Plugging  the  Leaks  Improving  reach  and  efficiency  of  the  Public  Distribu<on  System  

Team Name: Juggernauts

NSS  es<mates  that  41%  of  the  intended  food  grains  are  diverted    • Close  to  400  million  live  below  poverty  line  • India  has  more  than  68.7%  of  people  living  on  less  than  2$/day  • Survival  a  big  challenge  given  the  infla:on  rates  • Moral  responsibility  of  the  privileged  to  look  a>er  the  underprivileged  • Various  Government  plans  to  support  the  underprivileged  • But  corrup:on  at  grass  root  level  nullifying  the  impact  • On  average,  only  66%  of  the  intended  grains  reaches  the  end  stakeholder  in  India  • Implementa:on  of  Food  Security  Bill  will  only  add  to  the  leakages  

Leakage  occurs  at  various  points  in  the  current  process  flow  

Farmers  

Fair  price  shops-­‐  Run  by  dealers  on  commission  basis  

Mandal  level  stocking  points  

Godowns  

Integrated  tribal  dev  agency  

Primary  agriculture  coop  

Different  execu<ve  bodies  

Rice  Millers  (75%  sold  to  FCI)  

Civil  supplies  

Transport              (Route      officer)  

We  see  a  host  of  reasons  for  leakage  and  diversion  but  will  concentrate  only  on  the  most  important  aspects  

White  cards  

Leakage  in  the  distribu<on  system  

Changing  poverty  line  

Due  to  various  reasons,  even  people  above  the  poverty  line  have  white  cards.  This  means  more  food  grains  will  have  to  be  sold  at  subsidized  rates  to  people  who  can  afford  otherwise.  

Leakage  is  occurring  at  majorly  two  sources  in  the  distribu:on  mechanism:  •   While  transpor:ng  the  foodgrains  from  godown  to  stocking  point  • At  fair  price  shops,  the  shop  keeper  sells  subsidized  grains  at  market  price  

The  BPL  has  been  a  maRer  of  great  debate  and  concern,  In  recent  :mes,  different  commiRees  have  come  out  with  different  levels  of  poverty  thus  making  it  tough  for  the  government  to  issue  ra:on  cards.  

Poli<cal  pressure  

Due  to  vote  bank  poli:cs,  the  white  cards  that  have  served  their  purpose  (example  provided  to  gain  insurance  benefit)  care  not  being  cancelled.  Moreover,  no  suitable  ac:on  is  taken  when  the  surveyed  popula:on  falsifies  informa:on  about  their  economic  well  being.  

Focus  of  this  document  

White  cards  should  be  allocated  to  only  people  in  need  as  mass  distribu<on  defeats  the  purpose  of  subsidy  

Challenges  in  cancella<on  of  exis<ng  white  cards  

Low  penetra:on  of  alternate  id  (aadhaar  card)  

Poten:al  for  the  issue  to  become  a  poli:cal  roadblock  as  poli:cal  par:es  will  look  to  save  on  their  vote  bank  

Opera:onal  challenges  in  issuing  new  cards  

Recommended  solu<ons  and  implementa<on  plan  

Simultaneous  redistribu:on  of  expired  benefits.  The  number  of  people  losing  benefits  at  one  par:cular  :me  should  be  outnumbered  by  genuine  people  receiving  them.  This  will  help  prevent  from  the  issue  becoming  poli:cal.    

The  process  of  reissuing  new  cards  needs  to  involve  minimum  human  interven:on.    Aadhaar  card  to  serve  as  the  new  white  card  with  privileged  controlled  through  technology.  

Strict  ac:ons  to  be  taken  against  people  giving  false  informa:on.  Guidelines  have  to  be  in  place  for  BPL  benchmark.  The  new  poverty  guidelines  seem  promising.  

Problem  1  

There  is  a  need  to  priva<ze/incen<vize  the  fair  price  shops  to  reduce  the  urge  to  steal  from  the  government  Problems  faced  with  fair  price  shops  

Recommended  solu<ons  and  implementa<on  plan  

Fair  price  shops  to  buy  from  Government  at  the  Market  Price    BPL  people  to  present  their  Aadhaar  cards  at  these  shops.  Using  the  bar  code,  the  shopkeeper  to  verify  status  of  the  person  from  the  Government  database.    The  BPL  person  to  pay  a  minimal  price  (set  by  the  Govt.).  The  dealer  records  the  transac:on  with  the  Govt.  Database.  A  bill  to  be  generated  with  invoice  recorded  with  the  Govt.  and  a  copy  handed  over  to  the  customer.    

Problem  2  

Informa:on  asymmetry  between  people  and  dealers  about  the  quality  of  food  grains  and  the  arrival  cycle  of  those  High  arbitrage  opportunity  as  shop  keepers  buy  at  subsidized  rates  and  sell  later  at  market  price  Severe  levels  of  adultera:on  to  make  up  for  inventory  sold  through  unfair  means    

“Priva'zing  the  Fair  price  shop  system  along  the  business  model  of  petrol  pumps”  

•  The  Aadhaar  card  is  rela:vely  new  in  terms  of  reach.  Although  new,  it  is  rapidly  becoming  the  new  standard  with  more  than  360  million  cards  in  place  currently.  

•  Technology  implementa:on  is  a  major  challenge  especially  due  to  non  IT  savvy  nature  of  members  involved.  

•  Delay  in  payments  to  dealers  can  jeopardize  their  incen:ves  to  cooperate  with  the  system.  

•  Redistribu:on  of  benefits  has  to  be  done  very  tac]ully.  Slight  problems  can  turn  into  poli:cal  upheavals.  

•  Losing  corrup:on  benefits  can  result  into  bureaucra:c  hurdles.  

•  Corrup:on  in  assigning  contracts  to  shopkeepers  can  jeopardize  their  incen:ves  to  act  as  desired.  

While  the  solu<on  looks  feasible  to  implement,  there  are  some  things  we  need  to  keep  in  mind  

We  need  to  keep  in  check  the  progress  we  make  on  these  sugges<ons..  

 Encourage  Fair  price  dealers  to  sell  to  BPL  families  by  incen:vizing  them.    Slightly  extra  earning  over  the  retail  margin  would  be  a  strong  mo:vator.    Rigorous  process  to  be  followed  while  selec:ng  the  dealer.    The  installa:on  of  technology  infrastructure  to  be  mandatory  for    the  shopkeeper.  Strong  punishments  for  viola:ng  guidelines.      Govt.  IT  systems  need  to  be  in  place  to  process  huge  amounts  of  requests.  Support  systems  for  IT  to  be  developed  for  shopkeepers.    Data  Analy:cs  to  be  employed  on  the  lines  of  FMCG  organiza:ons.  Inventory  turnover  helps  forecas:ng  demand  beRer.  Leakages  will  be  easier  to  detect.    Hence,  eliminate  the  en:re  process  of  acquiring  the  food  grains  from  the  government  at  subsidized  rate,  rather  encourage  to  buy  at  market  price.    Timely  payment  by  the  government  to  the  dealers  is  extremely  cri:cal  for  success  of  this  model  

•  E-­‐PDS:  PDS  portal  of  India  -­‐  www.pdsportal.nic.in/  •  Na:onal  Food  Security  Bill  :  Challenges  and  Op:ons  -­‐  cacp.dacnet.nic.in/NFSB.pdf ‎  •   UIDAI  –  hRp://uadai.gov.in  •  Andhra  Prades  State  Government  PDS  process  •  Does  Economic  Theory  Inform  Government  Policy?  –  Kaushik  Basu  -­‐  

hRp://www.iegindia.org/kbdlecture.pdf  •  Poverty  in  India  –  Wikipedia  –  hRp://en.wikipedia.org/wiki/Poverty_in_India  •  Performance  Evalua:on  of  Targeted  Public  Distribu:on  System  (TPDS)  -­‐  

hRp://planningcommission.nic.in/reports/peoreport/peo/peo_tpds.pdf      

References