Cash for Food

Chhattisgarh's experiment with cash transfers for food rations has been a disaster

During a pilot project in direct benefits transfers, a fifth of the beneficiary households never received any money, and among those who did 70% got it after much delay.

Chhattisgarh has been lauded for the reforms initiated in 2004 in the public distribution system to ensure that subsidised foodgrains meant for the poor actually reached them. Over the last decade, the state’s network of food ration shops expanded to reach 85% of the population. It became the first state to implement a food security law in 2012 and was highlighted in numerous studies as a model state for the public distribution system.

Such was the pride that the Bharatiya Janata Party government led by Raman Singh took in the efficacy of its public distribution system that it consistently opposed the idea proposed by the United Progressive Alliance government at the Centre of giving beneficiaries cash instead of food. In December 2012, the Chhattisgarh Legislative Assembly passed a resolution emphasising that the state should be kept out of any initiatives that involved such cash transfers.

But the state government reversed this position after the Narendra Modi government came to power at the Centre last year. From June 2014, cuts were effected in the public distribution system: 15% of ration cards were cancelled while entitlements of rice and pulses were reduced. Based on unwritten orders of the food department, beneficiaries were compelled to get Aadhaar cards and open bank accounts under the threat of their rations being discontinued.

The Chhattisgarh government then started preparations to link the public distribution system with Aadhaar, the central biometrics-based identification programme, and to conduct pilot projects in direct benefits transfers in food.

Pilot projects

According to the procedure laid down for the direct benefit transfer, a cash subsidy of Rs 25 per kilo of entitled grain would be deposited into the beneficiary’s account. They could then withdraw the funds and buy grain from the ration shop. Under the previous system, though they would have had to pay Re 1 per kilogram of entitled grain.

The pilot was started in April 2015 in six shops across three cities – Raipur, Dhamtari and Mungeli. In a state with an effective public distribution system, the news of such major changes provoked worries among the poor. Protests resulted in the pilot project being shifted away from one of the selected ration shops in Raipur.  In Dhamtari town, the project had to be stopped mid-way.

A study conducted in August proved that their fears may not have been unfounded.

The study

Designed by non-profits related to the Right to Food Campaign, the study focussed on two ration shops in Raipur that had been selected for the pilot project. The aim was to understand the experience of the beneficiaries in accessing and using the public distribution system  after the introduction of direct benefit transfers.

A total of 103 households with ration cards were interviewed– 42% of them belonging to the Scheduled Castes, 37% to the Other Backward Classes and 20% to the general category. The salespersons of the two public distribution shops, and community leaders were also interviewed. The findings were startling:

* Twenty per cent of the households never received the money in their bank accounts during the four-month pilot (April-July 2015).

* Out of the households that did receive money in their bank accounts, 70% said the money reached their bank accounts with significant delays. Beneficiaries had to go repeatedly to the bank for withdrawal of money, which was time-consuming and tiring.

* The worst impact was on access to food itself. In April, 56% of households could not get their quota of rice. This went down to 20% in May, but rose to 27% in June.

Old system was better

In August, the direct benefit transfer scheme was stopped in Raipur and the previous system was reinstated. The survey showed that 96% of the surveyed households were able to get their quota of rice in August, a dramatic improvement over the preceding four months. This mirrors the situation in the pre-cash subsidy phase wherein the survey found that in February, before the direct benefit transfer started, 91% households had taken their entitled grain.

This clearly showed the system was working much better without the direct benefit transfers and the four-month period of the pilot project was the worst.

Among the households surveyed, 43% faced financial distress in trying to buy public distribution system rice during the pilot. Thirty seven per cent of the households had to take a loan from somewhere in order to buy public distribution system rice, while six households had to sell household items to buy rice, as they had not received the money in their accounts. In one case, the lady of the house said she had to sell her utensils to get money to buy rice.

Nearly one-third of the households said they faced problems in making an Aadhaar card or opening a bank account, or withdrawing money from the bank. A 65-year-old woman who lived alone did not have a bank account. No one helped her get one. As a result, she was unable to buy rice from the ration shop. She bought rice from a private shop with great financial difficulty. In another case, a woman produced all the required documents at the special camp organised by the government to introduce the new system, but her bank account was not opened and neither did she receive her Aadhaar card.

As many as 96% of the surveyed beneficiaries said they preferred the old system. In May, nearly 70 people had filed a complaint with the District Food Inspector regarding money not being credited to their account.

The study shows that the entire purpose of the public distribution system – ensuring food security support to families – has suffered immensely with the introduction of direct benefit transfers. Chhattisgarh had created a well-running public distribution system through painstaking efforts over a decade and yet cash transfers managed to disrupt it within a few months.

The author is a researcher associated with the Right to Food campaign in Chhattisgarh.

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