ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Cash for Food--A Misplaced Idea

Direct benefi t transfers in the form of cash cannot replace the supply of food through the public distribution system. Though it is claimed otherwise, DBT does not address the problems of identifying the poor ("targeting") and DBT in 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.

Some recent developments have once again made it clear that there is an accelerated push to replace transfers of foodgrains through the public distribution system (PDS) with cash transfers. The High Level Committee (HLC) on Reorienting the Role and Restructuring of the Food Corporation of India (FCI) (known as the “Shanta Kumar Committee”) went beyond its mandate and recommended that the PDS must be progressively replaced by cash transfers, and that the coverage under the National Food Security Act (NFSA) must be reduced from 67% to 40% (GOI 2015a). A shift to cash in place of foodgrains was argued for on the basis of data showing high leakages in the transfer of grains through the PDS. Using the same argument of leakages and inefficiencies, the Economic Survey for 2015–16 also recommends a shift to direct benefit transfers (DBT). It goes a step further and claims that direct transfers through the “JAM Trinity” platform (Jan Dhan–Aadhaar–Mobile) has the potential of “wiping every tear from every eye” (GOI 2015b). The finance minister, in his budget speech, mentioned neither the PDS nor the NFSA, but did mention JAM as one of the “game-changing reforms” introduced by the National Democratic Alliance (NDA) government.1

It has also come to light that taking forward the recommendations of the Shanta Kumar Committee, the Government of India issued letters to state governments urging them to come up with plans to shift to a PDS based on cash transfers linked to Aadhaar (Sethi and Agarwal 2015). While there are issues with making Aadhaar mandatory for the PDS (as the Supreme Court has said that Aadhaar cannot be made a precondition for access to any social schemes) in this article we focus on the issue of cash transfers replacing PDS.2

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