Economists dispute govt. claims on PDS leakage

February 04, 2015 02:04 am | Updated November 16, 2021 05:19 pm IST - NEW DELHI

People stand in queue in front of a fair price shop.

People stand in queue in front of a fair price shop.

Just how leaky is the Public Distribution System and is it getting worse or better? The question is at the centre of a dispute between economists over recent estimates of diversion in the PDS used in an official report.

The Shanta Kumar high-level committee on the restructuring of the Food Corporation of India submitted its report to Prime Minister Narendra Modi last week, recommending a gradual move to cash transfers. The committee used estimates of PDS leakage calculated by one of its members, Ashok Gulati, former chairperson of the Commission for Agricultural Costs, and Shweta Saini of the Indian Council for Research on International Economic Relations.

Economists Jean Dreze and Reetika Khera dispute these numbers in a paper to be published in the Economic and Political Weekly. When contacted by The Hindu , Mr. Gulati said he welcomed criticisms of the methodology and accepted some of them, but contended that his bottom line was that leakages were unacceptably high. While Mr. Dreze and Ms. Khera argued that a decline in diversion shows that the PDS can be reformed, Mr. Gulati said the improved number too was unacceptably high, and the process costly for the State. Cash transfer, he said, was a much better option.

Mr. Dreze and Ms. Khera faulted Mr. Gulati’s methodology in calculating the actual reported levels of PDS grain consumption by households, as well as the total off take by States, the difference between the two being the extent of diversion. As a result, while Mr. Gulati and Ms. Saini’s estimates showed 47 per cent diversion, Ms. Khera’s showed 42 per cent. More crucially, Ms. Khera’s calculations showed a decline in diversion since 2004-05, and rapid improvements in States like Bihar and Chhattisgarh which have undertaken reform.

At least one independent survey, the National Council for Applied Economic Research’s (NCAER) nationwide India Human Development Survey (IHDS), also showed a decline in PDS diversion from 49 per cent in 2004-05 to 32 per cent in 2011-12, Sonalde Desai, Senior Fellow at NCAER, said on Tuesday. Another study, by Himanshu, assistant professor of economics at Jawaharlal Nehru University, showed even lower levels of leakage than those estimated by Ms. Khera for 2011-12.

“The bulk of the leakage now is in the Above Poverty Line quota, into which more and more foodgrain is now being dumped. The best way to reform this would be to phase out the separate APL quota and instead broaden coverage under the Food Security Act,” Mr. Dreze said. States which had expanded their programmes and dropped prices were the ones which had seen big declines in diversion, Ms. Khera said.

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