instances of petty scams. Recently, a few Georgia State officials were arrested for creating fictitious identities and stealing $1.7 million using EBT cards.

Sri Lanka
Introduced in 1979, the food stamps programme was set up to replace the expensive food subsidies. The food subsidy came down sharply to 1.3 per cent of the GDP from 5 per cent after the introduction of the programme.

The criteria for eligibility was family income. The stamps could be used to purchase rice, wheat, pulses, flour, sugar, bread, milk, etc., but studies showed that 75 per cent of the coupons were used to buy rice, the staple food.

The programme had 8 million beneficiaries even though the government estimated that only 3.5 million people needed the scheme. Another study discovered that calorie consumption of the neediest declined after the introduction of the scheme. The stamps were not indexed to inflation as a result of which they lost value over time.

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