Would the People of Chhattisgarh Prefer Cash Transfers instead of Foodgrain?

There is striking evidence to show that the public distribution system (PDS) reforms undertaken by the Chhattisgarh government to decentralise grain distribution to the village panchayat, enhance transparency measures through the use of technology, and establish mechanisms to redress grievances have worked to overhaul PDS implementation in the state (Krishnamurti et al 2014; Puri 2012; Khera 2011).

 

While the Chhattisgarh PDS is concerned almost exclusively with the distribution of rice, and commodity diversification efforts to include lentils, sugar and cooking oil have been inconsistent and patchy,i it is widely agreed that the PDS is effective in delivering staple grain. Across various parts of the state, cardholders unanimously report that grain distribution is regular and that they receive the mandated entitlement. ii

 

Furthermore, the reach of the Chhattisgarh PDS is near universal, with almost all rural households holding an entitlement card. The quality of distributed rice is perceived to be acceptable and the token pricing at ₹1 or ₹2 per kilo is expectedly attractive. 

 

The form that food assistance should take is a subject of a longstanding debate.  The usefulness of a direct benefit transfer (DBT) or food subsidies as digital cash payments made directly into bank accounts has been considered now across governments in India. It has further been envisaged that the delivery of PDS or other welfare subsidies be linked with the ones biometric identity via the Aadhaar. (3)

 

How do users in Chhattisgarh, where the PDS has an expansive reach and makes effective grain distributions, view the idea of receiving cash transfers instead? This question was explored in interviews with adult users of the PDS across two different locations, a mixed-caste village from Chhattisgarh’s rice-growing plains (Abbhanpur block, Raipur district), and an Adivasi village from a hilly region of Bilaspur district (Kota block). (4)

 

The theme of discussion, the hypothetical scenario of the state making payments in cash instead of grain, found wide resonance and evoked strong sentiments. The general findings from these blocks are also echoed in casual discussions with informants outside these regions.

 

 

In April–May 2015, Kota and Abbhanpur had witnessed a recent “scare.” There had been news that the monthly distribution of rice by the PDS would be discontinued or “closed” (“band karvane ka bol rahe hai”) and that the state government would replace it with cash transfers to bank accounts instead (“kehte hain paisa bank account mein jama karenge”). 

 

This information had sounded alarm bells. While the worry that cash would replace grain had momentarily passed, and the PDS continued distributing rice at the village-level, the prospect of its replacement by cash lingered. 

 

The overwhelming and consistent preference for grain over cash is striking, especially since this preference was expressed by both men and women, irrespective of class, age, or community. It is useful to examine reasons for this sharp preference for grain over cash against the background of national debates about cash transfers. 

 

 

 

The statements above express a common apprehension that food assistance in the form of cash instead of kind would place the community at the mercy of the vyapari or traders. The worry is that both wholesale dealers as well as local shopkeepers would take advantage of the inelastic demand for staple grain, and would raise the price at which they sell it to consumers. 

 

For example, if the government had set the benefit transfer at a rate of ₹25 per kg of rice for an entitlement of 35 kg (a cash transfer of ₹25 per 35 kg, or ₹875), it was feared that traders would raise the selling price of rice to about ₹30 per kg, reducing for the consumer the real value of the subsidy. Then, to them it would be worth 29.16 kg of rice instead of the 35 kg currently received (₹30 per kg, or ₹875).

 

This is a legitimate concern since it is widely agreed that rural markets are underdeveloped and traders have significant power over local communities. An additional consideration is the effort and inconvenience involved in engaging with the banking system, in purchasing grain and in transporting it.

 

Although the banking infrastructure across Chhattisgarh is variable, in both Kota and Abbhanpur, banks are available within the reach of the villages that were studied. However, the process of engaging with them, and subsequently purchasing and transporting grain, is envisaged as tedious and expensive, compared to the current reliable village–level distribution of rice. 

 

However, while the above outlined factors— the little faith reposed in traders and the perceived difficulties of accessing banks or transporting grain—are important, these were not the primary considerations underpinning the preference for grain.

 

With a view to understanding their positions on the “idea” of cash transfers, community members were engaged in a discussion about a hypothetical situation, one where cash transfers to bank accounts were reliable and equivalent to the then received PDS entitlement of 35 kg of rice. In sum, a situation where cash transfers would be accommodating of fluctuation in market prices and cover the envisaged increase in transport or other costs to the consumer that a move to cash might bring.

 

It is noteworthy that while giving full consideration to this hypothetical “what if” situation of reliable and fair cash transfers, respondents were similarly consistent in their preference of grain. Underlying their choice was the firm sentiment that “cash in hand” would be unwisely spent and would erode the food security that grain provided. It is striking that both men and women echoed this sentiment, and felt that it was food grain transfers that enabled “the household to run” (ghar chalta hai). 

 

 

Some such as Paridabai expressed anger in even a hypothetical discussion about the possibility of grain replacement by cash. Others were calmer in reflecting about the question and reasoned why they felt that cash in hand, instead of grain in the kitchen would erode food security. 

 

Men sometimes displayed a degree of embarrassment in admitting that they would not be able to “control” how they might spend cash received, and were sometimes pragmatic and honest in reporting the reality of the problem of alcoholism, and how that may lead to misuse of money. They also reported likely scenarios where immediate needs would cloud long-term thinking and impinge strategising or decision-making about the use of cash in hand.

 

 

 

 

It is known that operational costs of delivering in-kind food assistance are high, and that systems are commonly subject to inefficiencies and corruption. (v) Those who advocate cash transfers have argued that they have the potential to bring significant financial savings to the government and also reduce corruption.

 

Furthermore, it is advocated that putting cash in the hands of the consumer allows them to exercise “choice,” select the grain of their liking from the open market, or use the money as they may choose. While the potential to rationalise finances and make savings exists for the government, for people in rural Chhattisgarh who have experienced reliable distribution of PDS grain, grain transfers represent greater food security.

 

It is striking that, in this context, respondents prefer to forego the possible “choice” that equivalent value cash transfers represent for the food security that grain represents. While the preference for grain over cash is not consistent across the country and, given leakages, communities in many states receive few benefits, for the state of Chhattisgarh, as Khera (2014) also finds, there is overwhelming preference for grain. (vi)

 

It is important to consider context as well as community reasoning on the food security implications of different forms of food assistance.

 

For individuals such as Jeevan Pardhi, the PDS has reduced vulnerability and afforded a hitherto unknown security. Jeevan Pardhi’s latter statement moreover points to an additional dimension of interest: what the relation between the PDS subsidy and household diet quality may be.

 

It is methodologically challenging to trace how income support and social protection experienced from PDS subsidies may contribute to improved diet quality, and here too, any financial savings may be diverted to non-food expenditures. There is, however, anecdotal evidence to suggest that freed from some burden of provisioning the staple sources of energy, some resources are being directed towards improving diet quality (vii). This important question would merit further careful research.

 

 

Drèze, Jean (2015): “The Pursuit of Cash Transfer Nirvana Ignores Inconvenient Evidence,” Huffington Post, 6 November, http://www.huffingtonpost.in/jean-draze/jam-and-the-pursuit-of-ni_b_8486410.html.

 

Drèze, Jean (2011): “The Cash Mantra,” Indian Express, 11 May, http://indianexpress.com/article/opinion/columns/the-cash-mantra/.

 

Khera, Reetika (2014): “Cash vs In-kind Transfers: Indian Data Meets Theory,” Food Policy, Vol 46, pp 116–28.

Khera, Reetika (2011): “Trends in Diversion of PDS Grain,” Economic & Political Weekly, Vol 46, No 21, pp 106–14.

 

Krishnamurthy, Prasad, Vikram Pathania and Sharad Tandon (2014): “Public Distribution System Reforms and Consumption in Chhattisgarh: A Comparative Empirical Analysis,” Economic & Political Weekly, Vol 49, No 8, pp 74–81.

 

Puri, Raghav (2012): “Reforming the Public Distribution System: Lessons from Chhattisgarh,” Economic & Political Weekly, Vol 47, No 5, pp 21–23

 

Svedberg, P (2012): Reforming or Replacing the Public Distribution System with Cash Transfers, Economic & Political Weekly, Vol 47, No 7, pp 53–62.