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The CAG review points out some glaring flaws in the working of the Targeted Public Distribution System. And it's high time government streamlined it, says audit guru M.V. Ramakrishnan.
In ancient Tamil literature we come across the expression aaril onru, meaning ‘one in six’: that was the proportion of the farmer's output of foodgrains that the king's men took away as tax. Of course, this was not the only tax levied by the king on his subjects. Rich landowners and lords had to turn up regularly in the royal court and pay a tribute called ‘kappam’ in gold, gems or jewellery, specified in accordance with their wealth and status. But not even the humblest farmer was exempt from the basic cess of 16.66 per cent on foodgrains. As soon as the crops were harvested, the grain-collectors accompanied by armed soldiers, would visit every field and barn and carry away cartloads of the fresh produce. The royal granaries were a well-stocked source not only for supplying the army but also for feeding the poor free of cost. It was the original public distribution system in India, and every farmer had to make his contribution. This practice of the Southern kingdoms had a historic echo in the chaut vasooli (one-fourth collection) imposed by medieval kings in North India. We have come a very long way since those times. All the old kingdoms have evolved through imperial interludes into one great republic, with a population of one billion. We are a modern, democratic and dynamic nation, well set on a steady course of economic progress. But hundreds of millions of our people are still poor, and we have our Public Distribution System (PDS) for the equitable sharing of foodgrains, as well as sugar and kerosene oil. Benefits and Burden A significant difference today is that the graingrowers are not required to pay any part of the cost, for the Central Government pays them a good price for the wheat and rice it procures (through the Food Corporation of India) for public distribution (through the States and Union Territories). In fact, the PDS is a double-edged concept and instrument. On the one hand, it aims to achieve a balanced distribution of essential food and fuel to the public at concessional prices. On the other hand, it also seeks to encourage greater production of foodgrains by undertaking unlimited procurement at guaranteed minimum support prices. Similarly, the Government enforces that sugarcane-growers are paid a good specified price by the sugar mills, to whom it pays a profitable price for the levy sugar procured for distribution at lower prices. Surely these twin objectives would be praiseworthy, as long as both of these are fulfilled. But an audit report of the Comptroller and Auditor General (CAG)—presented to Parliament in December 2000—raises; some serious questions. It reveals that while the farmers got the full benefits envisaged by the scheme in recent years, the public gained only very superficially. The difference between the procurement and selling prices of foodgrains and sugar—plus the cost of maintaining huge buffer stocks of both—constitutes the total food subsidy, which amounted to more than Rs 44,000 crore during 1992-99. This heavy burden was borne entirely by the taxpayers: and farmers pay no income tax, of course! Focus on Poor The origin of the existing public distribution system can be traced back to the situation of extreme food scarcity in urban areas that prevailed in the 1960s. With vastly increased agricultural production since then, it was extended to rural areas and tribal blocks in the 70s and 80s. Till around 1990, the PDS was a general entitlement scheme accessible to all consumers without reference to their income. The system provided basic food items (wheat, rice, sugar, and edible oil) and other essential products (kerosene and coal) at affordable prices through a country-wide network of fair-price shops. (There are 4,53,000 such shops now, supplying only wheat, rice, sugar, and kerosene). Later on, the focus shifted gradually from universal accessibility to selective poverty-based targeting. In 1997 the Targeted PDS (TPDS) was introduced, substantially slashing the price of the rations available to people living below the poverty line (BPL). The States and Union Territories were asked to identify BPL families on the basis of prescribed criteria, issue special ration cards to them, and deliver the benefits efficiently. Low Maximum So far, so good. But the CAG’s review points out that the implementation of the TPDS was extremely slack till 1999. Surveys of BPL households were not completed in 18 out of 31 States/UTs. Even where this was done, special ration cards were not issued to many BPL families. In some states a disproportionately large segment of the population was classified as BPL, diluting the whole idea. In many cases, BPL households did not get their full entitlement of foodgrains (10 kg per month). The average monthly rations issued to them was a mere 6.5 kg, and this too was not always sold to them at the reduced prices. In any case, even the maximum rations to which BPL families were entitled were far below their actual needs and were lacking in nutritional value. With such small quantities being doled out, the monetary advantage accruing from the specially reduced prices was naturally insignificant. Sugar rations too were quite meagre: the normal per capita allocation country-wide was only 5 kg per annum. The scheme was also marred by various other deficiencies, such as diversion and misappropriation of PDS supplies, heavy incidence of unrealistic ‘transit and storage losses’ en route to the fair-price shops, poor quality of foodgrains, etc. All told, the CAG concludes: ’’.... Thus, while the cost to the exchequer was enormous, the gains to the consumers were marginal.... The benefits of subsidised distribution of foodgrains to consumers was negligible.’’ High Minimum On the other hand, the full intended benefits of the scheme flowed to the farmers. From 1992 to 1999, the minimum support prices (MSP) for foodgrains were substantially raised, by 85 per cent for wheat and 65 per cent for rice. This was steeper than the corresponding increase in ruling market prices. In l992-93 a ‘central bonus’ for wheat was announced, and in subsequent years this became a standard feature. Even if a bonus was not declared in a given year, the MSP was fixed well above the previous year's MSP-plus-bonus. The support prices were usually on a par with prevailing market prices, and sometimes were even higher. The Government was committed to buy all the wheat and rice offered in the procurement centres, and therefore the Food Corporation was often forced to purchase much more than what was actually required. This resulted in the buffer stock of foodgrains swelling far beyond the prescribed level. The norm during the 90s was 22.3 million tonnes, but the actual stocks during 1993-98 ranged from 24 million to 35.6 million tonnes (they are now about 40 million tonnes). The CAG comments: ‘‘.... Procuring whatever quantity was offered, irrespective of the requirements, reduced availability to consumers, cost Rs 1,200 crore per year on average, exerted an upward pressure on prices (in the market), and contributed to storage losses.’’ In the case of sugar too, the interests of canegrowers and sugar factories were well protected by the Government, and they had no cause for complaint. It is relevant to recall in this context that no matter what they grow in their fields, the farmers get fertilisers (including imports) at heavily subsidised prices at the taxpayers’ expense (Business Today Online, Jan6, 2000). Government Response A formidable problem inherent in all nation-wide welfare and development schemes in India is the mind-boggling number of intended beneficiaries. How to survey vast hordes of poor people effectively, and how to ensure that the benefits do reach them all? No matter how massive the funds provided are, they always tend to fall far short of the actual requirements for achieving the declared objectives: so how to avoid dilution of the available resources that are scattered so far and wide? These are questions that are likely to haunt us forever, and we can only hope that the administration will do its best. And that is precisely where the Government machinery has been found wanting in many contexts, such as the Integrated Rural Development Programme, assorted employment generation schemes, projects in the health care and education sectors—and yes, the public distribution system. It is Audit's function to point out the facts as they are. The State Governments as a rule are callously indifferent to the CAG’s reports. The Central Government’s response is usually somewhat better, but it does not often take up his reviews for quick remedial action. The PDS report, however, seems to be having an exceptionally strong impact on the executive. For quite some time now it has been a topic for serious discussion between Audit and the Government of India at various levels, culminating in an unusual and earnest encounter between the CAG, Mr. V.K. Shunglu and the Finance Minister, Mr. Yashwant Sinha. The Government is bound to take a long time to tackle all the vital questions raised by the CAG, but at least in one respect it has acted promptly. With commendable speed it has come up with the ‘Antyodaya’ concept of providing much higher rations to the poorest families all over India at extremely low prices (just Rs 2 per kg for wheat and Rs 3 per kg for rice), which made news headlines a few weeks ago. It will push up the food subsidy still further, but several million people may find life a little easier. But of course, we can only hope for the best, as always! |
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