India's National Food Security Act 2013: Food Distribution through Revamped Public Distribution System or Food Stamps and Cash Transfers?

• Published in: Agricultural Economics Research Review Vol. 28; no. 1; pp. 39 - 55
• Main Authors: Bathla, Seema, Bhattacharya, Paramita, D'Souza, Alwin
• Format: Journal Article
• Language: English
• Published: Agricultural Economics Research Association 01.01.2015
• Subjects: cash transfers; consumer subsidy; economic cost; food stamps; Foodgrain stocks; National Food Security Act 2013; Public Distribution System
• ISSN: 0971-3441; 0974-0279
• DOI: 10.5958/0974-0279.2015.00003.8

This paper has estimated the cost and benefit of procuring and distributing the increased foodgrains required in view of the National Food Security Act, 2013. It has critically appraised the feasibility of reforming the existing public distribution system vis-à-vis adopting food stamps and cash transfers. The latter has been done by evaluating the good practices being introduced under the revamped public distribution system in the selected Indian states and alternative delivery mechanisms being followed in three developing countries, viz. Brazil, Sri Lanka and Jamaica. The analysis has indicated a nine-time increase in the economic cost borne by the Food Corporation of India to `1820 per quintal for rice and `1424 per quintal for wheat from 1980–81 to 2009–10. The average sales realization is far below this cost, thereby compelling unceasing support by the government. An increase in the foodgrains stock from 56 million tonnes to 78 million tonnes would lead to a considerable jump in the subsidy from `638 billion to nearly `1000 billion. The benefit to consumers in terms of savings due to subsidized food would be `78 per month. The cross country experience has revealed in-kind transfers to be better than cash transfers in terms of enhanced outreach, higher efficiency and food security. In many situations the choice between the two seems to be context-specific. The study has outlined the key considerations that the state governments need to dwell on while deciding to either shift to a better PDS similar to that initiated in a few states in recent years or implement the other system as in Brazil, Sri Lanka and Jamaica.