PDS can be extended to all till a vaccine is found for Covid
02 Jul 2020
Ensuring food security is critical at the juncture. Providing universal PDS is financially feasible as FCI has more stock than we need
Opinion: Bornali bhandari
The NCAER Quarterly Review of the Economy June 2020 has estimated that despite the ₹20 trillion Atmanirbhar Bharat package the economy in all likelihood will suffer from negative growth and elevated inflation in 2020-21 due to the combined negative shock and consequent dynamics of aggregate demand and aggregate supply.
Given this background the decision of the Central government to extend free ration to 80 crore beneficiaries till November 2020 is commendable. It addresses food security concerns for a large section of the population that is already identified as poor and covered under the National Food Security Act (NFSA). However there is still a significant proportion of population that is not covered under NFSA despite being poor. Moreover the economic impact of the pandemic will push additional people in poverty.
Uncertain trajectory
While there is resumption in economic activity after the unlocking of India in June 2020 localised lockdowns continue as the coronavirus ebbs and flows its spread in specific regions. Given the uncertain trajectory of the disease macro-economy and livelihoods it is imperative that all Indian citizens are given access to basic PDS for the amount of time that the vaccine is not found for coronavirus. The NCAER Delhi Coronavirus Telephone Survey Phase II conducted in second half of April 2020 found that targeting may not provide social welfare benefits to those who need it the most.
Currently as per the NFSA the PDS should cover 75 per cent of the population in rural and 50 per cent in urban areas. This translates to 67 per cent of total population or 80 crore beneficiaries as per 2011 census. Revising NFSA targets to current population would translate to 92 crore beneficiaries assuming a population of 138 crore. This revision would happen anyway after the Census 2021. But 2021 is far away and the need for food security is now and that too for all the population.
A key philosophical issue is that universal PDS (U-PDS) will be accompanied by increased leakages as we know that no system is perfect. In the current economic scenario should we focus on the risks of increased leakages or benefits of increased food security? This is a normative choice and using humanitarian and economic reasons we argue for the latter. Citizens may choose to sign up for PDS rations on a voluntary basis. Further the moral suasion powers of the Government as evident in the PAHAL scheme in giving up LPG subsidy voluntarily could be used. Tamil Nadu is a case in point which has U-PDS but covers only 81 per cent of the population.
Three issues
There are three issues with the U-PDS. Do we have enough food in our stocks to do that? Is it technically feasible to distribute rations in a way to minimise leakages? Is it financially feasible to have U-PDS given the Atmanirbhar package?
Food stock: As per the Food Corporation of India (FCI) website the total foodgrains stock in the Central Pool as on June 2020 was 832.7 lakh tonnes. The buffer norms are 214 lakh tonnes. The FCI storage capacity is 755.9 lakh tonnes.
Technical feasibility: The Annual Report of the Ministry of Consumer Affairs Food and Public Distribution 2019-20 shows the advanced stage of achievements in the end-to-end computerisation of targeted PDS operations. A carrot and stick policy could be used to address challenges of leakages.
Although imperfect the Delhi e-coupon model or a similar self-enrolment model is one way of reaching out to all beneficiaries. Aadhaar may be used for identification. Paper based application forms should also be made available. As Thapliyal and Jain (2020) point out in their MicroSave blog that the ‘One Nation One Ration Card’ is some distance away and will require various preparatory steps to achieve that goal. It may solve the problems of temporary migrants but does not address the issue of people who are left out of databases or have recently fallen into poverty (NCAER DCVTS II).
Ration can be home delivered or allowed to be picked up from ration shops with minimal contact. States can decide to suspend biometric authentication for beneficiaries in specific areas depending on the threat levels. In such cases States need to devise other mechanisms such as digital authentication by a government employee or PDS dealer and monitoring mechanisms to prevent leakages. At no point should rations be denied to people because of lack of connectivity or other technical issues.
Public finance: There are two sub-questions: What is going to be the cost and can we afford it? If we use the Tamil Nadu numbers and extrapolate this to India factoring in the need to include a greater number of beneficiaries in some States than others then the universal PDS should cover about 85 per cent of the population of India which translates to 117 crore beneficiaries of 138 crore. That is an increase of 37 crore from the current coverage. Out of that 12 crore are already due to increase in population from Census 2011 and the remaining 25 crore is due to U-PDS.
In 2019-20 the economic cost (EC) of running the PDS was ₹1.75 trillion. Factoring in cost recovery from States by selling foodgrains at central issue price of ₹2 per kg for wheat and ₹3 per kg of rice the subsidy cost comes to around ₹1.62 trillion. Implementing U-PDS the subsidy burden will increase by ₹0.75 trillion to ₹2.4 trillion.
This consists of two parts — ₹0.25 trillion to cover the percentage of current population as per NFSA norms and ₹0.5 trillion the additional cost of U-PDS. The total Pradhan Mantri Garib Kalyan package will cost the Central Government an additional ₹1.5 trillion.
We are proposing universalising basic PDS temporarily to all till a vaccine is found say about a year. It is financially feasible as the FCI already has more stock than we need. This stands true even after the scheme is extended. The NCAER QRE June 2020 has suggested myriad ways to manage public finances. Ultimately we need to save lives now to help them earn livelihood in future.
Bhandari is a Senior Fellow at NCAER and Thapliyal is a Partner at MicroSave. Views are personal
National Council of Applied Economic Research