Ration Bachao: Why do Protesters in Ranchi Want Food not Cash?

A reading list assesses if Direct Benefit Transfer (DBT) is the answer to leakages in the Public Distribution system (PDS). 


On 26 February 2018, thousands of people marched in Ranchi raising the slogan "DBT Hatao, Ration Bachao," (Remove DBT, Save Food Rations). They were protesting the introduction of cash transfers in place of the subsidised PDS rations. They marched from Nagri block in Ranchi district, where the DBT system is being experimented, to the Governor’s residence where they submitted a memorandum registering their protest.

A statement about the protest said:

In early October 2017, the Government of Jharkhand had begun an experiment with “direct benefit transfer” (DBT) under the public distribution system in Nagri Block of Ranchi District. Under the DBT system, people have to collect their food subsidy in cash from the bank before using it to buy rice from the ration shop at Rs 32 per kg. Earlier, they were able to buy rice from the ration shop at Re 1 per kg.The pilot has caused immense hardship for users of the public distribution system (PDS) in Nagri. They have repeatedly protested against the DBT pilot at the block and district headquarters, but their demand has fallen on deaf ears. Instead of heeding people’s demand for a return to the earlier system (Re 1/kg rice at the ration shop), the government has claimed – against all evidence - that the experiment is a success and should be extended it across the state. If this happens, it will exacerbate hunger and undernutrition in Jharkhand. At the street meeting, many victims of the DBT experiment in Nagri spoke about the hardships they face - Rashmi Tirkey, Neelu Tigga, Hindiya Oraon, among others. They said that they have to spend up to a week to withdraw each instalment DBT money. They have to make repeated trips to the bank and Pragya Kendra (business correspondent), often 5 to 10 km away, to withdraw their cash subsidy. At every step, there are long queues. They often return empty handed, e.g. due to connectivity failures or problems with Aadhaar-based biometric authentication. Many people have to forego their daily wages to collect their DBT subsidy.


The shift from PDS to Direct Benefit Transfer is often argued on the claim that PDS is inefficient because of corruption, poor quality of food, and leakages. Both biometric authentication and DBT have been proposed as measures to prevent this inefficiency. How true are these claims, and are cash transfers the answer? A look at some recent studies:


Understanding Leakages First 

1) Jean Drèze and  Reetika Khera (2015) use National Sample Survey Office (NSSO) data and other sources to explain PDS leakages. Their study brings to light that:

  • First, PDS leakages remain unacceptably high—about 30% according to the lowest estimate for 2011–12. 
  • Second, there is strong evidence of declining leakages in recent years. 
  • Third, the decline is particularly clear in states that are known to have undertaken serious PDS reforms, confirming the effectiveness of these reforms.  
  • Fourth, Bihar’s recent experience suggests that even the worst governed states are capable of improving their PDS.
  • Fifth, the biggest source of continuing leakages is the above poverty line (APL) quota. 


Will DBT expose the vulnerable to price fluctuation?

2) Dipa Sinha (2015) argues that direct benefit transfers (DBT) in the form of cash cannot replace the supply of food through the public distribution system. DBT does not address the problems of identifying the poor ("targeting") and introducing place of the PDS will expose the vulnerable to additional price fluctuation. Further, if the PDS is dismantled, there will also be no need or incentive for procurement from farmers and this system too will have to be done away with, adding a new source of vulnerability to cultivators of rice and wheat.


How will DBT impact nutrition intake? 

3) The main arguments for cash transfers  focus on efficiency. According to these, delivering cash directly to the beneficiary may cost less than the present elaborate but leaky system of physical procurement and distribution of actual food grains. This view does not take factors such as nutrition intake, social protection and income security into account. 

Many Right to Food activists argue that replacing PDS by equivalent cash would be detrimental to nutrition intake. Abhijit Sen and Himanshu (2013), in a two-part paper, evaluate existing in-kind food transfers. Part I outlines the dimensions involved, in terms of reach, transfer content and physical leakages, and deals with the impact of these transfers on poverty as officially measured. Part II reports the impact of these transfers on calorie intakes and also discusses some issues regarding the financial cost of these transfers. These results suggest caution in advocating cash transfers as a substitute to in-kind transfers. 


Will DBT affect social protection and income security?

4) The PDS’ importance goes beyond achieving food security: Reetika Khera and Jean Dreze (2013) write that it is also a means of income support and social protection in rural India. At the time the article was written, using National Sample Survey (NSS) data, they  noted that for the first time, the PDS was having a substantial impact on rural poverty.


Has Aadhar-Based Biometric Authentication worked?

5) One of the issues the protesters raised is that the DBT process has involved connectivity failures or problems with Aadhaar-based biometric authentication that have led them to return empty-handed.

While this article discusses how ABBA has been linked to the PDS in Jharkhand, it raises various issues related to this measure, including exclusion problems, transaction costs, and its impact on corruption that are just as likely for ABBA linked DBT.


Has DBT increased efficiency in the past?

6) Let us look at the case of Liquified Petroleum Gas (LPG) subsidies where the Aadhaar-linked Direct Benefit Transfer scheme was widely advertised as a "phenomenal success". The touted success was used to promote Aadhaar and DBT in other spheres such as the PDS. Rahul Lahoti's article argued that the limited evidence of potential savings in LPG does not match the tall claims.Even if he did, he asserted that it should not be used for the PDS:

LPG usage is mostly urban, is centrally administered by a few companies through  a fully computerised list of beneficiaries and does not need biometric verification; which makes it more conducive for DBT. On the other hand, PDS and MGNREGA are more rural-based, managed through multiple agencies with only partial computerisation of user lists and need repeated biometric verification, making the use of DBT far more challenging. The Economic Survey 2015-16 acknowledges some of these issues, but the government has begun the process of extending DBT to kerosene subsidy and PDS without due diligence.


Read More:

The UID Project and Welfare Schemes | Reetika Khera 

Revival of the Public Distribution System: Evidence and Explanations | Reetika Khera

Bihar on the Move: Food Security | Jean Dreze, Jessica Pudussery, Reetika Khera

Democracy and Right to Food | Jean Dreze 

Well done ABBA? Aadhaar and the Public Distribution System in Hyderabad | Anmol Somanchi, Srujana Bej, Mrityunjay Pande

Would the Shift to Cash Transfers Reduce Poverty and Ensure Food Security? | EPW Engage




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