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Informist, Tuesday, Nov. 19, 2024

 

MUMBAI – Leakage of grains, supplied by Food Corp. of India to over 813 million people, under the public distribution system results in a loss of approximately INR 691.08 billion, according to the study, "Rationalising Public Distribution System in India", released by policy advocacy group Indian Council for Research on International Economic Relations. The study, authored by Raya Das, Ranjana Roy and Ashok Gulati, quoted the Household Consumption Expenditure Survey for 2022-23 and said 28% of the allocated grains, amounting to approximately 20 million tonnes of rice and wheat, failed to reach the intended recipients. 

 

During Aug-Jul (2022-23), the absolute leakage in rice was 16.8 million tonnes and that in wheat was 2.9 million tonnes, according to the study. The economic costs of rice and wheat for the year were INR 3,670 per 100 kg and INR 2,590 per 100 kg, respectively.   

 

The study focused on the reforms required in the current distribution of food subsidies. "The significant loss highlights the urgent need for a shift towards direct benefit transfer for better efficiency and accountability in the distribution of food subsidies," according to the report. "By transferring subsidies directly to the beneficiaries' bank accounts, DBT (direct benefit transfer) minimizes leakage, reduces administrative costs, and ensures that the intended recipients receive full benefits. This approach enhances transparency and allows beneficiaries to purchase food grains as per their needs. While the Modi government gives high priority to direct benefit transfers, the PDS (public distribution system) has yet to see a change from physical quantities through FPS (fair price shops) to direct cash transfers to beneficiaries’ accounts," it added.  

 

The study referred to Shanta Kumar Committee's report submitted in January 2015, which had estimated leakage in the public distribution system at about 46% on an all-India level and as high as 70% in north-eastern states. The committee had recommended end-to-end digitalisation of the system to contain leakages and reduction of the then 67% coverage to 40% as the headcount poverty estimated by the erstwhile Planning Commission was about 21% in 2011.

 

Quoting the Household Consumption Expenditure Survey for 2022-23, the study said consumption poverty, as measured by the Rangarajan poverty line, fell from 29.5% to 8.4%. "This reduction in poverty suggests potential for targeting the bottom 15% of population for free food distribution, while those between 15-57% of the population being covered today in PMGKAY (Pradhan Mantri Garib Kalyan Anna Yojana) can be offered grains at least at 50% of the MSP (minimum support price)."

 

Such a central issue price method, in tandem with minimum support price, can lessen the fiscal burden of food subsidies, allowing for the reallocation of resources to development-focused expenditure, the study said. "It may be noted that such a system did exist during the Vajpayee government's period. It would be only wise to follow that path."

 

In the Union Budget 2024-25, the government had pegged food subsidy bill at INR 2.053 trillion, down 3.3% from a year ago. The actual expenditure of food subsidies under the National Food Security Act was over INR 2.0 trillion in Apr-Mar (2022-23), according to the budget documents. End

 

Reported by J. Navya Sruthi

Edited by Namrata Rao

 

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