People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 02

January 13, 2013


Case for a Reformed Universal PDS: Some Empirical Evidence


Archana Prasad


WHILE inaugurating the 1000th branch of the State Bank of Bikaner and Jaipur, P Chidambaram termed the direct cash transfer scheme as “pure magic” and a game changer. On January 1, 2013, Mrs Sonya Gandhi inaugurated the Dilli Annashree Yojana, cash transfer scheme which would transfer Rs 600 per month into the accounts of the most senior lady of a poor household in lieu of cheap rations.


The chief minister of Delhi claimed this would be the best way of meeting the needs of providing cheap grains to the needy. When questioned about the paltry sum of money for the scheme, the chief minister claimed that Rs 600 were enough to buy the ration for of a family of five or six people in the capital. The public outrage invoked by this remark forced her to clarify that this money is “a kind of a support for the families. You can buy anything with the money. If someone wants to buy medicine she can buy it with the assistance. If a woman wants to buy milk for her children, she can buy it.” This statement clearly indicates that the government is not interested in ensuring that poor families have access to cheap food. It would rather follow the principal of giving the individual beneficiary the choice of whether they want to meet their short term needs instead of ensuring their nutritional requirements.


The neo-liberal state is thus divesting itself of its own social responsibility of moving towards a hunger free country where the basic rights of every citizen are ensured. Though the idea of receiving direct cash may be attractive for some cash strapped families in distress this short term advantage is likely to have far reaching consequences for the food security of the family as a whole. Hence the government’s glorification of direct cash transfers in food needs to be demystified given the current experience.




The government argues that the cash transfer system is an efficient way of checking the leakages and corruption in the public distribution system. According to the Planning Commission almost half the PDS grain was diverted to other uses between 1997 and 2001. It is argued that given the systemic failure of the public distribution system (PDS), it will be unable to cater to the needs of the poor. Rather cash transfers will not only circumvent these failures but allow the poor to by pass the dysfunctional PDS.


But as the 2011 survey of the PDS by economist Reetika Khera shows, this understanding is misplaced. The survey of purchase entitlement ration in some sample states reveals a national average of 85 per cent. This means that poor families use the PDS for their daily needs despite the infirmities within the system. As the survey points out, the utilisation of the PDS is at an optimum level when the coverage and trend is towards the PDS universalisation. Thus four of the nine states covered by the PDS were moving towards universal coverage under the PDS system. Tamilnadu has had a universal PDS system for some time and Himachal has a universal PDS where the APL groups pay slightly higher prices. In Andhra and Chhattisgarh, the system is quasi-universal with nearly 80 per cent of the population entitled to PDS commodities. In other states like Orissa, Rajasthan and Jharkhand there is a move to expand the BPL list and make PDS more inclusive. In most of these states the state governments pay for expanded coverage, even as central allocations to states become more restricted. This expanded coverage has increased the efficiency of the PDS as it has reduced the diversion of PDS stocks. Thus the NSSO data show that the diversion went down from 52 per cent in 2004-2005 to 11 per cent in 2009-2010, whereas in Orissa it went down from 70 to 30 per cent in the same period.


The announcement of direct cash transfers for food under the Dilli Annashree Yojna have to be seen in the context of this experience. The government quotes the NSSO survey to show that most of the PDS covered families buy foodgrains from the open market in the states, and thereby justify direct cash transfers. It also argues that this scheme will cover two lakh urban poor who are not currently under the PDS net. However, it does not answer the crucial question of why the PDS covers a negligible number of families in Delhi. By Delhi government’s own estimation there are about 22.93 lakh people living below poverty line in the capital. Of these, about 2.61 lakh or 10 per cent of the estimated poor people have BPL cards whereas 1.03 lakh people have Antodaya cards. Thus a total of 3.03 lakh families out of an estimated 17.5 lakh families with ration cards are classed as BPL. Further, repeated surveys in here show that most poor families do not use the PDS because of systemic infirmities like pilferages in quantities, irregular timings of shops, improper weighing systems and other corrupt practices that need to addressed so that a reformed PDS can be put in place. But the direct cash transfer scheme simply replaces rather than reforms this system and puts the beneficiaries at the mercy of the open market. In effect, it means the privatisation of PDS through the penetration of the open market.




Surveys by several independent organisations have shown that poor people prefer foodgrains rather direct cash transfer as far as PDS is concerned. The 4005 household survey of the Roti Rozi Abhiyan, a network of 30 organisations in Delhi (2010), showed that 90 per cent of the urban poor preferred a reformed PDS to direct cash transfers in foodgrains. This number was particularly high amongst those who had BPL and Antodaya cards, whereas only 3.6 per cent of the BPL and 5.8 per cent of the Antodaya card holders preferred cash transfers.


Similar results were found by Jean Dreze and Reetika Khera (2011) in their nine-state study where Bihar was the only state where more people preferred direct cash transfer to PDS foodgrains. In states where the PDS was working smoothly, more than two thirds of the sample preferred PDS foodgrains. In the overall analysis, around 67.2 per cent of the sample preferred an improved PDS to direct cash transfers.


The reason for this result is not hard to understand given the problems faced in implementation of the pilot project for direct cash transfers in food in Kotkasim, Rajasthan. In 2011 the government started transferring direct kerosene subsidies in bank accounts and these were to be used to purchase kerosene from fair price shops at market prices. A report of the advisor to the Supreme Court commissioner in Rajasthan showed that most of the eligible people had no bank accounts, and kerosene dealers were complaining that fair price shops were becoming unviable because of the direct cash transfer system.


It is thus clear that direct cash transfer is ultimately aimed at the denial of entitlements and privatisation of the public distribution system. Given this experience and evidence it is necessary that direct cash transfers are opposed and the fight for a universal but democratised and reformed public distribution system is intensified and made more broadbased.