The Power of One

This is one obituary that refuses to leave my mindspace.

It is not often that we see touching, personal tributes to politician who passed away but E. Chandrasekharan Nair seems to have been a very unusual politician indeed. He is being refered to as the driving force behind Kerala's public distribution system which is not just functional (an usual thing in India), but also super efficient in delivering essential provisions (grains, fuel) to those who need it the most.

My own mother is a big fan of ECN. For a citizen who is not below the poverty line (BPL), even she can get 2kg of raw rice, 2kg of chemba (red) rice, 2kg of wheat atta and 0.5L of kerosene - all for just INR 100. "Where else in the world can you walk into a PDS shop and get so much for INR 100?" she asks, "Folks with BPL cards can get foodgrains at INR 1/kg!...even migrant labourers from other states are eligible for this facility!"

In most other states, foodgrains meant for the PDS is regularly siphoned off to private millers who, in turn, package it and sell it as branded stuff. How did one politician manage to fight off the usual lobbies and pressure-groups to put in place a welfare system that actually works?

The key to building an efficient PDS apparantly lies in the government agency that runs it. In this case, ECN was responsible for implementing key reforms as the minister in charge of  Kerala's Department of Food and Civil Supplies, for three long stints (1980-81, 1987-91 and 1996-2001).

Under this department, a public company, Kerala State Civil Supplies Corp Ltd (SupplyCo) runs a vast machinery for efficiently procuring foodgrains directly from the farmers at minimum support prices, of getting the grain processed in contracted mills, and, finally, getting them distributed through 14 district depots, 56 taluk depots and around 1500 retail outlets (Maveli Stores). The sales turnover of this company was nearly INR 4000 crores in 2015-16!


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REFERENCES / LINKS

- Obituary (NewsMinute) - http://www.thenewsminute.com/article/ex-kerala-minister-e-chandrasekharan-nair-architect-maveli-stores-passes-away-72372
- Obituary (The Hindu) - http://www.thehindu.com/news/national/kerala/e-chandrasekharan-nair-passes-away/article21095877.ece
(2000) - Interview - http://www.frontline.in/static/html/fl1719/17190980.htm
https://en.wikipedia.org/wiki/E._Chandrasekharan_Nair
Maveli Stores - https://en.wikipedia.org/wiki/Maveli_Stores
SupplyCo, Kerala - http://supplycokerala.com/

Food for Thought

The National Food Security Bill 2011 is all set to be introduced in the second-half of the Budget Session of Parliament. The Bill presents a difficult set of dilemma's and conundrums.

On the face of it, there could be no cause which is more noble: using our surplus stocks of foodgrains to feed the poor. The Bill proposes to use large-scale food distribution to feed 67% of the country's population of 1.2 billion.

Yet, as always, the devil lurks in the details.

Where will the food come from?

Even though our FCI godowns are overflowing with foodgrains, the Bill needs our Public Distribution system to handle 74 million tonnes by 2013-14. However, just 29.7 million tonnes were lifted by states in 2009-10 as against 45.4 million tonnes allocated for the PDS!

Where will the money come from?

The official estimated cost is Rs.95,000 per annum. Experts say that this is a rather conservative figure. Gulati & Gujral (2011) calculated the minimum annual expenditure at Rs. 200,000 Crores. To put the amount in perspective, total subsidies budgeted for 2011 on everything was Rs 140,000 crore.

Can the existing logistics network handle this?

You could call this 'new wine in an old, leaky bottle'. Until inefficiencies in the existing distribution systems are addressed on a war footing, we might be sending more money than ever before, down the drain. To take one example, labour in FCI is highly organised and an unskilled worker (loading and unloading job) earns around Rs 35,000 per month -- much, much more than the average skilled worker.  According to reports, 'hundreds of such FCI workers get more than Rs 1 lakh a month and the highest is about Rs 1.85 lakh per month'.

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LINKS & REFERENCES

The cost of Food Entitlement

* Aggarwal, Ankita and Harsh Mander (2013): ABANDONING THE RIGHT TO FOOD, EPW, Feb 2013 -- url -- http://www.epw.in/commentary/abandoning-right-food.html --- http://centreforequitystudies.org/wp-content/uploads/2013/02/Abandoning_the_Right_to_Food.pdf

* FE Editorial: NOW TO DIGEST THAT FOOD, 19 Dec. 2011, Financial Express, 19 Dec., 2011 -- url -- http://www.financialexpress.com/news/fe-editorial-now-to-digest-that-food/889477
- To put the amount in perspective, total subsidies budgeted this year on everything are R1.4 lakh crore.
- spends 5-6 times more on farm subsidies than it does on farm investment where the returns in terms of poverty reduction and higher farm growth are several times higher.
- other distortions like the Essential Commodities Act that allows states to ban movement of agri-commodities and suspending futures markets to the APMC Act that allows commission agents to take away as much as 15% of the farmers revenue

* Gulati, Ashok and Jyoti Gujral (2011): "FOOD SECURITY BILL: Can we afford Rs. 6 lakh crore food subsidy in three years?", The Economic Times, 17 Dec., 2011 -- url -- http://articles.economictimes.indiatimes.com/2011-12-17/news/30528849_1_food-subsidy-subsidised-grain-priority-households
- The farmers are not happy as the MSP for wheat and rice has gone up by less than 20% against a cost escalation of about 45%.
- But Punjab imposes 14.5% taxes and various forms of cess, etc, on top of the MSP for any procurement of grain being done from the state. The argument is that many states have minerals and they impose large royalty on their mineral wealth.

* PRS Legislative Brief - NFSB-2011 - http://www.prsindia.org/uploads/media/Food%20Security/Legislative%20Brief%20National%20Food%20Security%20Bill%202011.pdf

* Swaminathan, MS (2009): SYNERGY BETWEEN FOOD SECURITY ACT AND NREGA, The Hindu, 1Jun2009 ---url---http://www.hindu.com/2009/06/01/stories/2009060153470800.htm

Blue Kerosene and the Black Market

An article in the Sunday Express caught my attention – “Tamper-proof kerosene: there is proof it can be tampered”. In this piece, Amitav Ranjan explains how the allegedly hi-tech, tamper-proof blue dye being used to color kerosene meant for the Public Distribution System (PDS) is being “cleaned” by using the most commonplace of substances – clay - before being used to adulterate petrol and diesel sold in the open markets. The dye is being imported from Authentix, a British Company, at the cost of Rs. 150 Crores per year.

India consumes 9.35 million tonnes of kerosene in 2007-2008, entirely sold through the PDS at a heavily subsidized price of Rs. 9.09 per liter. Its low administered price is a great incentive for the dealers who divert large volumes to mix it in petrol priced at Rs. 50.56 or in diesel sold at Rs. 34.80.

A study by NCAER (2006) showed 38.6% of kerosene diverted for other use. Another study by ASSOCHAM (2006) says that the government spends Rs. 15,000 Cr. in subsidizing Kerosene and that the illegal diversions were costing it Rs.5700 Cr. (per annum?)

In India, a vast chasm exists policy formulation and implementation. To make things worse, the willingness of our decision makers to bridge this chasm seems inversely proportional to number of people affected by it. Nothing exemplifies this better than the country's Public Distribution System (PDS).

Instituted during the 1940's as a response to war-time shortages, PDS was meant to be a conduit for distributing essential food-grains, edible oil and fuel to the poorest sections of the society.

Has it worked? – Proponents of the PDS system claim that after it was buttressed by the creation of Food Corporation of India and the Agricultural Prices Commission in 1965, it has become India’s de facto National Food Security System. They claim that the ‘minimum support price’ instituted by APC, along with the nation-wide distribution system has been successful in “preventing any more famines in India”.

Many others are unanimously and vehemently against wasting public money on a system that leaks like a sieve. Studies bear out that the PDS system is most ineffective in Orissa and Madhya Pradesh, where the level of rural poverty is among the highest in the country. In the words of a former IAS officer, Mr. M.G. Devasagayam, "…policies are shaped by central politicians and senior civil servants who are not well aware of the practical and political difficulties at the local level resulting from their policies."

Perhaps Mr. Devasagayam is being careful when he blames the central politicians and the senior bureaucrats. Local politicians and junior bureaucrats certainly know what is actually happening on the ground - the PDS system has become a valuable source of political patronage and party funds. Who would want to kill the goose that lays golden eggs?

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References & Links:

• Tamper-proof kerosene: there is proof it can be tampered - Amitav Ranjan, Indian Express, 4 October 2008
• PDS and India's food security - M. G. Devasahayam; BusinessLine, Monday, August 13, 2001 http://www.hinduonnet.com/businessline/2001/08/13/stories/041303mg.htm
• Excess food stocks, PDS and procurement policy - Arvind Virmani and PV Rajiv; Planning Commission, December 2001 http://planningcommission.nic.in/reports/wrkpapers/wp_pds.pdf
• It's the Policy, stupid, not implementation - P. Sainath; Sep., 2001 http://www.indiatogether.org/opinions/ps1.htm
• Department of Food and Public Distribution - http://www.fcamin.nic.in/dfpd_html/index.asp
• PDS Kerosene diverted to the black market, BusinessLine, August 4, 2006 http://www.hindu.com/2006/08/04/stories/2006080404182000.htm
• Execution of subsidy programmes – Ministry of Petroleum and Natural Gas http://petroleum.nic.in/subsidy.htm