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October 24, 2012

In India, Cash Replaces Food Rations for Poor

by Anjana Pasricha

India has ambitious plans to make cash payments to the poor to overcome massive fraud and theft in the country’s social welfare schemes. India operates the world's largest public food distribution system to prevent hunger, but billions of dollars of these subsidies never reach the poor.  
    
Raj Kumar, an auto rickshaw driver living in a West Delhi slum colony, received about $20 every month last year in place of food such as wheat and sugar.  Kumar got the money as part of an experiment to replace food rations given to the poor with cash. He was happy.

Raj Kumar says the wheat handed out by the government store is often of very poor quality, sometimes it is not even fit for animals to eat. With money in his own hands, he could buy much better quality food. And at times, Kumar says, he never gets the rations because the shop has not received them.
 
Corruption

The food distribution is part of a five-decade-old subsidy program in which billions of dollars worth of food is earmarked for India’s poor. It is the world’s largest public food distribution system. Depending on income, the rations are given either free or at subsidized rates. The cost: about $10 billion last year.
   
But graft and waste afflict the program. Findings by the Supreme Court and various news investigations have revealed that a large part of the food is siphoned off by a network of corrupt officials and sold to traders at market rates.

Narendra Saxena, a commissioner to the Supreme Court who monitors hunger-based programs, says government data indicate the scale of the problem is huge.

“Studies by the Planning Commission show that around 58 percent of food does not reach the poor people, the intended beneficiaries," he explains. "It is very bad in states like Bihar. There is a lot of corruption at the state level. 50 per cent of the ration cards have been given to the non poor.” 

He says the fraud scheme is simple. Rolls of beneficiaries are stuffed with fake names, or the names of those who do not qualify for the subsidy.    

Overhaul

To cut the massive fraud, the government wants to overhaul the distribution of food and various other subsidies by using an electronically verified identity number given to all Indians. It has undertaken pilot projects in eight states to make direct cash transfers using these numbers stored in what is called “aadhar” cards.
    
Two hundred million Indians have received these numbers. Prime Minister Manmohan Singh recently said that this will boost efforts to help the poor.  
 
Singh says that the identification number will ensure that the right person gets the money, and make it possible to eliminate middle men. He says this will reduce complaints of fraud.

Experts agree the cash transfers will reduce graft. But they say this will not fix the problem. They point out that many poor people have no bank accounts, especially in remote rural areas, where hunger is more rampant.
 
Saxena says the electronic cards may ensure that fake names are removed from rolls. But he says the real challenge in the food subsidy program is identification of the right beneficiaries.

“Identification cannot be done by giving them some kind of a card," he notes. "Where out of 100 only 30 people have to be selected, that 30 selection has to be done by some government functionary. And that is where the problem lies. So therefore even if we give cash subsidy it will go to the wrong people. The poorest people have no rations cards, no aadhar cards, no identity at all.”
 
There are also worries that money given to poor families may be misused by some members of the family and be spent on liquor, or gambling.

Among those who say they will opt for food rations rather than money is Dev Das and his wife Seema. They live in the New Delhi colony where the cash transfer experiment was conducted.

Dev Das says the money they received was used to repay loans and other bills. When they got rations, they actually consumed more food.

Experts point out that some states such as Kerala and Chattisgarh have made headway in curbing theft in the food program and run more efficient programs compared to other states. They say other states should also try to follow their example and streamline the distribution of food to prevent hunger that still afflicts the country. The numbers are daunting -- nearly half of the children below five in India are malnourished.