Public Distribution System – Not (a) Fair (Price)!

Ganga Prasad Rao
http://myprofile.cos.com/gangar


When young, there was a 'pata nahi kis ration ka (khana) khaya' joke – a reference to how certain boys were much healthier than others (sometimes without the appetite to show for it). Those were the days when the public distribution system (PDS) served a useful purpose of providing essentials to citizens (during war time), and guarded them from hoarding and exorbitant prices. For those of us who are 'fresh', the PDS is a government sponsored network of 'fair price shops' that are fed from Central warehouses by a fleet of contracted trucks and backed by a Ministry, bureaucrats, officials and accountants, who keep track of the meticulous task of feeding subsidized essential household items to millions across the country. Last time I checked, they sold grains, flour, sugar, kerosene and perhaps cooking oil. Citizens merely need to apply for a 'green card', and stand in line, sometimes for a few hours (good place to socialize, mind you!), and collect the goodies against a mark in the card.

Times are a changing. Our country has twice as many people. Wholesalers, retails and roadside grocers have sprung up everywhere. There are many suppliers for most commodities; competition rules the roost by and large. Why, then, do we persist with the PDS? Consider the colossal corruption that is pervasive in the system. Consider the inefficiencies and distortion brought about by quotas, mandatory 'set-asides' of private production for PDS purposes, and the compromise on product quality. Consider the delays and the time and effort expended by millions as they trudge to the ration shop in the fortnightly/monthly ritual. Consider the opportunity cost of the hundreds if not thousands employed in civil supplies; the incremental congestion, pollution and accidents on the road from PDS freight transport. Add to it the kerosene subsidy cost on government, stockholders and the environment. Put them together and what you have is a gargantuan mistake that impoverishes the nation even while the government claims to promote equity. Why, lately, the government has sought to use the PDS network to supply more essential commodities and hold down inflation!

Sure, we can do better. There have been innumerable commissions that have gone in to the issue. (Despite all the pollution, their recommendations apparently haven't gathered enough dust yet!). Social security-type checks is an obvious answer. But we could do one better. Thankfully, the government has done a decent job with the Voter photo ID scheme. It is sufficient to simply register that identity number in to the central PDS computer system (what are supercomputers for?) and provide goods free up to a certain amount every month (or up to an aggregate amount annually) by swiping the Vote ID card in to the grocer's computer. The amount could be debited to a major bank which would then be compensated by the government. Reasonably straightforward and demonstrably superior. The consumers are free to discount shop at their convenience. Private grocers will not grudge the business; they are paid instantly for sales. All fair price shops can be shut down. Annual contracts for freight transport can be done away with. Innumerable warehouses will be available to farmers and entrepreneurs at a lower price. And the Ministry may scale down substantially along with its facilitating departments. This scheme could be extended to utilities payments and transport expenses, permitting the poor to apply the subsidy when and where it is most necessary.

In my opinion, the improvements in efficiency will more than pay for the dismantling and re-allocation of resources mis-allocated under the current system. In fact, it may be possible to pass on the benefits of the dismantling to the beneficiaries of the PDS. The way to go about this is to scale back PDS region by region, starting with the urban areas, rather than scale back commodity by commodity which will only prolong the agony.

Let's do our poor and our nation a favor. Let's abolish PDS and fair price shops.