World Bank prescription for PDS restructure

This is due to a combination of high leakage of grains,a range of demand and supply side issues in program design and implementation,and considerable leakage of subsidies to the non-poor.

In recent years,there has been increasing recognition of the need for reforming the PDS… The overall position of this report is that fundamental reform options for PDS should be considered and that offering households the option of a cash transfer… is an attractive option.

The long-term problems of PDS cannot be solved quickly or with a single prescription for all states and all time. However,offering options which allow households choices… could allow for flexibility,greater efficiency,and accountability .

Fair-price shops

The measures proposed,many of which are in practice in some states,include: doorstep delivery of grains to FPS at the cost of the state (currently being done in 17 states/UTs); allowing FPS to sell non-PDS commodities which will… increase the likelihood of (their) being open more days in a month; and increasing the margin on grains for FPS to 2 per cent of the cost. States are increasingly moving from FPS operated by private operators to operation by community-based institutions. This seems eminently sensible in terms of having operators who are more

accountable.

Decentralised purchase

Firstly,locally purchased grains are more likely to accord with local dietary preferences. Secondly,local procurement could spread the economic benefits of the procurement subsidy from the current concentration in a few states to farmers in all states. Thirdly,the costs of transportation and storage are likely to be reduced.

Flexible offtake

The most obvious reform in this respect is obviously allowing,as a number of states already do,for weekly drawing of the households allocation. A second measure would be allowing BPL and/or AAY (Antyodaya Anna Yojana) households to carry over their monthly ration from one month to another when they had less need for their full ration.

Stronger monitoring

One element of management reform may be more direct community oversight in PDS operations,strengthening the use of Information and Communication Technology (ICT) at the beneficiary end in order to promote more robust identification and in reducing leakage. This can take a variety of forms,some such as in Andhra Pradesh already simple biometric identification but not fully integrated into a smart system,others involving bar coding and other applications.

Pricing review

It appears that FCI is inefficient in its handling of grains… A truly independent review of their cost structure with a prior commitment by (the government) to implement its findings would seem desirable.

Food stamps/coupons

Another option is introduction of food stamps or coupons,an approach that is prevalent in Andhra Pradesh and Rajasthan,and was introduced in Bihar in 2007. The current food coupon approach involves coupons which are redeemable only in the FPS network,though there is no reason not to allow for a coupon which would be redeemable also in approved private food retailers.

Smart cards

(These) could be redeemable also at approved private traders and/or FPS. A smart card system can facilitate individual identification and remote transaction processing/storage.