Free goodies for the well-off in southern states amid calls for universal PDS

Ration card, Aadhaar card and voter ID issued by Government of India as an identity card (Source: ShutterStock)

Free rice and wheat along with cash transfers, heavily subsidised sugar and cooking oil are flowing into the homes of even the relatively prosperous people in Tamil Nadu.

The state claims to have implemented a universal public distribution system (PDS) to include more people in welfare schemes. This trend is also visible in neighbouring Andhra Pradesh and Kerala, which have reached out to people and helped them face the economic downturn caused by the pandemic.

In Tamil Nadu, a ‘rice card’, which offers free rice and other subsidised foodgrain, was once meant for only the poorest people. So, S Ramesh (name changed), who lives in a posh Chennai locality with his wife, son and daughter-in-law, was amused when the outgoing state government offered him a rice card for his family last year.

“There was no due diligence done. It (the offer of a rice card) was open to everyone, so now even upper middle class people have shifted to rice cards,” Ramesh says. Of course, everyone is happy because all cash doles the state government announces from time to time are done for rice cardholders.

People are happily collecting the goodies that come with the card.

“In the past, cash transfers have happened for Pongal, flood relief and now for COVID-19. The new DMK government has now announced Rs 4,000 cash relief in two instalments (besides free foodgrain) for two months due to COVID-19 and I took my first instalment from the ration shop earlier in May,” Ramesh said.

Beneficiaries have been given an “ATM Card” type card which is swiped at the ration shop. Besides the first instalment of the cash dole, Ramesh also took 5 kg of the 20 kg free rice he is entitled to and two kg free wheat. Also, at 500 grams per member, his family was entitled to two kg sugar at a subsidised rate of Rs 25 per kg; a litre of palm oil (Rs 25) and tur daal (Rs 30).

The TN cash transfer scheme is unique since cash is given along with rations at ration shops, instead of bank transfers. Nearly two crore people are deemed vulnerable in the state and have been issued rice cards.

Of course, it is clear from what Ramesh says that apart from covering for the vulnerable, the rice cards are also being used to woo voters, but a universal scheme for foodgrain or essentials must be accessible to all the needy instead of excluding people to plug leakages.

Other southern states are also including more beneficiaries in their respective PDS than what the central government scheme allows. Annie Raja, General Secretary of the National Federation of Indian Women, says Kerala offered a universal PDS last year after the pandemic wrecked livelihoods.

And the Andhra Pradesh PDS covers more than 41 lakh families, over and above nearly 88 lakh families which get subsidised rations under the central PDS scheme. Chakradhar Buddha, Researcher with LibTech India, says the state government has allowed rice cardholders five kg of free rice for two months besides other foodgrain and cooking oil etc at subsidised rates. Buddha says that problems persist in the delivery of rations. The most glaring one is the inability of the tribal population (the most vulnerable section) in getting their Aadhaar cards authenticated. This usually leads to the cancellation of cards and such families become ineligible for rations. “About 1.2 lakh tribals are currently without PDS cards,” he says.

The demand for universal PDS and cash transfers has grown as lakhs of people are unable to access supplies under the current system. Of course, the Centre has been doing its bit throughout the COVID-19 pandemic.

A working paper by noted economist Jean Dreze and Anmol Somanchi, prepared for the Centre for Health Equity, Law, and Policy, shows foodgrain rations under the Central PDS were nearly doubled from April to November 2020; employment generation under the rural jobs guarantee scheme, the National Rural Employment Guarantee Act (NREGA), was expanded by nearly 50% year on year; cash transfers were made to old-age pensioners and to women’s Jan Dhan Yojana (JDY) accounts.

But some economists say the fiscal cost of universal Central PDS may not be easy to bear. D K Srivastava, Chief Economist with EY, points out that universalising PDS will be fiscally “quite costly and in the present circumstances, India may not be able to afford it. Overall fiscal resources are at their lowest level related to GDP…they had started coming down even before covid hit the economy. The situation may not improve as long as the Covid19 challenge continues and until the Indian economy recovers fully" Srivastava said a universal PDS would amount to an additional expenditure of nearly 2% of GDP. An analysis of the Union Budget for 2021-22 by PRS Legislative shows that India’s total subsidy burden grew by nearly a fifth since FY20, largely due to higher food subsidy allocation. In 2021-22, food subsidy BE is Rs 242,836 crore, nearly double the Rs 115,570 crore BE for FY21. The Revised Estimates for FY21 showed food subsidy expenditure at Rs 422,618 crore, 2.6 times the BE.

Meanwhile, Dreze and Somanchi have said that for most households, the transfers done by the government last year have been just a fraction of what they lost due to lockdowns and the ensuing economic crisis. Currently, only beneficiaries identified through an Aadhaar-based system are eligible for subsidised (or free) food packets from the Central government.

Shamika Ravi, senior fellow at the Brookings Institute, says that while the bottom 20% of the population has been well targeted by the government through its various welfare schemes since the pandemic began, “we now need to address the falling consumption of the middle class. The middle class needs to be included in the PDS”.

On how will this impact the fisc, she said the impact depends on how the middle class is defined. “Is it everyone except the top 20%, top 30%, top 40%?”

A study by Azim Premji University has estimated that currently, nearly nine crore eligible beneficiaries have been left out of the Central PDS system due to various reasons – with difficulties in Aadhaar card authentication being a major reason. Perhaps the Centre will heed cries for at least a temporary universalisation of PDS and doing cash transfers through this existing network of ration shops.