Free food scheme raises some questions

Christmas brought good cheer to 81 crore Indians as the government announced that it was making all food grain distributed under the Public Distribution System (PDS) completely free for one year. Each person would get 5 kilos of rice or wheat or coarse cereal every month free. The PDS is a sixty-year-old system meant predominantly for the poor.  It sells food at subsidised prices. It is understood as the network of ration shops around the country. The word “ration” means allocating a scarce commodity in small portions so that everyone gets something. India had huge shortages of food till the early 1960’s and had to go with a begging bowl to Western nations. Scarcity meant that food price inflation could go sky high. Thenceforth came the PDS and ration shops.  The government also introduced the concept of a minimum support price (MSP) scheme for crops, along with a big and assured procurement scheme to incentivise farmers to increase domestic production. Then came the green revolution, basically in the States of Punjab and Haryana. So, India became self-sufficient in food production and even started exporting wheat and rice.

Under the NFSA, three fourth of the rural families and one half of urban families would receive rice, wheat and coarse cereal at 3, 2 and 1 rupee a kilo respectively  

The PDS however continued to expand because it caters to the poor. It was revamped in 1992 and again in 1997 for better targeting of backward districts. However, it was clear that a large amount of government procurement was not translating into better distribution (despite the PDS) and better nutrition. There were also stories of leakage as cheap food grain was stolen from ration shops and sold in the open market for a profit. The poor people who lined up at ration shops were often told that the stock is finished. Come next week. Or next month. The hapless poor who stood in long lines only to be turned away, had no legal recourse. There was no legal penalty for ration shops which were stocked out, nor was there any penalty for the government.

This was the background to the National Food Security Act of 2013 also called the Right to Food. It was passed as a constitutional guarantee, and culminated after decade long movement led by activists who went to the Supreme Court. The activists said that despite a mountain of food grain in government granaries, there was still widespread starvation and malnutrition.

If the PDS can be used to distribute free food, why was the PDS not used during Covid instead of launching a new scheme called PMGKAY?

Hence the PDS mechanism was strengthened by the NFSA by placing a legal obligation on the government to provide subsidised food. Under the NFSA, three fourth of the rural families and one half of urban families would receive rice, wheat and coarse cereal at 3, 2 and 1 rupee a kilo respectively.  How successful the NFSA has been is a matter of debate and separate discussion. The recent low ranking of India in the World Hunger Index led to a lot of controversy and charges of conspiring to malign India’s image. Much was made about the subtle difference between hunger and malnutrition.

But during Covid the Prime Minister’s Gareeb Kalayan Anna Yojana (PMGKAY) was launched to give free food grains to each person who were already covered by the NFSA.  So, this Covid-time scheme too reached (or is supposed to have reached) 81 crore Indians. It was extended six times since May 2020, and is about to expire in December 2022. The total estimated expenditure on it has been 4.5 trillion rupees so far. This scheme has run parallel to the PDS. The government has distributed more than 55 million tonnes of free food grain in the past two years.

Now the PMGKAY has been shut down, and the PDS has been made totally free for one year.  Several questions arise.

Firstly, if the PDS can be used to distribute free food, why was the PDS not used during Covid instead of launching a new scheme called PMGKAY? In fact, that same Covid-time scheme is continuing under the name of free PDS. If the PDS requires ration cards, while PMGKAY did not, surely the PDS could have been tweaked during Covid?

When free food is given away, how will the government prevent re-sale of that same food grain by the beneficiaries for a profit?

Since a lot of the poor do not get covered under the PDS, and since their ration cards are not expected at other places, there has been talk of “one nation one ration card”. This is especially true for migrant workers and their families. So, this scheme could have been rolled out during Covid, thus strengthening the effectiveness of the PDS. Of course, in the current extension the cost of free food grain will be borne by the Centre and not the States. Secondly, why is the government not unloading 4.4 million tonnes of food grain from its stocks into the private market? That has been strongly recommended by a member of the Niti Aayog. This would surely dampen food price inflation. 

The subsidised or free grain is helping curb inflationary impact, but in the long run prices have to be raised

Cereal inflation is running at 13 percent and wheat inflation is 20 percent. When free food is given away, how will the government prevent re-sale of that same food grain by the beneficiaries for a profit? Such re-sale is entirely possible given such high inflation. Would it not be better to involve market traders? Nobel laureate Amartya Sen had famously said that market traders make available scarce food grain more efficiently and promptly than any government ever could. Famines and shortages are prevented because of quick inflow facilitated by private traders into scarcity-hit regions. Thirdly, once having become used to free food, how will the government ever raise PDS prices? Unless PDS prices move closer to market prices, the subsidy will become unsustainable.

Will the budget for free food eat into the budget for health and education, on which our public spending is much below that of our peers?

Of course, the subsidised or free grain is helping curb inflationary impact, but in the long run prices have to be raised. Lastly, if 81 crore citizens need free food for 42 months, what does that imply about the official poverty ratio? If hunger is not a big problem, why are we giving away free food on such a massive scale? Are we on our way to becoming a “langar nation”? Will the budget for free food eat into the budget for health and education, on which our public spending is much below that of our peers? That scarcity simply helps private clinics and coaching classes. It is time to think about the free food program in a holistic and comprehensive way, taking into account all social sector budgetary priorities and affordability.

(Dr. Ajit Ranade is a noted economist)

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