Reforming food subsidy: Food coupons could work
We welcome the government’s reported move to start pilot projects to use food coupons for providing the poor with food security.
By ET Bureau |
We welcome the government’s reported move to start pilot projects to use food coupons for providing the poor with food security. If the pilots work, it would be a viable way to reform the inefficient public distribution system (PDS) marked by high levels of theft, wastage, spoilage and administrative costs.
A system of food coupons essentially means ending dual pricing of foodgrains, and substituting competition and innovation by the private sector in procuring and distributing grain all over the country, for the current, costly and inefficient administered system. Of course, food coupons could ‘leak’ to the undeserving, given the political economy that informs administration of anything in the country. But a system of food coupons definitely would cut the leakages and administrative costs entrenched in inefficient grain handling by state agencies and lower the subsidy bill.
The new system would encourage more efficient private grain handling as the beneficiaries would be allowed to directly buy grain of their choice from kirana shops, against food coupons. Here, the catch is that all restrictions on private trade in grain have to be removed, simultaneously. Trade must have the right to stock and transfer large quantities of foodgrains from surplus to deficit states.
Food stamps cannot co-exist with stockholding limits. The PDS not only sells grain at subsidised prices but also carries out nationwide distribution of grain from a few surplus-producing regions. This latter task would shift to private trade under a system of food coupons.
The Planning Commission had estimated that there are around 6.52 crore poor families, but states have issued over 10.58 crore ration cards, raising questions over the efficacy of their poverty estimates. The issue must be resolved , ahead of launching the pilots. Checks should also be in place to prevent counterfeiting of food coupons.
A parallel market can be prevented if it is linked to the unique identification number to be given to every citizen in the country. It would also make sense to make the food coupons non-fungible and to transfer them to the woman of the household.
A system of food coupons essentially means ending dual pricing of foodgrains, and substituting competition and innovation by the private sector in procuring and distributing grain all over the country, for the current, costly and inefficient administered system. Of course, food coupons could ‘leak’ to the undeserving, given the political economy that informs administration of anything in the country. But a system of food coupons definitely would cut the leakages and administrative costs entrenched in inefficient grain handling by state agencies and lower the subsidy bill.
The new system would encourage more efficient private grain handling as the beneficiaries would be allowed to directly buy grain of their choice from kirana shops, against food coupons. Here, the catch is that all restrictions on private trade in grain have to be removed, simultaneously. Trade must have the right to stock and transfer large quantities of foodgrains from surplus to deficit states.
Food stamps cannot co-exist with stockholding limits. The PDS not only sells grain at subsidised prices but also carries out nationwide distribution of grain from a few surplus-producing regions. This latter task would shift to private trade under a system of food coupons.
The Planning Commission had estimated that there are around 6.52 crore poor families, but states have issued over 10.58 crore ration cards, raising questions over the efficacy of their poverty estimates. The issue must be resolved , ahead of launching the pilots. Checks should also be in place to prevent counterfeiting of food coupons.
A parallel market can be prevented if it is linked to the unique identification number to be given to every citizen in the country. It would also make sense to make the food coupons non-fungible and to transfer them to the woman of the household.
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