Eleventh Five Year Plan

136 Eleventh Five Year Planidentification of households at State level. There aretwo problems here. One is the criterion used for allocationof foodgrains by the Central Government toStates. The Central Government allocates foodgrainsto States based on a narrow official poverty line. Thereis a need to look at this allocation criterion to States. Ifwe go by the official poverty ratio criterion, only 28%of the population is eligible under PDS at all-India levelin 2004–05. However, food-insecure households maybe much higher than the official poverty ratios. Forexample, undernutrition among children and householdsis much higher than this figure. The use of BPLestimates to determine Central allocations should berevisited because there is a significant mass of householdsjust above the poverty line.4.1.37 A second problem is the use of BPL methodfor identifying households by the States. This identificationdiffers from State to State. For example, someof the south Indian States do not follow the officialpoverty ratio for limiting the ration cards. In AndhraPradesh, more than 70% of the households haveration cards. This is one of the reasons for highinclusion errors in Andhra Pradesh.(II) VIABILITY OF FPSs4.1.38 An important institutional concern is that ofthe economic viability of FPSs, which appears tohave been badly affected by the exclusion of APL populationfrom the PDS (which happened after PDSbecame TPDS in 1997). The virtual exclusion of theAPL population has led to a big decline in offtake. Withfewer ration cards to serve, lower turnover, and upperbounds on the margins that can be charged to BPLconsumers, the net profits of FPS owners and dealersare lower under the TPDS than before. Since there areeconomies of scale here, for instance, with respect totransport, the distribution of smaller quantities islikely to make many shops unviable. When FPSs areeconomically viable, there are fewer incentives to cheat.4.1.39 Some of the steps suggested by the High-levelCommittee (HLC) on Long Term Grain Policy torevive the retail network were the following:‘Relax restriction on eligibility to be a licensed FPS;make NGOs and village-level retailers eligible toundertake licensed PDS distribution, and in particular,encourage women; remove restrictions on therange of commodities that can be sold in a FPS; andallow registered associations of FPS dealers to purchasethe grain allocated directly from the FCI’.(III) REGIONAL ALLOCATION AND PRICESTABILIZATION OBJECTIVE4.1.40 One of the objectives of the PDS has alwaysbeen to ensure price stabilization in the country bytransferring grain from cereals-surplus to cerealsdeficitregions. Targeted PDS has reduced the effectivenessof this objective. This is because under TPDS,the demand for cereals is no longer determined byState Governments (based on their requirements andin practical terms on past utilization) but on allocationsdecided by the Central Government (based onpoverty estimates prepared by the Planning Commission).The new system of allocation, as pointed out bythe HLC, has led to imbalances between actual allocationsand ‘allocations necessary to meet the differencebetween cereals production and requirement’.(IV) LEAKAGES AND DIVERSION4.1.41 Undoubtedly, in many parts of India, the currentsystem of delivery has weaknesses resulting in leakagesat different stages. As the Programme EvaluationOrganization, PEO Study (2005) points out, ‘the shareof leakages in offtake from the Central Pool is abnormallyhigh, except in the States of West Bengal andTamil Nadu’. Further, ‘in terms of leakages throughghost BPL cards, there are fewer problems in AndhraPradesh, Haryana, Kerala, Punjab, Rajasthan and TamilNadu than in other States’. At the FPS level, leakageswere found to be high in Bihar, Punjab, and Haryana.4.1.42 The study goes on to identify the factors associatedwith relatively low leakages at the FPS level andconcludes that ‘general awareness of the beneficiaries,high literacy and strong grass root-level organizations(particularly PRIs) have helped States like WestBengal and Himachal Pradesh in minimising FPSlevel leakage, while in the case of Tamil Nadu, it isthe elimination of private retail outlets’. It has beendocumented that strong political commitment andcareful monitoring by the bureaucracy are the keyelements of the success of PDS in Tamil Nadu.