Just how leaky is the PDS?

Updated - February 07, 2015 05:19 pm IST

Published - February 05, 2015 06:00 pm IST

Old stock of paddy repacked in new gunny bags at a government godown for PDS in the Dhamtari district of Chhattisgarh, on March 30, 2004. 
Photo: V.V. Krishnan

Old stock of paddy repacked in new gunny bags at a government godown for PDS in the Dhamtari district of Chhattisgarh, on March 30, 2004. Photo: V.V. Krishnan

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Why do we not have a clear answer on just how much grain is leaking out of the Public Distribution System? If you’re interested in just what ‘leakage’ means and how it’s worked out, here’s a little primer.

So first: what is leakage? Since we know anecdotally that many households do not get all the grain they are entitled to, we can assume some is being illegally diverted. It’s key to realise though is that while we assume that leakage is equal to stealing or corruption, we don’t actually know what’s happening to the missing grain.

That said, here’s how leakage is calculated. The National Sample Survey Office conducts nationwide consumption surveys every two years. One of the questions they ask is how much PDS grain a household consumes. Theoretically, the total PDS grain that all households say they consume should tally with the total grain that states offtake from the Food Corporation of India (FCI). The mismatch between it is leakage.

It sounds more simple than it is, and the complications are why there is now a >raging debate about whether the estimates of leakage used by the High Level Committee on restructuring the FCI, which recommended a gradual dismantling of the PDS and a move to cash transfers, are inaccurate. The HLC used estimates from a >paper by Ashok Gulati and Shweta Saini and the principal opposition comes from Jean Dreze and Reetika Khera. I spoke to both sides.

So what are the points of disagreement?

1. The first number is how much a household consumes. What Mr. Gulati and Ms. Saini did is that they multiplied the average consumption by the total number of households with a ration card. Mr. Dreze and Ms. Khera’s problem with this is that the NSSO explicitly states that its average is over all households, not just those with a ration card. In 2011-12, the National Council for Applied Economic Research’s India Human Development Survey found that 13 per cent of households had no ration card. Mr. Gulati admits this error.

2. On the offtake side, Mr. Gulati and Ms. Saini make the error of including grain meant for schemes like the Integrated Child Development Services (ICDS), a feeding scheme for infants and pregnant women, into the total figure, while the NSS is asking households about grain that they got from the PDS store only. They concede this error too.

3. Finally, there has been substantial “ad hoc allocation” by governments of late, primarily in the Above Poverty Line quota. While Mr. Gulati and Ms. Saini include all five categories of ad hoc allocations, Mr. Dreze and Ms. Khera say that they consulted with the union government’s Department of Food and Public Distribution, which agreed that only two types of ad hoc allocations need to be included in the calculation. As a result, Mr. Saini and Ms. Gulati overestimate the total offtake, they say. Mr. Gulati said that he had sought a clarification from the ministry after receiving Mr. Dreze’s note.

What this works out to appears small – Mr. Gulati and Ms. Saini estimate that leakages are 46.7 per cent, while Mr. Dreze and Ms. Khera find they are 42 per cent. But where this matters is at the state level. Mr. Gulati and Ms. Saini did not use their methodology to calculate leakages for previous years; for the past, they relied on others’ estimates. As a result, they find leakages are not reducing. However Mr. Dreze and Ms. Khera find that leakages reduced from 54 per cent in 2004-5, to 42 per cent in 2011-12. The decline by their calculations was rapid in states like Bihar and Odisha which, like the older examples of Chhattisgarh, Tamil Nadu and Himachal Pradesh, have made attempts to reform the PDS.

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