As the government and policymakers debate the efficacy of universalising the public distribution system, India?s apex court has suggested the total disbanding of subsidised grain distribution to above poverty line (APL) families, thereby restricting the facility only to below poverty line families. The SC?s suggestion?even if it goes against the NAC?s initial recommendations that called for the complete universalisation of the PDS (later restricted to one-fourth of the poorest administrative blocks) is worth considering, given the huge subsidy burden that the government incurs in distributing cheap foodgrains. At present, 10-35 kg (which has been recently hiked to 15-35 kg) of wheat and rice are distributed to 11.5 crore APL families every month. Wheat is sold at Rs 6.10 per kg, while rice is sold at Rs 8.30.
The central issue price (CIP) of wheat and rice sold through the targeted public distribution system (TPDS) has not been revised since 2002, while the minimum support prices have risen sharply. The central government bore a subsidy of 59.5% for wheat and a subsidy of 56.2% for rice sold to APL families through the TPDS in 2009-10, while it was 49.77% and 41.20% for wheat and rice, respectively, in 2006-07. The CIP remained static while the economy cost (sum total of the MSP, storage and transportation costs) continued to rise, causing the subsidy burden to soar. Although there has been some movement in the direction of increasing the CIP of foodgrains sold to APL families, no concrete action has been taken so far.
Of the 42 lakh tonnes of foodgrains allocated on a monthly basis for TPDS as of October 2009, almost 18.21 lakh tonnes is meant for APL families. Disbanding the cheap grain scheme for APL families would save huge amounts of grains and will also help in bringing down the subsidy burden. Not only this, the scheme would result in the reduction of government procurement. This would cause fewer storage-related problems as well as lower distortionary forces in the market. If circumstances necessitating the distribution of foodgrains at cheap rates to APL families arise, they can be considered on a case-by-case basis.
However, a robust foodgrain distribution programme for the poor, with close to zero pilferage and wastage is the real need for which the SC provides some very concrete solutions.
sanjeeb.mukherjee@expressindia.com