Getting PDS vs cash wrong

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New Delhi | Published: June 25, 2018 5:22:16 AM

If bank/UPI services made better, cash better than rations

Given that this infrastructural shortage was brought out over a year ago, it is unfortunate that this has not been addressed so far.

After the Abdul Latif Jameel Poverty Action Lab (J-PAL) did a study along similar lines for NITI Aayog last year, the social audit unit of the Jharkhand government has come out with a study showing that, in a pilot project in Nagri block, people preferred getting subsidised rations from PDS shops rather than getting cash and then using this to buy food grains in the market at unsubsidised rates—if rice costs Rs 23 per kg in the market versus the Rs 3 it cost in the ration shop, each person would get Rs 20 in cash into the number of kilograms of subsidised rice they were entitled to.

One of the reasons, the audit found, was that people said it took families up to 13 hours to withdraw cash from their bank accounts and then go to market to buy their food supplies; matters were complicated by the fact that just 17% of people received their cash transfers on time and 13% never even received their funds.While critics of the cash subsidy plan have used the study to demand that the pilot should not be scaled up across the country, this is really missing the wood for the trees. Presumably, people had to go to their banks a few times, first to check if the money had been deposited and then to withdraw it. A simple solution like SMSs from the bank when the money was credited to their account could take care of part of the problem—that, of course, is for those who have mobile phones; if, on the other hand, the money always came in on time, this issue would not arise.

While this would not obviate the need for going to the bank to withdraw the cash, even this could be fixed with easier mobile banking; customers could then simply pay the ration shop using BHIM or some other app instead of going to the bank to withdraw the cash. Or, if the government ensured that banking correspondents in the village—or the shops from where food grains are bought—had Aadhaar Pay apps along with small fingerprint scanners that cost a couple of thousand rupees, residents would not even need to have mobile phones. One of the issues that came up in the J-PAL study was that the cash dole didn’t cover the costs of non-subsidised grain—that too is easily fixed, by being realistic about the amount of cash given. Given that this infrastructural shortage was brought out over a year ago, it is unfortunate that this has not been addressed so far. More so, since, if cash transfers replace physical rations, the government can also wind down FCI’s operations quite significantly and, along with this, reduce the huge losses it makes due to its inefficiency.

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