Replace PDS with food stamps

Freedom to export and import foodgrain within a domestic price band.

To insulate poor producers and poor consumers of agricultural commodities, including consumer goods like cereals and pulses, the Economic Survey suggests the government should announce a price band for domestic prices in which imports and exports are freely allowed without any duty controls.

"If international prices change beyond this band, domestic prices would be systemically dampened though imposition of variable import export duties," the survey says. This, along with targeted subsidies, would help balance the interests of farmers, who need a predictable price regime to plan their cropping patterns, the survey says.

It is also critical of the the failure of the public distribution system and even the Targeted PDS (TPDS). It calls for introduction of food stamps or food coupons which could be valid outside the PDS outlets once the markets get better integrated. Food coupons will allow the consumers a wider choice, the survey says.

It also suggests introduction of smart cards for reducing the incidence of bogus ration cards or diversion of foodgrains. It wants linking of the smart cards programme with ration cards and the voter ID cards for better targeting. The survey also calls for development of marketing infrastructure, storage and warehousing to narrow the gap between producer prices and consumer prices.

The distribution of foodgrains at subsidised rates to the poor, including the 65.2 million families below the poverty line has led to a 40 per cent jump in spending on food subsidy, amounting to Rs 43,668 crore (for wheat and rice only) in 2008-09 over the previous fiscal, says the Economic Survey.

This is the fifth instance since 1998-99 when the annual growth rate of food subsidy has crossed the 30 per cent-mark, after 2000-01, 2001-02 and 2002-03 and 2007-08. The food subsidy incurred by the government in 2007-08 stood at Rs 31,260 crore, a jump of 31 per cent over 2006-07, says the survey. The subsidy is defined as the difference between the economic cost of foodgrains and the issue price.

This has happened because of increase in the cost of wheat and rice due to a rise in the minimum support price of both the grains. For 2008-09, the cost of wheat and rice were provisionally fixed at Rs 1,392.7 and Rs 1,789.8 per quintal, respectively, up from Rs 1,353.2 and Rs 1,563.7, respectively, in 2007-08.

However, the offtake of foodgrains from the central pool, primarily under the targeted public distribution system (TDPS), has also gone up in the past five years, from 31.3 million tonnes in 2002-03 to 37.4 mt in 2007-08.

According to the survey, the stock position of foodgrains is adequate for meeting the TPDS and welfare requirements during the current financial year. As on April 1, the stock position for foodgrains stood at 35 mt, comprising 21.6 mt of rice and 13.4 mt of wheat, against the buffer norm of 12.2 mt and 4 mt, respectively.

Procurement of rice in FY 2008-09 stood at 32.8 mt as compared to 26.3 mt in 2007-08, while the procurement of wheat for 2008-09 stood at 22.7 mt.