Are We Staring at Another Phase of Dilution of PDS in India?

On February 28, 2020, it was reported that the central government’s think tank, NITI Aayog, in a discussion paper recommended a revision in the coverage of urban and rural populations under the National Food Security Act (NFSA), 2013 to generate annual savings of Rs 47,229 crores spent on food subsidies. It has recommended that the coverage of rural population be reduced from 75% to 60% and that of urban population from 50% to 40%.

A couple of days later, Food Secretary Sudhanshu Pandey clarified that once the new census data was available, the Centre might consider revising the number of people who get subsidised food grains under the NFSA and that the Food Ministry has had discussions on the recommendations made by NITI Aayog.

These recommendations have been made at a time when farmers from across the country have been agitating on the borders of Delhi against the three farm laws passed by the government of India in September 2020, arguing that the laws not only threaten their lands and livelihood, but also the food security of the country.

This is also the time when India has ranked 94th among 107 countries in the Global Hunger Index 2020, featuring in the ‘serious’ hunger category. India’s neighbours – Bangladesh, Myanmar and Pakistan, while also featuring in the ‘serious’ category, ranked higher at 75th, 78th and 88th positions respectively. According to a report by Food and Agriculture Organisation (FAO), 14% people in India are undernourished. Around 51.4% of women in reproductive age are anaemic and 34.7% of children aged under five are stunted.

The NFSA was enacted in 2013 to ensure access to adequate quantity of quality food to the people of India at affordable prices under various schemes. The distribution of food grains was to be done through the infrastructure put in place under the Public Distribution System (PDS). Despite being converted to Targeted Public Distribution System (TPDS) (from universal PDS) in 1997, TPDS or the ration system has become synonymous with food security. According to the Food Grain Bulletin (November 2020), about 67% of the total population of the country is covered under the NFSA and the estimated food-grain allocation was 549 lakh tonnes.

With the passage of farm laws, it is feared that the entire system of public procurement and along with it the system of public distribution is on its way to being systematically dismantled. The public procurement and the public distribution systems are intrinsically connected. PDS in India is the largest of its kind in the world. This was started in 1939 as a rationing system during the war time by the British government in Bombay and then expanded to other cities and regions. It was made a universal scheme in the 1970s for the provision of cheap food and as a strategy to alleviate poverty.

In its first phase until 1960s, PDS was expanded to other cities. In this period, distribution was dependent on import of food grains. Between 1960 and 1978, a number of organisational changes were made and the government set up the Agricultural Prices Commission (later came to be known as the Commission for Agricultural Costs and Prices) and the Food Corporation of India to strengthen domestic procurement and storage. Following this, until 1991, there was a large-scale expansion of the PDS in India, which was supported by domestic procurement and stocks. However, in 1997, PDS was converted from a universal ration distribution system to a targeted one in line with the policies of economic and trade liberalisation introduced in India at that time.

TPDS was introduced in India in 1997 following the advice of an influential World Bank document that recommended curtailing the food subsidies provided by India. Under the new system, households were targeted in the basis of the income criteria and used the income poverty line defined by the Planning Commission to demarcate households into two categories – ‘Above Poverty Line (APL)’ and ‘Below Poverty Line (BPL).’ Along with this, the system of dual central issue prices was introduced where the BPL and APL consumers were distributed grains at different prices. In March 2000, the subsidies for APL consumers were slashed. In other words, the families whose incomes were even slightly above the poverty line decided by the Planning Commission were now not to be supported under the PDS. In 2001, the Antyodaya Scheme was launched for the ‘poorest of poor’ in which food grains were distributed with additional subsidy.

In 2005, the Planning Commission in its evaluation of the Targeted PDS said, “The transition from universal PDS to TPDS has neither benefited the poor, nor helped reduce budgetary food subsidies.” Having studied and analysed the PDS system in great detail, prominent economist Madhura Swaminathan argued that there are four major problems with the TPDS. These include:

1. Targeting has led to a large-scale exclusion of needy households from the PDS.

2. Targeting has adversely affected the functioning and viability of the PDS network and led to a collapse of the delivery system.

3. TPDS has failed to achieve the objective of price stabilisation through transfer of cereals from surplus to deficit regions.

4. Reports hint at large-scale leakages from the PDS system.

While it was argued by the proponents of TPDS that the scheme will enable the system of grain distribution to reach the poor and needy more effectively than the Universal PDS, evaluation of the targeted system by government authorities as well as independent researchers have shown that the results have been quite the opposite. Moreover, the very first stage of exclusion constitutes the households that for multiple reasons, personal as well as institutional, do not possess a ration card.

According to a working paper submitted to the United Nations in 2008, a total of 60% or more of the population from a majority of Indian states had been excluded from the PDS. This also included the state of Kerala, which was, in fact, a model for the rest of the country before the introduction of TPDS. It was only in Andhra Pradesh and Karnataka that a majority of rural households possessed BPL or Antyodaya cards. The report estimates an all-India average of 52% agricultural labourer households either had no card or an APL card. The effective exclusion of agricultural labourer households in Bihar and Uttar Pradesh in 2008 was a whopping 71% and 73%.

All the progress that had been made with the introduction policies in the 1960s in accelerating the production of food grains and ensuring a period of low and stable prices of cereals has been undone. Swaminathan argues that as a result of liberalisation, the policies to address food security have been weakened and have had a very damaging impact on consumption and nutrition. The primary push of the liberalisation policies advocated by advanced capitalist countries and international institutions such as the World Bank and International Monetary Fund (IMF) have been to – reduce food and agricultural subsidies given out by developing countries and leave distribution to the market. Opening up of trade and deflationary policies at the macroeconomic level were integral to the neo-liberal model of economic reforms. Deflationary policies are pursued to reduce domestic demand and are recommended within the neo-liberal model to economies that need to tackle external deficit.

These policies resulted in a decline in purchasing power of people (particularly the rural population) and an effective decline in demand and absorption of food grains for consumption purposes. There was a continuous decline in sale of food grains from the PDS which was reflected in increasing public food stocks year after year starting from 1998. Increasing buffer stocks led to the government beginning to export food grains at an unprecedented scale. Between June 2002 and June 2003, which was recorded as the worst drought year in two decades, the then NDA government had exported 12 million tonnes of food grains (17 million tonnes by November 2003). Utsa Patnaik explained, “Independent India has never before seen such huge exports, only made possible by more and more empty stomachs over the preceding years. It is an utter scandal and a disgrace, that at the same time that millions of the rural poor were going hungry and those already hungry were being pushed into starvation, rather than undertake widespread food-for–work programmes the government preferred to feed foreigners and their cattle by exporting foodgrains, applying a heavy subsidy to beat low world price.”

From 186.2 kg in 1991, the per capita food availability per annum in India declined to 177.7 kg in 2016 and has only marginally increased to 179.6 kg in 2019. This is comparable to the net availability of food grains in 1903-08 at 177.3 kg. In contrast, the annual availability of food grains per capita in China and Bangladesh in 2015 stood at 450 kg and 200 kg respectively and more than 1,100 kg in the US.

Instead of recognising a decline in purchasing power of people and a resultant contraction in demand, the official line adopted by the government and its authorities is that increasing public stocks of food grains reflects a surplus over what people wish to consume, essentially a ‘problem of plenty.’ In addition, it often argued that the minimum support prices (MSP) offered to the farmers by the government have been ‘too high’ resulting in excessive output and procurement.

Towing the same line, in 2015, a High Level Committee on restructuring the FCI headed by Shanta Kumar, recommended that the FCI be ‘more business oriented’ and facilitate a “pro-active liquidation policy to liquidate stocks in OMSS/export markets, whenever actual buffer stocks exceed the norms.” The Committee also recommended that the coverage under the NFSA be brought down from 67% to 40% and that owing to leakages, the implementation of NFSA be deferred in states that have not done end to end computerisation. This is the same report that estimated that only 6% of the farmers in the country had gained from selling wheat and paddy directly to any procurement agency. It recommended that the FCI must focus on ushering in ‘competition in every segment of food grain supply chain, from procurement to stocking to movement and finally distribution in TPDS.’

The passage of the three farm laws and the ongoing discussions on contraction of the coverage under NFSA are in keeping with these recommendations from the proponents of the neo-liberal model in India and in advanced capitalist countries. They are not cognizant of the fact that cutting down on MSP (which is akin to income for farmers) will further deepen income deflation and lead to more indebtedness amongst farmers only exacerbating the agrarian crisis.

Sub-Saharan Africa (SSA) is a specimen of the degradations faced by the developing world in consequence of introduction of liberalisation of agriculture and related ‘structural adjustments’ and neo-liberal reforms. After liberalisation, the per capita food grain absorption in SSA fell from 158 kg in 1980 to 136 kg by mid 1990s. This proves that the farmers are not misguided or ill-informed in their unequivocal resistance against the ongoing phase of agricultural reforms in India. The benefit of hindsight from India and other developing countries makes it clear that both the producers and consumers of food grains stand to suffer from the likely dismantling of the public procurement and distribution systems in India.

The writer is an author and a Research Associate with Newsclick. The views expressed are personal. She can be reached on Twitter @ShinzaniJain.