The PDS does not work, let’s shift to coupons or cash transfers

This is a part of a series of articles on the proposal to shift from PDS to coupons or cash transfers. To see the introduction, click here .

In evaluating alternatives including cash transfers, it is first important to identify both contributions and failures of the system.  Proponents of reforms today have focused exclusively on the problems, without dwelling on the things that it has done.  There is a reason why the PDS is so popular in Tamil Nadu, Kerala, Andhra and increasingly in other states including Chhattisgarh.  In all these cases the PDS has worked and means a lot to the life of poor people.  It has failed in other parts of India, and sometimes miserably.  Given that the basic structure of PDS is the same across India, one should ask whether the failure of the PDS is due to the design of the system, or whether it is due to larger problems in how these states function.  If it is the former, it makes immense sense to reform or even replace the system.  If it is the latter, we may spend a lot of resources and energy into replacing the system only to find that the alternative will suffer the same fate in the states where it does not deliver.  One problem with the arguments to replace the PDS lock, stock and barrel is that they do not ask serious questions as to why the PDS has failed in some parts of India; and instead they assumes that the PDS has been a failure overall.

Apart from the fact that the PDS has functioned well in some states, we should also take into account some of the inherent advantages in its design compared to cash transfers.  For example, it is more versatile at critical times such as galloping food inflation in its ability to get the government to absorb some costs, compared to cash transfer programs or anything else.  While it is possible in theory to adjust the amount of the cash transferred by taking into account inflation, such a process is politically unlikely to respond to massive food inflation unlike the PDS, where there is a prefixed commitment to provide the entitlements at a certain price.  Further, such as system will automatically respond to differing levels of inflation across regions of India, whereas the cash transfer system will have to have a massive input of information about differing levels of prices in every region, and it has to be accompanied by very complex arrangements to provide different amount of support to people in different regions.

The PDS also provides some means of social intervention when there is coalition among traders to artificially increase the price of grains.  It has served as an outlet of grains bought by the government to insure farmers with a minimum price for their produce.  The PDS also serves to transport grains from many of the grain surplus states into places where it is required.  I will not claim that these functions cannot be done by alternate arrangements; but, if we have to evaluate the system, we have to take into account what it has done along with what it has not; and we have to take into account what the costs of doing it through an alternate system would be.  The calls for replacing the PDS have generally been accompanied by a dismissal of the PDS system as an unqualified failure that accomplishes nothing.  The reality of the PDS is far more nuanced.

About Vivek Srinivasan

I work with the Program on Liberation Technology at Stanford University. Before this, I worked with the Right to Food Campaign and other rights based campaigns in India. To learn more, click here.

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