ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Food Subsidy in Cash or Kind?

The Wrong Debate

The need for the public distribution system varies widely across states and districts. In some districts, the poor draw more than 80% of their grain from thePDS, but in other districts this share is less than 10%. A wide diversity of relationships with the PDS exist, suggesting a need for alternative modes of provisioning. A variable geometry of food provisioning might emerge, with cash working better for the needs of some districts and grain supply continuing to work better in other districts. Only a well-designed empirical test of the alternative modes will help ascertain the preferred shape of the PDS for a particular state or district.

Should food subsidies, currently availed in the form of subsidised cereals, be given out in the form of cash instead? Arguments have been advanced on both sides of this debate, which remains largely unresolved so far. Some analysts and official agencies have come out in favour of the cash alternative.1 Other scholars have argued that the food security of the country’s poorer citizens is better ensured by retaining the existing mode of in-kind subsidies given out through the public distribution system (PDS) (Khera 2011a, 2011b; Sinha 2015; Media for Rights 2011; Ghosh and Qadeer 2006).

This debate, having been waged for nearly a decade, is usually conducted in either/or terms: either the PDS should be entirely replaced by cash transfers, or it should remain entirely in-kind. Individuals and families, however, do not live by these either/or terms. Hardly any family gets its food entirely from the PDS or entirely for cash. Most make use of both systems. Poor households have to supplement the PDS rations with grains bought for cash. On an average, across the country, less than 30% of BPL (below poverty line) households’ total grain consumption derives from the PDS, while more than 70% is sourced from the market. The relative shares of the PDS and the market in the grain supply of the poor vary considerably from district to district and from state to state. People in some districts get more than 80% of their grain supply from the PDS, whereas people in other districts source less than 10% of their grain from the PDS. The requirements for a cash alternative in terms of behavioural and administrative changes in the former type of district is very different from the requirements in the latter type.

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Updated On : 12th Aug, 2019
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