Since the 1990s targetted distribution of food to the poor has been an integral element of the state’s offerings for its poor. Evolved in the 1960s as a system of management of food scarcity and as a policy tool for supporting the poor in times of a crisis, it began as a measure of universal entitlement. The nature and purposes of food transfers changed over time: from a measure of managing the food economy after the bumper harvests post the green revolution to a major revamp in 1997 when universal transfers were replaced by targeted transfers for the poor when it became the prime policy for a ‘hunger free India.’ The introduction of the concept of the poorest of the poor in 2000, an ‘Antyodaya’ class entitled to priority allocation, fine-tuned this policy linkage of food transfers to a battle against poverty.  

In any rational analysis and debate, food is indeed the only means to remove hunger, and to that extent an argument such as mine that tries to put a question mark on what seems only to be a logical linkage, runs the risk of sounding out of place. To further argue in favour of cash transfers as substitute of food takes this risk further.

Yet, what we have as a demonstrated experience from several Latin American countries in the sphere of poverty alleviation and hunger removal in a real time of the 1990s is indeed the story of large-scale rationalisation of social policy in favour of cash transfers. The Bolsa familia in Brazil and the Progresa in Mexico represent such an effort.

That India should be unwilling to argue with and learn from some of these demonstrated lessons is to a certain extent indicative of the “we know it all” and/or “India can lead the world” and/or “we don’t need to learn from the third-world” approach fashionable in policy and intellectual circles. The real reasons however lie in the fear of opening up to scrutiny and ultimately destabilising the large-scale and corrupt political economy of food transfers, full of rent-seeking opportunities up to the point of last mile deliveries to the poor. 

This article seeks to discuss some problems with food transfers in India, review features and achievements of Conditional Cash Transfer (CCTs) programmes from Latin American countries, and concludes with a rationale for cash transfers in India. The hope is that this will widen the terms of debate and lead to a scenario where ‘food’ and ‘cash’ are no longer seen as shibboleths demarcating two ideological sects, lobbying for the rightness or ‘leftness’ of their views. Beyond dogma, there must ultimately be a centrality to the entitlements of the extremely poor and vulnerable of our country.

Problems with food transfers through the PDS

Jointly run by the centre and states, the Public Distribution System in India distributes food grains sugar, and kerosene to the identified poor. Even in terms of policy design, the transfers are seen as supplementary measures, with no responsibility for providing the entire household need.

Between 1992 and 2007, three sets of BPL census were held to identify the poor and give them ration cards. The first survey was based on the income criteria. The number of the poor identified in this way was double that of the Planning Commission estimates. The methodology was changed for the 1997 survey, from income to consumption. Prima facie exclusion criteria were applied to summarily exclude those who appeared non-deserving.

These criteria faced a lot of criticism, and National Sample Survey estimates showed that a significant number of the non-deserving got BPL cards. As per NSS 2004-05, 16.8 percent of the richest and 30.5 percent of the next richest quintile had cornered BPL cards. The criteria were changed for a third time for 2002 when a score based ranking system consisting of 13 socio-economic criteria was adopted. Now, there could be just as many poor as the Planning Commission had estimated! While this was perfect in terms of the expenditure balance sheet of the government, the poor were left out of the system.

Clearly, the error with our current efforts at reform lay in the exclusive thinking that the only problem with the working of the food distribution through PDS was poor reach, incorrect identification and corruption of dealers. The first two issues could seemingly be tackled by a new identification criterion which the Saxena committee has been set up to recommend.

Over two decades of the working of the programme, the Saxena Committee set up to recommend a new criteria for the estimation of poverty states, on the basis of NSS estimates, that at best only 39 percent of the eligible poor have BPL or AAY cards – a majority 61 percent remain excluded. Since the number of those identified as poor in the country comes close to the Planning Commission estimates, it is correct to assume that a major part of the benefits are indeed siphoned off to those not eligible. When the extremely poor reach the doors of the state for the making of cards, they are informed that the quota has been exhausted. Those who have cards need to make several trips to ration shops to get their due quota.

The quality is poor, with a SEWA report for east Delhi slums reporting that stones were mixed with grain, and sugar was liquid. Shariff reports from a random survey in Delhi that there is a flourishing grey market in grains; where the poor buy their ‘quota’ of ration at lower than market rates, but at substantially higher than government rates.

There is little to be gained by one more round of new criteria for identification, when the entire implementation chain for food transfers is riddled with vested interests that seem difficult to wish away.  

Cash Transfer Schemes in Latin American countries

During the 1990s CCT programmes were adopted by countries across Latin America as key elements of their poverty reduction efforts. In these countries, the formal welfare systems that existed until then prioritised formal sector employees, leaving the very poor to rely on informal ways of social protection. The inadequacy of these systems in terms of protecting the extremely poor and vulnerable was exposed during the severe economic crisis of the 1980s.

Against this background, several programmes for in-kind transfers, feeding, workfare and cash transfers emerged, with a direct focus on very low-income and vulnerable groups. In the early 1990s CCTs emerged as a mechanism of integrating social policy in a scenario where the poor were still under-served, and could access benefits only through powerful intermediaries. While specific features vary across countries, what are common to the CCTs are three things – a monetary transfer, targetting mechanism and conditionalities (Bastagli: 2009).

In Brazil, the monetary transfer is done to a large proportion of the population (24 percent), with a basic amount paid to all the extremely poor, and also to poor families with children in the school-going age. In Nicaragua, a food grant is paid to all the extremely poor households. In Mexico, four major food subsidies were replaced over time by a single transfer to poor families on complying with certain conditions of human development consumption. The conditionalities are in essence ways of improving health, education and nutrition among the poor. In Brazil, when children and/or pregnant and lactating mothers are unable to come to health centres or attend school, this is seen as red-flag by the state, and the families seen as being in need of greater state support. 

Supplementary programme features such as the transfers to bank accounts, electronic benefit cards with beneficiaries to see who received what, transfers in the name of women heads of household have created great levels of transparency and faith in many countries, specially Brazil.

Even in areas where president Lula’s popularity has not been very high, the Bolsa is running well. Extensive involvement of the federal Bank Caixa, measures for checking frauds, and administrative reforms for having an integrated ministry, Ministry for Fight Against Hunger, are essential parts of the implementation strategy. The programme also has exit and graduation strategies to check inter-generational poverty transmission.

What comes across as the real benefits of the CCT are their transparency, their ability to cut down transaction costs and vested interests that have developed in the implementation chain for in-kind transfers. Their upfront focus on going to school, or attending health centres is a measure of promoting difficult to attain human development consumption amongst the extremely poor, and also akin to self-selection. Only those who are really in need go to a government school or health centre, and in the process become eligible for monetary benefits.

During policy discussions with several  Indian states interested in introducing cash transfers, one of the issues raised very frequently was that during inflation the real value of cash would decline while food transfers would remain above market fluctuations. The answer to this does not come in a yes/no format, but in understanding three nuances of the current working of the food policy.

Food transfers through the PDS do not protect the poor from inflation, as they have to rely on the market for a lot of their wheat-rice needs, and all of their non-cereal needs. The grey market from where the poor have to actually purchase their grains are closer to market prices and in no sense inflation insensitive. Third, even in theory there are no free lunches and rising grain prices ultimately imply that the government has to be paying for these at some point. Countries with CCT have indexed cash transfers to protect against inflation, and that is a replicable exercise.

The bigger issue is that the introduction of cash does not mean a withdrawal of the government from interventions in the food-economy management or for ultimate responsibility in the case of hunger. What this author argues against is the monopoly of ideas which have privileged food transfers in the form of wheat and rice transferred through PDS as the only route to removal of layers of poverty. This is a transfer that simply does not reach and the vested
interests are too many.

This first appeared in the May 16-31 issue of the Governance Now magazine (Vol. 01, Issue 08).