Do poor states perform poorly in PDS?

The article titled: Villagers in poor states use ration shops less, shows survey data written by Surabhi and carried out by The Indian Express dated 29 January, 2013 states that:

“Rural families in low income states such as Bihar, Uttar Pradesh and West Bengal depend far less on ration shops for wheat and rice than the national average. In Bihar, less than 12 per cent of the rural population uses ration shops to buy rice, and in West Bengal, less than 6 per cent of rice consumed by rural families is bought from these shops, data from five-yearly National Sample Surveys (NSS) show.

In richer states like Tamil Nadu and Karnataka by contrast, a massive 91 per cent and 75 per cent respectively of the rural population uses ration shops”.

The Indian Express news story further adds:

“In states with weak income indicators, the weak delivery system shows up in all commodities except kerosene. In rural Bihar, just five per cent of the total rice and wheat consumed came from ration shops. In UP, less than seven per cent of wheat consumed by rural households is bought through the PDS”.

What am I opposing?

It would be wrong to infer from The Indian Express article that in the poorer states PDS is not functioning well. At certain places, the news article is factually wrong. The article also misses to clarify why PDS performed well in certain states but not in the rest. Reviewing past studies, I would like to argue that a targeted PDS was detrimental to its functioning. PDS reforms carried out by various state governments proved to be beneficial.

Before going further to break the myth created by the Indian Express news story, I would like to mention that we are looking at two things in the NSS 66^th Round report on PDS, which is available here:

a. Proportion of households reporting PDS rice/ wheat purchase (can also be termed as incidence of PDS purchases)

b. Share of PDS purchases in total consumption (for rice and wheat)

A careful reading of the NSS 66^th Round report on PDS indicates that the contribution of PDS purchases to total consumption in 2009-10 witnessed a considerable improvement compared to 2004-05, particularly for rice and wheat/ atta.

The case for rice

Source: NSS 66th Round Report titled: Public Distribution System and Other Sources of Household Consumption (July 2009-June 2010), page 17

Now, let me demystify one by one what the NSS report says (see the table S3-1):

1. Table S3-1 (column 2) of the NSS 66^th round report shows that for the rural sector, the proportion of households reporting PDS purchase of rice (consumption in a 30-day period) was highest for Tamil Nadu (91% of households), followed by Andhra Pradesh (83.9%), Karnataka (74.6%), Chhattisgarh (67.4%), Kerala (54.3%), Odisha (51.6%), and Maharashtra (46.8%).

2. Table S3-1 (column 6 and 7) of the NSS report displays that the contribution of PDS purchases was highest in Tamil Nadu (rural: 52.7%, urban: 40.9%), followed by Karnataka (rural: 45%, urban: 17.7%), Chhattisgarh (rural: 41.2%, urban: 25.7%), Andhra Pradesh (rural: 32.9%, urban: 21.5%), and Kerala (rural: 27.9%, urban: 24%).

Why are some states performing so well in PDS rice?

From point no. 1 and 2 mentioned above, it could be inferred that in a poor state like Chhattisgarh [BPL population: 48.7 percent in 2009-10; Per Capita Net State Domestic Product (factor cost) stood at Rs. 25835 during 2009-10 as compared to India’s Per Capita Net National Product (factor cost) Rs. 33731], both incidence of PDS purchases and dependence on PDS improved due to the reforms carried out by the state government.

The well-documented factors behind Chhattisgarh’s PDS success are: a. Political will; b. Private dealers replaced by panchayats; c. 70 percent of the population covered at Rs. 2/ Rs. 1 per kg of rice; d. Huge investment from state revenues; e. Chhattisgarh is a rice surplus state and procures approximately 40 lakhs million tonnes of paddy annually, which is the 5^th largest in India; f. Corrupt persons have been put behind the bars; g. Toll free number for grievance redressal and h. Constant monitoring. More BPL cards were issued under the Mukhyamantri Khadyann Sahayata Yojana (MKSY) in Chhattisgarh. 2 kg iodized salt to every BPL household is being provided free of cost under Amrit Namak Yojana on a monthly basis. The PDS department has been kept out of the ambit of money making or corruption since it was considered important to win elections. For more on this, please refer to Reforming the Public Distribution System: Lessons from Chhattisgarh by Raghav Puri, Economic and Political Weekly, February 4, 2012 Vol xlvIi, No. 5.

It has been shown by Reetika Khera [Revival of the Public Distribution System: Evidence and Explanations (November, 2011), Economic and Political Weekly, Vol. XLVI, No. 44 & 45, Nov 5] that in states like Andhra Pradesh [BPL population: 21.1 percent in 2009-10], Himachal Pradesh [BPL population: 9.5 percent in 2009-10] and Tamil Nadu [BPL population: 17.1 percent in 2009-10], where PDS is either universal or quasi-universal, the performance has been better. Free grains were given in Tamil Nadu since June 2011. Andhra Pradesh and Tamil Nadu never put caps on the number of BPL households and these states do not have a BPL category for the PDS. Andhra Pradesh and Tamil Nadu have moved to per capita entitlements. Dal and edible oil are provided under the PDS. Edible oil and dal can be purchased from PDS shops in Himachal Pradesh apart from kerosene, sugar and salt. 

In Odisha [BPL population: 37.0 percent in 2009-10; HDI ranking: 22 (HDI-0.362) in 2007-08], the PDS has been universalized in Kalahandi-Bolangir-Koraput (KBK) region. Grain is provided at Rs 2/kg to BPL households in the KBK region. Odisha has entrusted the management of the fair price shops to gram panchayat secretaries. The purchase to entitlement ratio-PER (proportion of full entitlement purchased by BPL households) in Odisha is nearly 100 percent. 

In her past study based on secondary data from NSS 2007-08, Reetika Khera [Trends in Diversion of PDS Grain (March, 2011), Working Paper No. 198, Centre for Development Economics] has found that in the reviving/reforming states of Chhattisgarh, Uttarakhand, Odisha, Madhya Pradesh and Uttar Pradesh per capita monthly PDS purchase has improved.

Now, let me come to the next two points that I deduce from the table S3-1.

3. Table S3-1 (column 2 and 3) shows that in states like Bihar (rural: 12.2%, urban: 4.2%), West Bengal (rural: 25.7%, urban: 6.9%), and Jharkhand (rural: 26.4%, urban: 8.6%), the proportion of households reporting PDS purchase of rice is quite low. Similar, situation could be observed in Punjab, Rajasthan and Haryana.

4. Table S3-1 (column 6 and 7) shows that the share of PDS purchases in consumption was low in Bihar (rural: 5.1%, urban: 2.2%), West Bengal (rural: 6.3%, urban: 2.9%), Assam (rural: 11.2%, urban: 5.1%), and Jharkhand (rural: 14.0%, urban: 7.4%). The share of PDS rice purchases in consumption is also low in Punjab, Rajasthan and Haryana.

Why are some states languishing in PDS rice?

Khera’s (November, 2011) paper indicates that in Bihar 15 kg of rice (Rs 6.7/kg) and 10 kg of wheat (Rs 5.22/kg) are given on a monthly basis under the PDS to households. Sugar, salt, edible oil and pulses are not provided. In Jharkhand, 35 kg of rice (Re 1/kg) is given on a monthly basis under the PDS to households. Sugar, salt, edible oil and pulses are not provided. In these two states, BPL lists are patchy and PDS is subject to "exclusion errors". Full quota is seldom received by the BPL households in Bihar [BPL population: 53.5 percent in 2009-10; HDI ranking: 21 (HDI-0.367) in 2007-08] and Jharkhand [BPL population: 39.1 percent in 2009-10; HDI ranking: 19 (HDI-0.376) in 2007-08] as indicated by low purchase to entitlement ratio. In Bihar and Uttar Pradesh, fair price shops are operated by private dealers. Poor quality grain, which is supplied, is not liked by the consumers. Khera (March, 2011) says that diversion of foodgrains is rampant in West Bengal.

The case for wheat

Source: NSS 66th Round Report titled: Public Distribution System and Other Sources of Household Consumption (July 2009-June 2010), page 20

Let me explain what I derive from the Table S4-1 of the NSS report.

5. It can be seen from Table S4-1 (column 2) of the NSS 66^th round report that for the rural sector, the proportion of households reporting PDS purchase of wheat (consumption in a 30-day period) was highest for Karnataka (69.2% of households), followed by Tamil Nadu (57.3%), Madhya Pradesh (45.7%) and Maharashtra (44.2%).

6. Table S4-1 (column 6 and 7) of the NSS report shows that the contribution of PDS purchases was greatest in Tamil Nadu (rural: 85.8%, urban: 64.7%), and also large in Karnataka (rural: 51.5%, urban: 13.5%), West Bengal (rural: 41.4%, urban: 11.7%), Kerala (rural: 39.7%, urban: 33.1%) and Chhattisgarh (rural: 39.1%, urban: 17.9%).

I am also providing below the other points that could be interpreted from Table S4-1 of the NSS report.

7. It can be inferred from Table S4-1 (column 2 and 3) that in states like Assam (rural: 1.2%, urban: 1.5%), Andhra Pradesh (rural: 1.7%, urban: 2.8%), Odisha (rural: 5.2%, urban: 7.5%) and Bihar (rural: 12.7%, urban: 5.4%) the proportion of households reporting PDS purchase of wheat is quite low.

8. Table S4-1 (column 6 and 7) also shows that the share of PDS purchases in consumption was low in Assam (rural: 1.5%, urban: 1.3%), Bihar (rural: 5.1%, urban: 2.4%), Andhra Pradesh (rural: 5.1%, urban: 7.5%) and Uttar Pradesh (rural: 6.8%, urban: 7.6%).

Past studies can again be consulted (as I did earlier) to explain why some states have performed better than the rest in PDS wheat.