There are people in the

world so hungry, that

God cannot appear to
them except in the form
of bread

Public
Distribution
System vs.
Direct Cash
Transfer
Ayush Yadav 14HS20012
Ayush Yadav

Public Distribution System vs. Direct

Cash Transfer

Both PDS and Direct cash transfer are food security systems.

Importance of Public Distribution System in a Developing

Country like India
Developing countries such as India face the biggest challenge in the form of food
and nutritional security to all its citizens. It is the right of every citizen to have
proper and regular access to sufficient food for an active and healthy life which is
also properly nutritious.
It also provides price stabilization in the country and become a decisive force
against private traders who try to exploit the situation of scarcity of food in the
country.
In India, subsidized food and non-food items are distributed to the poor. A below
poverty line (BPL) card holder should be given 35 kg of food grain and the card
holder above the poverty line should be given 15 kg of food grain as per the norms
of PDS.

Experience of Public Distribution System in India

In India, the basic aim of PDS is to provide essential commodities like rice, wheat,
sugar, and edible oil and kerosene at subsidized prices.
From 1960 to 1980 it continued to be an ad hoc scheme but, in 1980 the coverage
of PDS extended to rural areas in some states as welfare programme. In 1985, the
scheme extended to all the tribal blocks covering about 51 million persons. The
scheme was revamped and extended to 164 million persons covering the rural
areas. Thereafter, number of fair price shops were introduced to distribute the food
grains at subsidized price and the amount spent on subsidy for PDS increased from
3295 crores in 1974-75 to Rs. 9000 crores in 1998-99, which indicate the
importance of PDS in the India's development process.

In 2015, Chief Economic Advisor Arvind Subramanian presented a report which

shows that combined subsidy for rice and wheat accounts a third of Indias total
subsidy bill of 3.8 lakh crore which shows the amount invested in PDS by the
government. The National Sample Survey Office data released in 2015 showed that
more rural households are buying from PDS, and their purchases of subsidised
food have doubled in years 2008-2014. Nearly 28% of rice eaten by all rural
households in 2011-12 was from the PDS, more than double the share of 13.2% in
2004-05. Also, nearly 46% of rural households across India bought subsidised rice
from PDS in 2011-12, up from 24.4% in 2004-05 and 39% in 2009-10.

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Ayush Yadav

Major Challenges

Some of the challenges that PDS is facing today include:

Increasing number of the cases in which people are receiving bad quality
food grains in ration shops because corrupt dealers are replacing good
quality supplies received from the Food Corporation of India with bad quality
of food grains and are selling FCI stock in the black market.
Furthermore, fair price shop owners have been found to create large number
of bogus cards to sell food grains in the open market.
Identification of households for PDS services has been highly irregular and
faulty in various states because there are no set criterias as to which family
is BPL and which is APL. This confusion has given massive scope for
corruption and irregularities in PDS systems because those who are actually
meant to be benefitted are not able to take the benefits of PDS.

Direct Cash Transfer as an Alternative Strategy

The Government provides subsidies, notably on fuel and food grains, to enable the
common man to have access to these basic necessities at affordable prices. A
significant proportion of subsidised fuel does not reach the targeted beneficiaries.
Direct Cash Transfer is a mechanism to transfer the subsidy amount directly to the
Aadhaar-linked bank account of beneficiaries. Some main agendas are:

Preventing delays in delivery.

Preventing leakages and accumulations in one hand.

Reducing expenses in distributing the subsidies in hand.

Influencing everyone to have bank account so as to increase financial

inclusion.

Right now it is applied to LPG subsidies, kerosene, fertilizer, pensions,

scholarships etc.

Indian Experience
Currently , 78 central government schemes are part of Direct Cash Transfer
although major focus is on account of transfer of subsidy on cooking gas
cylinders(PAHAL SCHEME) and NREGA transfers with the coverage estimated at
around 80 % and 74%, respectively. AICTE's fellowship schemes have over 99%
coverage and the number of beneficiaries are estimated at around 21,500. However,
there are several schemes in which Direct Cash Transfer remains on paper and
there is zero coverage as of now.
Direct cash transfer in the case of LPG subsidy had resulted in a 24 percent
reduction in the sale of subsidised LPG, as ghost beneficiaries had been excluded.
The savings to the government were to the tune of 12,700 crores in 2014-15.

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Ayush Yadav

International Experience of Direct Cash Transfer

Research carried out by
the Overseas Development
Institute (in Kenya,
Mozambique, the Occupied
Palestinian Territories,
Uganda and Yemen)
investigating individual and
community perceptions of
cash transfer programmes
shows that the money has
positive effects on the lives
of the individuals and
families that receive them.
Data collected by Center for
Global Development shows
the graphs of how people in
different countries preferred
cash over aid.

Major Challenges and Possible Measures

Problems of identification will remain because still ways to find needy are not
updated, so cannot expect that cash transfers to solve this existing problem. Also,
leakages will remain, in some cases it was found that social security pensions given
to the aged, widows and disabled in many states were received by someone else.
There are problems in opening of bank accounts, availability of banks in remote
areas presence of middle-men even when the money is transferred into the
account, delays in release of amounts and so on.
Furthermore, cash does not guarantee food security as there is no guarantee that
the cash transfers will be used to buy food. Poor families are often debt ridden and
are usually in need of cash to meet their household, medical, educational or other
expenses and they may use it in that instead of having food.
Possible solution can be improving the PDS by putting in better parameter for
dividing households into APL and BPL. Also, expanding the PDS by including other
commodities such as pulses and edible oil to improve nutrition and strengthening
the PDS by introducing reforms such as de-privatisation of fair price shops,
doorstep delivery of food commodities, end-to-end computerisation, putting in place
an effective system of transparency, accountability and grievance redressal,
decentralise procurement.