Odisha, MP among those saying the move may compromise food security in some of the nation’s poorest parts
Sayantan Bera i
A file photo of a ration shop. Photo: Indranil Bhoumik/Mint New
Delhi: Plans by the centre to initiate cash transfers to poor households under the public distribution system (PDS) may run into trouble, with some states—notably Odisha and Madhya Pradesh—raising objections on the grounds that such a move may compromise food security in some of the poorest parts of the country.
The states’ objections come in response to recommendations of the high-level committee on Food Corporation of India (FCI)’s restructuring, chaired by former food minister Shanta Kumar.
The panel has recommended an overhaul of the FCI-managed PDS. Among other things, the panel suggested reducing coverage under the National Food Security Act (NFSA) from 67% to 40% of the population and starting the process of cash transfers in order to check high leakages. The panel estimated that cash transfers could save the exchequer Rs.30,000 crore annually. For 2014-15, the central food subsidy bill is estimated at Rs.1.15 trillion.
While the centre told Parliament on Tuesday that it has no plans to amend the NFSA or reduce coverage, its earlier communication to states revealed plans to implement direct benefit transfer (DBT) in all union territories and some select districts of states on a pilot basis. In a letter to the states on 10 February, the centre had proposed three models for transferring food subsidies to targeted households. While states can choose between cash transfers and manual disbursal of foodgrains, all beneficiary households will have to be linked with the Aadhaar database, the letter said. However, some state governments have objected to the direct cash transfer recommendations of the FCI panel and may not opt for cash transfers as a way to receive food subsidies.
Odisha said cash transfer would limit procurement from farmers and therefore threaten food security. “Providing grains in PDS is closely connected with procurement operations in rice and wheat...if government of india decides to go for cash transfer in PDS, it has to gradually reduce procurement operations and stop procurement after sometime,” reads a 9 February letter from the state food secretary to the centre. “When MSP (minimum support price) offered for paddy and wheat are way below the costs incurred by farmers, withdrawing MSP is a sure recipe for creating a food crisis in the future,” the letter said, adding, “In many villages where 65% of our people live, there is hardly any market to cater to the needs of people.
In Odisha, a quarter of the population belonging to scheduled tribe community lives in remote and far flung areas. Cash transfer will hit them the hardest as they will have no access to food market.” Regarding the Prime Minister Jan Dhan Yojana—the flagship scheme which seeks to ensure a bank account for all households—Odisha said, “It is too early to bank upon its utility as the nearest bank for over 50% of the population is 10-15km away for getting any tangible benefit. Hence this recommendation (cash transfer) does not merit any consideration at this point of time.”
Responding to the FCI panel’s estimate of 40% to 50% leakage in the PDS, Madhya Pradesh said the calculations are based on old data and that the state does not agree with the numbers. “In recent years, there has been wide-scale use of technology in PDS that has resulted in improvement... New transparent methods/criteria and robust ways to address complaints have helped in reducing leakage,” reads a 9 February letter from Madhya Pradesh food secretary Ashok Barnwal to the centre.
“Cash transfers in PDS are a debatable issue with opinions in favour and against it. A fallout of cash transfers may be that families may not purchase foodgrains and buy other non-essential items with the transferred cash. Also, cartels of local sellers may create shortages and hike prices in the market. In such cases, food security of poor households may be effected.
The state government (therefore) does not agree to the cash transfer recommendations,” added the letter.
Prior to the FCI panel’s report, the Tamil Nadu chief minister too had written to Prime Minister Narendra Modi objecting to cash transfers. “In principle, the government of Tamil Nadu is strongly opposed to any move to monetize and transfer in cash the subsidy element under the PDS, including kerosene and fertilisers, where the issue is not just the quantum of subsidy, the critical concern is access to and timely availability of commodities,” said a 28 November 2014 letter from chief minister O. Panneerselvam.
It remains unclear if the Bharatiya Janata Party (BJP)-run Chhattisgarh government will continue with its opposition to the cash transfer scheme. In December 2012, the state had passed a food security act with chief minister Raman Singh emphasizing that the state will not implement cash transfers in PDS.
“In the past few months the state was preparing for pilots of cash transfer, not for food grains, but other PDS benefits like sugar and kerosene. That hasn’t found favour with the ruling politicians and the pilot may have been shelved,” said Samir Garg, a Raipur-based adviser to the commissioners of the Supreme Court in the Right To Food case.
“The state was the first to initiate PDS reforms—by bringing ration shops under cooperatives and panchayats, computerising godowns, initiating doorstep delivery of grains, and grievance redressal, thereby reducing PDS leakages to 9.3% in 2011-12 (from 91% in 2004-05). Their model is tried and tested; politically, the state may not opt for cash transfers,” Garg added.