Group Members

Rakesh DM-120Bharadwaj DM-128Abhinav FN-02Prashant FN-082Kalyan DM-129Aradhna IB-019

To understand the leakages in following Schemes and Subsidies:

• PDS• Mid Day meal scheme• Fertilizer subsidies• Power sector• NREGA

• The Road Ahead

With a network of more than 4 lakh Fair Price Shops (FPS) claiming to distribute annually commodities worth more than Rs 15,000 crore to about 16 crore families, the PDS in India is perhaps the largest distribution network of its type in the world.

PDS is operated under the joint responsibility of the central and state governments, with the former responsible for procurement, storage, transportation (upto the district headquarters) and bulk allocation of foodgrains.

The state governments are responsible for distributing these foodgrains to consumers through a network of Fair Price Shops.

This responsibility includes identification of families below poverty line (BPL), issue of BPL cards, and supervision and monitoring of the functioning of the Fair Price Shops.

States are also responsible for movement of foodgrains from the district headquarters to the PDS shop, which requires storage at the sub-district level.

Large errors of exclusion of BPL families and inclusion of above poverty line (APL) families

Prevalence of ghost BPL/AAY cards Diversion of subsidised grains to unintended

beneficiaries Section of the APL households not lifting

their ration quota and thus a part of the entitlement of these households leaking out of the PDS supply chain.

The present procedure for selection of BPL beneficiaries is opaque, bureaucratic, and does not involve gram sabhas. The basis on which village wise cap on the maximum number of entitled beneficiaries is fixed, is not clear and not well defined.

Some states, such as Bihar, Jharkhand and UP are not being released the APL quota on the ground that they did not lift it in the past when the market price was low.

This policy favours the southern states which have been subsidising the APL quota out of state funds, and punishes the poorer states

Selection procedure of FPS dealers is not transparent, and often based on patronage or bribes

Some poor states such as Bihar and Orissa are not able to lift their entire quota

Inadequate storage capacity with FCI in some districts

Poor financial condition of many State Food Corporations

Allocations from GoI are valid only for a month, and if the state government is not able to lift within that time, its quota lapses.

The poor do not have cash to buy 35 kg at a time, and often they are not permitted to buy in instalments.

Low quality of foodgrains Weak monitoring, lack of transparency

and inadequate accountability of officials implementing the scheme

Price charged exceeds the official price by 10 to 14%

Ration cards are mortgaged to ration shop owners

The shop does not open for more than 2-3 days in a month, and the card holders are not allowed to lift their quota of previous months, or in instalments during a month.

No grievance redressal mechanism

A large number of homeless and poor living in unauthorised colonies in urban areas have been denied ration cards, and are thus not able to avail of PDS, despite being Indian citizens.

Seasonal and temporary migrants face problems in receiving their entitlements during the period they are out from the village.

Fertiliser subsidy leakage may likely total to a shocking 10 percent plus of the country's massive subsidy bill this year(in 2010).

Back-of-the-envelope estimates by the department of fertilisers (DoF) have pegged fertiliser subsidy leakage at a mind boggling Rs 12-15,000 crore in 2008-09 alone, when subsidy levels touched alarming proportions of Rs 76,603 crore.

Significantly, much of the "leakage and over-charging," in the Centre's fertiliser subsidy may have been facilitated by the much-vaunted but highly porous fertiliser monitoring system or FMS.

The costs of unreliable quality and supply

The costs of theft The costs of poor targeting

Definition of a household Distribution of job cards Unsolicited fees being charged for work

application forms Non-issuance of receipts Presence of contractors Non-availability of muster rolls at the

worksite

The kerosene subsidy bill is said to be Rs 10,000 crore(in 2005)

Given the reported leakage of about 40 per cent of the total quantity of subsidised kerosene, the size of the scandal is about Rs 4,000 crore—many times Bofors

 

A study by D K Pant of the National Council of Applied Economic Research, undertook a sample survey of 42,000 households across 23 states and union territories, with two-thirds of the households being rural

Inferences from the survey : One is the siphoning off of kerosene meant for the

subsidised public distribution system (or PDS), for non-household use (read adulteration of diesel).

The second is diversion from the PDS to the market. And the third is the purchase of PDS kerosene by

households without a ration card or an entitlement card—which means the kerosene trader makes a killing.

 Taken together, Dr Pant has found the leakage of PDS kerosene to be nearly 40 per cent of the total sale of PDS kerosene in 2004. In some states in the northern and eastern regions, the leakage is more than 50 per cent.

Direct cash transfer will be implemented

A separate system for the appraisal of the government employees .

It refers to the practice of government placing some amount of cash, based on requirement, into an individuals bank account in order to help him/her tide over a certain difficulty or to offset the removal of government subsidy that had been in place till then.

Targeted Subsidies:-subsidies can be targeted and made to reach only the people they were meant for.

Massive Savings:-DCT will translate into good savings for the government.

Responsible/Reduced Usage:-Because DCT will only compensate for a finite amount of resources consumed, it will encourage beneficiaries reduce their usage of these resources.

The state government’s incentive of a bicycle to a girl child joining the ninth standard under a scheme called Mukhyamantri Balika Cycle Yojana, started in 2006. Girls get Rs 2,000 to purchase bicycle and Rs 700 for uniforms. In three years, from 2007-08 to 2009-10, about 8,71,000 girls have received bicycles.

Mexico – PROGRESSA – transfer of cash to the woman heads of the extremely poor rural families

Unwillingness -People might not be, initially, so receptive to the the idea of universal subsidy being removed and a more targeted system being brought in to replace it.

Mammoth Task - Creating bank accounts for millions of house holds across India will be no easy task and will require many changes/simplifications in the procedures for account creation

 http://rru.worldbank.org/documents/publicpolicyjournal/244Monar-042402.pdf

 http://articles.economictimes.indiatimes.com/2010-06-19/news/27624602_1_fertiliser-subsidy-fertiliser-ministry-subsidy-bill

 http://www.business-standard.com/india/news/the-kerosene-scandal/226264/

http://www.business-standard.com/india/news/the-kerosene-scandal/226264/

http://awareness-2009.blogspot.com/2011/03/pds-vs-cash-transfer.html

http://www.hindustantimes.com/Raids-on-eateries-reveal-leakages-in-public-distribution-system/Article1-615560.aspx

http://www.business-standard.com/india/news/govt-%60subsidises%60-grain-leakagepublic-distribution-system/305478/

http://southasia.oneworld.net/todaysheadlines/india-to-shift-to-direct-cash-transfer-for-welfare-of-poor

http://www.voanews.com/english/news/asia/India-Considers-Changing-Food-Distribution-to-the-Poor-101479119.html

THANK YOU