Public Distribution vs Direct Transfers
Source: Financial Express

This piece was originally published in Financial Express.

The debate in India regarding the delivery mechanism for the Public distribution System (PDS) has been polarised along the lines of cash versus kind transfer, inclusion criteria over exclusion criteria for beneficiary selection and the composition of product portfolio. This debate has been revitalised with the news that government is contemplating scrapping PDS, and replacing it with direct benefit transfer (DBT) for food because of encouraging results from pilots in Haryana and Puducherry. Though the PDS continues to be the fulcrum of food subsidisation, states like Bihar, Andhra Pradesh, Madhya Pradesh and Delhi, are conducting pilots for alternative mechanisms. Karnataka, recently made ration-card-holders eligible to buy rations at any PDS shop within the state i.e. not only their preassigned shops. Amid all these, one facet that deserves attention is: What do the beneficiaries of this system themselves want? Do they want a DBT, a food stamp, or the traditional PDS with some rough edges smoothed? Is the transferability of PDS across shops the preferred option or a purchasing power preserving DBT would make them happier? These questions relate to the rubric of demand assessment. Common sense might suggest that for maximum effectiveness, programmes like the PDS have an inbuilt system for such assessment. Yet, hardly any government programme ever carries out a demand assessment, and the PDS is no exception.

The need for demand assessment

Effectiveness of programmes like PDS, are usually assessed from the supply-side with indicators such as cost of delivery, coverage, leakages and prices for the intended beneficiaries. The question remains about the demand assessment, the importance of which has amplified after the enactment of National Food Security Act (NFSA) where PDS is pivotal as the last node of delivery. In our research, we break ranks with much of the literature to assess what people really want from the PDS. We conducted surveys in three states/regions of Bihar, Odisha and Eastern Uttar Pradesh. Our motivation comes from the fact that for reasons, including historical continuity, PDS has been designed without accounting for changing needs and preferences as a result of several factors—modifying dietary patterns, food cultures, social structure, social norms, improving access to information, and changing aspirations of the people.

The results clearly indicate heterogeneity in terms of socio-economic environments, political structures including power relations that determine the nature and type of engagement with the PDS, tastes and preferences and the delivery systems and efficacy of the PDS. After NFSA, substantive changes occurred in eligibility, entitlement and delivery mechanisms that also form a basis for heterogeneity. Heterogeneity shows up in varied preferences relating to the PDS (e.g. rice over wheat or variety of rice preferred). Some problems in PDS may be due to a mismatch between what is desired and what the programme provides for, for example leakages.

Delivery mechanism: What do the beneficiaries want?

On choice between the current PDS and DBT, responses seem quite diverse. In Odisha (sample focusing on tribal districts), overwhelming 93% are not in favour of DBT replacing PDS, and around 92% do not see it as the way to go in near future as well. With such a stark aversion to DBT, it is pertinent to ask the reasons behind such choices. Both women and men express fear that cash is prone to misuse by them or family. Interestingly, tribal women are wary of DBT for their own habits as well, expressing fear that they would end up diverting cash to buy local toddy and tobacco. More from a programme perspective, a significant percentage of women find dealing with banks complex with many formalities. Here, it becomes important to delineate the issue with the programme itself and the implementation hitches.

Coming to Bihar, another poor state, the fruits of heterogeneity and need for demand assessment come to the fore. Despite the documented claims of PDS improvement in Bihar, there is significant buy in for non-PDS delivery systems, cash and food coupon. With deeply entrenched caste system and local power dynamics, cash or universal food coupon emerge as tools to minimise the interface with the PDS dealer, often a source of harassment/abuse especially for women. In Eastern UP, the responses are divided, with around 51% in favour of DBT. Some reasons cited for preferring DBT were its comparative ease, flexibility and the prospect of better quality food compared to PDS. 

Since a significant 48% do not favour cash, it is worthwhile to explore their reasons. The perception is conditioned primarily by their negative experience with other schemes like old-age pension. This apart, households not preferring cash seem to believe that PDS insures against inflation in a way that DBT may not, and that cash transfer may encourage even greater corruption at the local level. As a common finding two factors bear on the needs and preferences: experiences with the current PDS and the familiarity or experience with the alternative.

Possible policy implications

So, what are the main takeaways? There is a need for needs assessment driven by significant heterogeneity. One may argue that there is a limit to needs assessment in terms of its granularity. There however are broad questions like preferred mode of transfer in PDS. An important implication is to refrain from making policies based on demonstration effect (nationally or internationally) for that could result in suboptimal outcomes. For example, if cash transfer is working in Haryana, there is no guarantee that it will work in Odisha.

By: Mamata Pradhan, Devesh Roy, Avinash Kishore & Vinay Sonkar
Pradhan is a doctoral scholar, University of East Anglia, UK. The findings are part of her Ph.D. thesis. Roy and Kishore are research fellows, and Sonkar is research analyst, International Food Policy Research Institute

Photo credit:Financial Express