Huge PDS pilferage is just one of the many problems
Given that the all-India level of pilferage in the public distribution system is over 40%, according to a study by the Commission for Agriculture Costs and Prices (CACP), it should be interesting to see what solutions the Independent Evaluation Office within the Planning Commission comes up with—it’s very first study is that on the working of the PDS. The pilferage number, according to the CACP, is higher in poorer states like Bihar and West Bengal where it is around 70% of the total grains supplied—the CACP has based its numbers on the comparison of the supply data provided by the PDS system with the actual consumer survey done each year by the National Sample Survey Organisation across the country. The reason why the high pilferage in states like Bihar and West Bengal is important is that, unless the system is fixed quickly, the losses will multiply since these are precisely the states where, under the Food Security Act, there is to be a big step up in the amounts of cereals being given to the poor and middle class at vastly subsidised rates. Given the large number of people who have got Aadhaar identities, this may have been easier to overcome, but the government doesn’t seem to be in any hurry to substitute the leaky PDS system with Aadhaar-based direct cash transfers.
What makes the Food Security Act even more worrying is that, at a time when, as per capita incomes rise, the population is moving away from cereals and wheat, it is ensuring the farm sector remains geared to producing mainly these crops. At an all-India level, between FY05 and FY12, food consumption came down from 40% of private consumption to 31%. And within this, even the so-called priority sector households in rural areas who are to get hugely subsidised cereals, spend around 30% of their food expenditure on items like fruits and vegetables, milk and milk products and pulses. But with production lagging the demand by a big amount—between FY10 and FY12, while per capita GDP rose a third, production of fruits rose just 5.3%, and that of vegetables, 12.6%—it is not surprising that inflation in these commodities has been so high. The government’s usual solution, of raising minimum support prices, however, is not going to work here since these products don’t lend themselves to bulk purchasing of the type FCI does. Getting an appropriate supply response means freeing up farmers from the mandis so as to get higher prices, it means getting a supply chain in place so that one year’s high prices are not followed (as usually happens with onions) with a dramatic slump once greater quantities of the crop come in the next year. Most important, it means agriculture has to be weaned away from wheat and rice. The exact opposite is happening today.