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India Considers Changing Its Food Distribution System for the Poor

   Direct Subsidy (or Coupon) System Proposed to Plug Leaks in the Public
   Distribution System

   Dave DeForest 25 August 2010

   A  proposal being considered by Indiaâs political leaders would change
   the  way  the nationâs poor receive government aid.  Some politicians
   and  government  economic advisers are proposing scrapping the current
   system and instead distributing food coupons directly to the poor.

   Currently,  poor  Indians  receive  a special card with which they can
   purchase  food  at âfair price shopsâ set up to distribute food to the
   needy.  The food is procured and sold through the governmentâs Public
   Distribution System (PDS).

   A  coupon  system would eventually enable poor people to purchase food
   in any store in the country, not just those in the government system.

   âBy  introducing  the  direct subsidy system, the government can spend
   half  the  money  it  is  spending  now  and  get double the benefit,â
   economic advisor Kaushik Basu told the [1]Economic Times.

   The  current  system is expensive to operate in part because resources
   moving  through the system have a tendency to âleak outâ through theft
   and inefficiency.

   âThe  trucks sometimes donât reach (or only half the load reaches) the
   shop,  sometimes  there  is a lot of siphoning of the grain that takes
   place  even at the fair price shops,â said  [2]A. Ganesh-Kumar, a New
   Delhi-based  research  fellow  with  the  [3]International Food Policy
   Research Institute.

   Besides  leakage, he says one the most important of Indiaâs challenges
   is to determine exactly how many poor people there really are.

   âThe  coupon system is an alternative in the sense that the government
   does  not  get  itself  involved  in the actual business of procuring,
   storing  and  distributing grains,â Ganesh-Kumar said.  âIt can bring
   down   costs   for   the   government,  but  the  same  issue  of  the
   identification of the poor remains,â he added.

   âTo be effective, a coupon system needs a complete registry of all the
   citizens  of  the  country,â he pointed out. âRight now the government
   has set up a unique identity authority which is supposed to do exactly
   that, but this process will take maybe two or three yearsâ¦â he said.

   Ganesh-Kumar  says  poverty  estimates  widely  range between 28 to 80
   percent  of  the  population, but the official government figure is 37
   percent.  He  says  some  people  currently receiving benefits are not
   really poor and some who do need help are not getting it.

   With the need so great, feeding the poor has been a perennial issue in
   political   campaigns  in  India  and  leaders  routinely  promise  to
   eliminate  hunger.But many poor people are simply âfalling through the
   cracksâ in the current system.

   Despite  a  generous  allocation  of  government  resources, many poor
   people continue to suffer from malnutrition.

   The  British  newspaper  the [4]Guardian reported this year that there
   are  more  poor  people  in  India  than  in  all of the 26 nations of
   sub-Sahara Africa combined. The [5]Times of India reports that half of
   all child deaths in India are due to malnutrition.

   A.  Ganesh-Kumar  said he regretted that the cost-effectiveness of the
   current  system  has  not  been  given  enough  attention  in  current
   discussions  about possible changes. âThe need of being cost effective
   isâ¦not even being debated in this country,â he said.â

   Ganesh-Kumar  would  not  hazard  a guess as to whether the new coupon
   system  will  be  approved.   He pointed out that there are more than
   100,000  people  who  work  for  the  current  system  and  they  will
   undoubtedly oppose getting rid of it.

References

   1. http://economictimes.indiatimes.com/defaultinterstitial.cms
   2. http://www.igidr.ac.in/~agk/
   3. http://www.ifpri.org/
   4. http://www.guardian.co.uk/
   5. http://timesofindia.indiatimes.com/

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