Friday, July 06, 2007

Food subsidy administration through coupons

5 Jul 07, 18:01

Rishi raj: Hi..What would be the effect of giving coupons for PDS system ?

Giving coupons would be dismantling the existing PDS system. Food coupons allow the beneficiaries to directly purchase food grain of choice, as opposed to a predetermined basket available under PDS, from ‘kirana stores’ at PDS prices (the latter can collect the difference from the government). Besides, encouraging more efficient private grain handling, this opens up the possibility of large corporate involvement.

While coupons do have merits, it should be remembered that they will also bring with them some problems which are peculiar to them.

One of them is -- will they be delivered the way they are meant to be delivered? Perhaps it is distinctly possible that they will be garnered by the undeserving and a parallel/black/underground market for them develops. In all probability political affiliations may determine who is 'deserving' and who is not. Perhaps a biometric smart card based system of distributing coupons can overcome some of these problems. But will the political system allow such a system to take root?

Second is corruption. This had haunted the existing PDS system also. Nobody is talking of safeguards against corruption in the ravamped coupon based system. It would be naive to think that this will not be there.

But on the positive side:

  1. Given that a reasonable system of distribution is allowed to be kept in place, it would ensure not just food security, but nutritional security for the vast majority of our needy masses.
  2. The coupon system is more easily amenable to a technology backed fight against corruption and iniquities in the distribution system.
  3. Once the private sector is involved in it, the raison deter of black marketing gets removed.
  4. The supply chain management burden that is now there on the government stands off-loaded to the private sector. Government would be able to do a much better job of ensuring food security as it can concentrate only on procurement for security reasons.

1 Comment:

ramkyc said...

One interesting statistic that needs to be noted in this context is this -- it has been estimated that the cost of transferring a rupee to the poor through the PDS is Rs. 6.68 and administrative cost accounts for 85% of the total expenditure. So, if coupons can make a significant dent in either of these figures, it is worth experimenting with it rather than sticking to the PDS system.