Diets, Nutrition, and Poverty - The Oxford Topic of Food, Politics, and Society - page 344

The reasons include long distances to a fair-price shop, irregular availability of grains
in these shops, participants not being allowed to buy grains in small installments, low
quality of grains offered, and small difference between TPDS and market prices. As a
result, the actual subsidy received by the poor is extremely low—less than Rs 4 per per-
son. The income boosts are 1.4% in rural areas and 0.9% in urban areas.
The poverty impacts were also low. Confining to the income gap measure, based on
the NSS data for 2004-2005, the estimated gap was 20.2% in both rural and urban areas,
implying that the monthly per capita expenditure (MPCE) for the average poor house-
hold fell short of the poverty line by 20.2%. The reduction in income gap is about 1% as a
result of the TPDS subsidy.
The extent of leakages is substantial. More than one-third (36.7%) of the sub-
sidized grain intended for poor households ends up as sales to nonpoor house-
holds. About 10% of all grains are spoiled during storage and transportation. The
Planning Commission (2008) reports that 58% of the subsidized food grains do not
reach BPL families because of identification errors, nontransparent operations,
and unethical practices in the implementation of TDPS. Add to it the high cost of
handling food grains, and the government ends up spending Rs 8.5 to transfer one
rupee to the poor.
Khera (2011) offers a detailed analysis of profitability of FPS, forms of corrup-
tion at different stages and diversion of PDS supplies to open markets. Although
restricted to a sample of 388 households in 8 villages in Rajasthan in 2002-2003,
many of the findings are new and insightful, whereas some corroborate the findings
of others. The important contribution of this study is to highlight low profitability
of FPS, corruption at different levels, and extent of diversion of PDS supplies to
open markets.
Estimates of diversion of PDS supplies, based on comparison of off-take data from
the Ministry of Food and Consumer Affairs, Government of India, and consumption
data from NSS (round 61), are alarmingly high. Taking these estimates at face value,
two-fifths of the official PDS off-take was diverted. Less than one-fifth of rice was
diverted compared with more than two-thirds of wheat. There is also a clear north-
south divide in these diversions. In mainly rice-eating southern states, the proportion of
food grains diverted ranged from 11-48%. Wheat eating states concentrated in the north
had diversions ranging from 43-88% (Khera, 2011).
Wheat diversions for FPS are very profitable. The shopkeeper gets a paltry margin of
7 paise per kg of wheat sold to a BPL household, as compared with a margin of Rs 1.97
for selling this amount in the open market and a much higher margin of Rs 4.50 per kg
of Antyodaya wheat. An honest FPS earns no more than Rs 100 per month, whereas, on
certain assumptions of amounts diverted, the profit is Rs 7972 (net of transportation
costs). Hence, the incentive to cheat is irresistible.
Corruption is rampant in obtaining a license; commissions are paid to FCI officials
for expediting supplies; and amounts supplied are frequently lower than recorded. BPL
consumers are often turned away on grounds of inadequate supplies, quality sold is
abysmal, and buying quotas in installments is discouraged. Under TPDS, low margins
are compounded by shrinkage of sales volume.