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In October 2017, the Jharkhand Government introduced a Direct Benefit Transfer (DBT) pilot for the Public Distribution System (PDS) in Nagri – a block on the outskirts of Ranchi. Instead of rice at Re 1 per kg at the ration shop, the PDS cardholders are to receive the subsidy (calculated at Rs 31.60 per kg) in their bank account, and they buy rice at the ration shop at Rs 32.60 per kg. If this pilot succeeds, the Jharkhand government plans to extend it across the state.

A recent survey in Nagri, however, found that that 97 per cent of the sample households opposed the DBT pilot. Their unhappiness – indeed anger – with the DBT system is not hard to understand. In January 2018, about 25 per cent of cardholders did not receive the cash. Even those who get money face many hurdles. Many households do not know which of their bank accounts is being credited with DBT money (the sample households had 3.5 bank accounts on average). They are often constrained to make multiple trips to the bank to find out if the money has come, as most of them do not receive SMS alerts. Some banks even disallow cardholders from withdrawing money (claiming that the amounts are too small), forcing them to make further trips to the local Pragya Kendra or banking correspondents, where they often have to pay bribes. The entire process leads to a huge waste of time and money for the cardholders. It is especially cumbersome for the elderly, the disabled, and those who find it difficult to take time off work.

All this is in addition to the hassles of Aadhaar-based biometric authentication (ABBA), rampant across Jharkhand. ABBA applies at the Pragya Kendra and ration shop. It is far from clear what purpose DBT serves when ABBA is in place at the ration shop.

PDS dealers, too, are inconvenienced by the DBT system as they now have to spend much more time to distribute grain and have to handle about Rs 4-5 lakhs worth of cash every month.

Nagri is the latest in a series of unsuccessful DBT pilots. As per NITI Ayog’s surveys of DBT pilots in Chandigarh, Puducherry and Dadra and Nagar Haveli, this system is more expensive to access PDS entitlements. These surveys also found that over time a small proportion of cardholders stopped receiving the cash subsidy. While these pilots allowed cardholders to buy food items from the market, in Nagri people are restricted to purchase grain from the PDS shop. A DBT pilot also failed in Kasba block of Purnia district (Bihar), though further details of this experiment are not available.

Jharkhand has amongst the highest levels of hunger and undernutrition in the country and the PDS there is a lifeline for many rural households. It may be recalled that lakhs of ration cards not linked with Aadhaar were deleted in Jharkhand last year. In the last five months, seven starvation deaths were reported in Jharkhand. Five of them were due to the mandatory integration of PDS with Aadhaar.

A padyatra will be taking place from Nagri to Ranchi on 26 February, to demand the discontinuation of the DBT pilot. This protest is jointly organized by five opposition parties (Communist Party of India (Marxist), Communist Party of India (ML), Indian National Congress, Jharkhand Mukti Morcha and Jharkhand Vikas Morcha) and several social movements and networks (Right to Food Campaign Jharkhand, Adivasi Moolvasi Astitva Raksha Manch, All India People’s Forum Jharkhand, United Mili Forum, All India Kisan Sabha, Jharkhand Jan Sanskriti Manch, Ekta Parishad, Bagaicha, Jharkhand Nagrik Prayas and others).

For further information please contact Akash Ranjan (9931014008) or Ankita Aggarwal (9504091005) or write at rtfcindia@gmail.com. Follow on Twitter: #RationBachao.

Recently in Durg, Raipur and Rajnandgaon (Chhattisgarh)

Jagdish Ram Nishad’s winter paddy crop is about to be harvested. On his three-acre farm, a few km from his home, green paddy strands stand along the neat rows of cabbage that are now in full bloom.

In the last ten years, the 38-year-old farmer in Kopedih village, about 30 km from Rajnandgaon town off the four-lane National Highway 6, assiduously transformed his rain-fed single crop land into an irrigated lush-green multi-crop farm. He improved his land’s productivity by ploughing back part of his profits to create assets like a bore-well which, he says, in turn helped him diversify into growing vegetables.

A paddy procurement guarantee and a bonus amount over the support prices gave him more cash that he could reinvest in his farm. In return Nishad voted for Raman Singh, who became popular across rural Chhattisgarh as ‘Chaur (rice) Wale Baba’ for his paddy procurement and rice distribution programmes.

Nishad is, however, concerned today if the returns from paddy would remain steady. The Raman Singh government, mired in a multi-crore food distribution scam that is threatening to dent its image, didn’t buy his entire paddy crop in the season that just ended the way it did this past decade. Plus, it has not paid him the bonus amount that it has been giving from its treasury by the season end.

This is the first year in a decade that Nishad says his returns actually declined as compared with his last year’s income. “Nuksaan to bahut hua, dhaan bhi pura nahi liya aur bonus bhi nahi diya (my loss is big; the government did not fully procure my paddy, nor gave me the bonus amount),” Nishad says. He’s not the only one sulking. In Chhattisgarh, paddy growers suddenly look unhappy with the chief minister.

More than a million paddy growers in Chhattisgarh are agitated over Raman government’s sudden shift in procurement policy and an inexplicable scrapping of bonus. They felt it was a breach of their trust. In the run up to December 2013 assembly elections, the BJP promised in its manifesto that if voted back to power, its government would procure “every grain of paddy produced” and hike the bonus to Rs 300 per quintal.

The state’s decision is actually driven by a paradigm shift in the Centre’s procurement policy.In June last year, immediately after coming to power, the Modi government asked all states to scrap bonus payment to wheat and paddy growers saying it “distorts markets and keeps private players out of the food business”. If they continued to pay bonus, the Centre warned in a letter to the states, Central agencies would restrict procurement leaving the states to bear the burden for surplus grain. The move was aimed apparently at tackling the rising food prices by keeping the surplus grain in the market.

So while the UPA government supported him in subsidizing his state’s paddy economy, the Modi government is hitting the ‘Chaur-wale Baba’ where it hurts the most. It is in a way forcing Chhattisgarh to cut its paddy procurement, scrap the bonus and ultimately alter its much-touted public distribution system (PDS) by bringing in direct cash transfers. But the policy shift is hurting small farmers like Nishad when rural economy is in tatters, even some of the Chhattisgarh ministers admit privately.

“It’s like Jor ka jhatka dhire se lage,” remarked the food and trade policy analyst Devinder Sharma. The Centre is slowly dismantling two drivers of green revolution: the Food Corporation of India (FCI), which is the backbone of food procurement, storage, transportation and distribution, and price guarantee.”

In the last week of March 2015, Professor M S Swaminathan, regarded as the father of India’s green revolution, urged the Modi government to implement recommendations of the Farmers' Commission he had chaired. Citing a need to safeguard interests of small farmers in the face of growing risks in agriculture due to climate change, he suggested the formulae for support price for commodities should be production cost plus 50 per cent.

“Our green revolution has been sustained only because of public procurement of wheat and rice at a fairly reasonable MSP,” he said. “There is no other profession that has such low return”, he said adding that farming is the riskiest profession in the world due to uncertain weather conditions arising from climate change. “The future will belong to nations with grains and not guns.”

Chhattisgarh began procuring paddy from growers immediately after its creation in 2001 at a premium of Rs 50 over the then prevailing support prices, mainly because farmers sold their produce in distress in open markets controlled by private traders and rice millers then. The state marketing federation procured paddy from farmers through cooperative societies, each catering to a cluster of 15-20 villages. The FCI bought the surplus rice after the state met its PDS requirement of about 2 MMT.

The burden of bonus was borne by the state; the Centre paid for procurement, distribution, handling and storage. This system may now be dumped if the Centre accepts the recommendations of a high-level committee led by BJP MP Shanta Kumar on the FCI restructuring. The committee gave its report in January 2015.

In 2014-15, Chhattisgarh’s paddy farmers earned, by a modest estimate, Rs 2,500 crore less on account of non-payment of bonus and part-sale of their produce to private traders at lower rates, a former Chhattisgarh minister who did not want to be named admitted.

Not just the growers but also about 1350 village cooperative societies, which work as sub-agents for the Chhattisgarh state marketing federation, a nodal agency for paddy procurement, face uncertainty, said Raviprakash Tamrakar, a farmer and chairman of the Vruttakar Sahkari Society, Nankatti. “We are being taken back to the previous system where millers and traders will exploit producers,” he feared.

Tamrakar, who leads a United Farmers’ front in Chhattisgarh, said the procurement system has several flaws that need to be rectified, but it’d be a disaster for farmers if the government scraps the policy. “A farmer has a guarantee that his produce would be procured at a support price and he would get bonus as an incentive to produce the grain; it stabilizes his economy and helps him meet his expenses.”

The high level committee in its report thought otherwise. In an 80-page exhaustive report, it explains how the current food-procurement system and FCI functioning is obsolete and hence must be changed. The committee has said the FCI should leave the procurement to state agencies and private players in the states where such a system is fully developed and move to eastern states like West Bengal where procurement is weak and where through private participation it could help build a robust system.

As regards the bonus, the committee recommends a per hectare crop-neutral cash subsidy to the tune of Rs 7000 but a total decontrol of fertilizer prices.

Modi had begun to speak of his idea about unbundling of the FCI into three separate arms even before he became the Prime Minister. A section of economists feel the Union government needs to tide over a “wasteful expenditure” on food subsidies that include of paying a high price to wheat and rice growers, while growers say the support prices still don’t meet their every-burgeoning production costs. While Raman Singh, who’s on a sticky turf over the multi-crore PDS scam, has not yet made any open remarks against this shift, people close to him say he is concerned.

The CM wrote to the PM last October months after the June diktat. Highlighting the plight of his state’s paddy growers, he urged Modi to reconsider his directive to stop bonus on paddy procurement.

In 2013-14, his government gave Rs 2,400 crore in bonus payments to farmers on 8 MMT of paddy it procured – it came to Rs 270 per quintal. The principle paddy procurement price cost Rs 13,000 crore at Rs 1360 a quintal. In his letter to the PM, the CM said withdrawal of bonus would “reduce buffer stock” and “adversely impact the overall food security of the country.” He said since the bonus is paid by the state, it should be left alone to decide about it.

Chhattisgarh’s promise of Rs 300/quintal as bonus for the 2014-15 was the highest in the country. To the PM, the CM said bonus payment is “the most important decision” of his government to improve farmers’ condition in his state. It was a promise made by the BJP in November 2013 assembly polls, he reminded. The CM said in his letter that 8 MMT of paddy would give about 5.4 MMT of rice and since the state needs only 2.4 MMT rice for its public distribution system, it would be left with a “surplus of 3 MMT” should the Centre not procure this rice in central pool. Chhattisgarh is the third largest contributor of rice to central pool with a significant share in the food subsidy bill.

A former minister in the Raman government said: “People are unhappy; I hope good sense prevails on the Prime Minister.” The Centre has not taken a call on the HLC report, but has accepted some recommendations. Last Wednesday, the Centre asked the FCI not to purchase food-grains in Punjab and Haryana. While the latter has reportedly toed the diktat, the former has pleaded for a phased-withdrawal. “It (the policy change) will have a strong impact on Chhattisgarh’s economy,” TS Singhdeo, the leader of opposition in Chhattisgarh Legislative Assembly, said. “The BJP did not keep its promise to farmers,” he said. “We want the government to restore bonus.”

In the last decade, Chhattisgarh emerged as the largest exporter of non-Basmati rice in the country – a success largely credited to its policy of price incentive and procurement. Last year, the state procured about 8 MMT of paddy; this year (2014-15), it initially said it would restrict procurement to 10 quintal an acre, but later raised it to 15 quintals in view of ensuing local body polls.

But the damage had been done. The CM, who called for a ‘Congress-Mukt Chhattisgarh’, instead saw swathes of rural Chhattisgarh getting BJP-Mukt. In his home district of Rajnandgaon, his party could win the municipal corporation, but was wiped it out in the Zilla Panchayat on the issue of paddy price. Out of 24 seats, the Congress in that panchayat won 18 seats, while the BJP won the remaining six.

The ruling party’s defeat was spread across the state – it lost in the tribal belt of Surguja and Bastar, central plains, rural centres as well as Raipur, the biggest urban body.

By the end of the procurement season in February, Chhattisgarh government bought 6.3 MMT of paddy, nearly 1.7 MMT less compared to last year, when actual production has reportedly increased.

As Tamrakar, the farmers’ leader explained: “Farmers are angry; to dissuade them from selling their paddy to a society the government imposed so many conditions that small farmers felt it’s better to sell their paddy to private traders event at a loss.” Oblivious of the top-down policy changes, farmers like Nishad are wondering if Modi and Raman Singh have turned their backs to the promise of placing more money in the hands of rural peasantry.

Take his own case: On an acre, he earned at least Rs 7,000 less this year, Nishad says. He explains: He got 20 quintals of paddy on an acre, about 60 quintals overall in Kharif. If the government procured his entire crop, he would get Rs 1360 (MSP) a quintal. If you take Rs 270 bonus that it gave on a quintal last year, his income would stand at Rs 97,800. Exclude the input and production cost, he would make a profit of Rs 45,000, at least. But here’s how much he actually made this year. He sold 25 quintals to private traders at Rs 1100/quintal. He sold 35 quintals to the government at Rs 1360.

In all he earned Rs 75,100, or Rs 22,700 less than what he would have made had the government stuck to its promise of procuring his produce and giving him a bonus like it did last year.

Nishad says he would usually use the bonus amount to buy inputs for the next season. “Bonus payment usually comes this time when we begin the next season’s preparation,” he says.

“Will the state procurement system stay?” Nishad wonders. It’s not clear if Modi has made up his mind.

Across Chhattisgarh, the withdrawal of bonus and a drop in state procurement of paddy meant a drop in the income of farmers. Nishad is better off than other farmers, since he is among 20 per cent who have irrigation facilities. Someone like Kunjlal Tandon, a dalit farmer of two acres in Bodegaon village of Durg district, is not only unhappy; he’s mighty worried. For the next season he has no money, he says. Even a small bonus was his big support from March to June. Now, he says, he’ll either sell or lease out his land.

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The Economic Survey of India states that PDS allocations lost to leakages were 54%of wheat, 15%of rice, 48%Sugar & 41% of Kerosene. That's over Rs. 68,700 crore rupees.

[tweetthis twitter_handles="@Aun_X, @Vidyut" url="https://t.co/IoqjNglEh2"]Amazing how popular ration items show the most "leakages" #EconomicSurvey http://t.co/YzVnuK7ZWD[/tweetthis]

Wheat, sugar and kerosene are the three items most people prefer to purchase from the PDS system. These are the three items that do not result in any major perception of lower quality from having been purchased from the PDS system, as opposed to rice, which is usually noticeably poorer quality than the more expensive and better tasting store bought varieties. Most purchasers of rice from the PDS system, other than the very poor end up using it for making flour or batter for dosas. Very few who can afford to eat well bother with the rice from the PDS system to eat with cooked grain in tact. Is it not remarkable then, that rice, which often has poorer quality sacks than sugar manages to leak more than sugar? Who are we fooling here?

Here we take a look at the inside story on "leakages" with kerosene. Similar stories exist for other items too.

The PDS system in India was introduced in 1965 and was aimed at poverty alleviation and to curb hunger in the lower classes of the society. With time India has changed, but the good old Public Distribution System remained the same.

The PDS system in India has always been in news for all the wrong reasons. Out of the entire host of commodities those are sold through PDS, Kerosene’s black market alone is worth Rs. 10,000 Crores. While there have been talks and talks only to reduce these losses, no action is visible on ground. We have often heard that black marketers are ruthless, they have been robbing the government and even have killed some honest Government officers like Sonawane in Nasik, Maharashtra or some senior journalist in Andhra Pradesh, but not much of the reporting is done to understand the real cause. We are often told that the price deferential between the Diesel and Kerosene is responsible while that isn’t the complete picture.

The System:

Kerosene is sold in the market through a whole host of dealers and sub dealers. When a tanker is dispatched from the company it is sealed and secured. When it reaches the Dealer or the whole seller, it need to be first checked by the Tahsildar or any officer from his office and certified that the tanker is not tampered with. Only after that a tanker can be unloaded at the depot.

Once the Tanker is unloaded at the depot, it again needs to be certified by the tahsildar that the entire load is unloaded, and the documents are needed to be stamped and signed. Same goes with Semi wholesalers as they buy the entire sealed lorry from the Dealers. The semi-wholesaler then distributes the stock to the Hawkers and retailers.

The Government has fixed approx. Re1 / ltr as commission to the dealer as well as the wholesalers. But the need of unnecessary checks at every level means more money changes hands as bribes right from the clerks in the tahsildar’s office to the District Supply Officers. A Dealer normally pays 5000 to 10000 per month depending on his quota. Higher the quota more is demanded from the District Supply Officers. Even after the payment of these bribes, the dealers and wholesalers are raided and show cause notices are issued against them when they ask questions.

Now let’s talk about hawkers and retailers. Each retailer and hawker has been allotted a monthly quota which can be in the range of 1 to 5 barrels (200 ltr/ barrel) a month, depending upon the need of kerosene in his territory. A retailer buys kerosene from the dealer at the rate of 15.40/ ltr and sells it at 15.66/ltr (or he is suppose to sell at that price). That means he makes Rs. 52/barrel. Imagine this. Just the transportation cost that he bears from the dealer’s depot till the point of distribution costs Rs 200/barrel. Add to it his record keeping expenses which is about Rs 200 per month plus the monthly bribes of Rs. 1000 per month that he has to pay to various clerks of the tahsil office.

All these numbers makes the entire business unviable for him. Since he is the only point of leak in the distribution system, mafias target these poor retail license holders. They purchase the entire monthly quota from them giving them a profit of Rs. 5/ ltr. Or Rs 1000/ Barrel. And then they retail it for Rs. 40/Ltr in the open market.

This is a systematic problem. Apart from a culture of bribery, the narrow margins also contribute to making the business unviable, leading to "leakages". The end result is poor availability of kerosene for the common man, regardless of price.

There is a need to use more realistic language in reporting statistics to citizens. There is also a need to investigate sources of leaks and plug them comprehensively while making necessary revisions for the system to still remain viable enough for the distribution to happen.

Another problem is that kerosene is not available for purchase other than government ration supplies - even if a citizen did not want to purchase it in "black". Unless you have a ration card that allows you to purchase kerosene, there is no legal way if you needed to buy it for say... cooking on an outing or using with oil paints or lighting a bonfire. There is a need for kerosene to be available for purchase on the open market as opposed to government ration sources alone. This will reduce the market for "black" kerosene if people can simply buy legally.

The problem is such that these "leakages" often result in kerosene being unavailable for people to purchase even if they are entitled to purchase with their ration cards. Households dependent on kerosene for cooking end up spending far more money purchasing the kerosene siphoned off from the system at higher prices.

As per The Hindu report, Government is currently losing Rs. 12.54/ ltr by way of subsidies. If the subsidies are removed the kerosene will be retailed in the market for Rs 27.68Rs/ ltr. This is still cheaper than what is being sold by the mafias in the open market. This will raise the price for the poor consumer regardless. The alternative is to devise a system and adequate checks that prevent this pilferage. Possibly by making the margins more realistic and clubbing them with severe punishments for theft.

These solutions are really practical but it needs a strong political will for its implementation. But you can never expect a government which works hand in glove with mafias to implement them.

Regardless, the mafia causing such massive losses to the country have to be eradicated. In the meanwhile, the Economic Survey of India should at least stop lying and call these "leakages" what they are - pilferage. The real problem has to be visible for real solutions to even be deemed necessary.

This post has been written in collaboration with Aun Ajani.

Aun Ajani is a MBA graduate from the Birmingham Business School, UK. He has previously worked with an Investment bank and is now conducting market research to implement his business idea. He has witnessed the problems in kerosene retail and distribution business since his childhood as his family is in the petroleum retail business since the last 75 years.