IS MORE INCLUSIVE MORE EFFECTIVE? THE ‘NEW PUBLIC DISTRIBUTION SYSTEM FOR FOOD IN INDIA

Nawad, Bihar, India. Source: Vartika Singh, IFPRI

In September 2013, the Parliament of India enacted the National Food Security Act (NFSA), which entitles two thirds of India’s population to five kilograms of rice, wheat, or coarse cereals per person per month at one to three Indian rupees (Rs) per kilogram. Five states in India—Andhra Pradesh, Chhattisgarh, Tamil Nadu, Odisha, and West Bengal—had already implemented similar changes in the targeted public distribution system (TPDS) a few years earlier using their own budgetary resources. They made rice available in fair-price shops to a majority of their population at less than Rs. 3/kg.

Data from household consumption surveys by the National Sample Survey Organization (NSSO) show improvement in the coverage of TPDS and average off-take of grains from fair-price shops between 2004-05 and 2009-10 across all states of India. However, the increase in coverage and off-take was significantly higher in four out of these five states than in the rest of India. (The policy did poorly in West Bengal.) An average household in these states purchased three kilos more rice per month from fair-price shops than its counterpart in non-treated states because of more generous TPDS policies backed by administrative reforms.

The increase in consumption of publicly-distributed rice was the highest in Chhattisgarh, the poster state of TPDS reforms. Households there used money saved on rice to spend more on pulses, edible cooking oil, vegetables, and sugar, and other non-food items. We also find evidence that making TPDS more inclusive and more generous is insufficient unless it is supported by administrative reforms to improve grain delivery and control diversion to open markets.

In a recent IFPRI Discussion paper on Is more inclusive more effective? The “new-style” public distribution system in India, the author’s highlight  the following pertinent recommendations of Shanta Kumar High Level Committee on NFSA.  They include the following changes:

• Government of India should defer implementation of NFSA in states that have not done end-to-end computerization; have not put the list of beneficiaries online for anyone to verify; and have not set up vigilance committees to check pilferage from PDS.
• NFSA coverage should be brought down to around 40 percent.
• Priority persons to be given 7kg/person/month instead of 5 kg.
• Central issue prices should be linked to Minimum Support Price (MSP) for Below Poverty Level households (suggested 50 percent of MSP).
• Targeted beneficiaries under NFSA or TPDS to be given six months’ ration immediately after the procurement season ends.
• Gradual introduction of cash transfers in PDS, starting with cities with a population of more than one million, extending it to grain surplus states, and then giving option to deficit states to opt for cash or physical grain distribution.

The amendments prompt further research on the possible impact that each of the aforementioned points might have on 1) consumer welfare and 2) making the TPDS more efficient.  Both aspects are important, given the high levels of hunger and malnutrition in the country along with the high levels of leakage in the PDS. Finding the right policy mix is crucial.