Sunandoroy February 1996
The central objective of economic planning in Indian Economy has over the past fifty years remained “Growth with Social Justice”. Access to and an egalitarian distribution of necessities has always been an essential ingredient for equitable development. A wide spectrum of social security measures on part of the State were designed to tackle the dual menace of poverty and inequality in the access to essential requirements of the Indian populace. Social security in the Western sense occupies a marginal place in developing economies due to the different socio-economic conditions. The kind of all-encompassing income support available to the lower income groups in the advanced world to enable them to cross the poverty line is not comparable to the efforts in developing countries, given the high level of poverty in the latter set of countries. Even then, with a vast majority of the population living below the poverty line, Governments in many countries have sought to protect the weaker sections of the population by providing for a number of social support programs designed to protect their basic needs. Public provision of basic needs has typically included subsidized medical facilities, subsidised housing and food distribution programs and various poverty alleviation and employment programmes . At this crucial juncture, when the Indian economy is undergoing rapid economic transformation, these Social Security measures by the state are in need of significant restructuring and rationalization. The strain on resources of developing world that is eager to embark upon the path of catch-up industrialization through efficient utilization of existing resources.
Therefore, the issue of targeting of welfare services has assumed importance to the resource scarce developing countries like India. It is in this context this paper attempts an evaluation of the efficacy of targeting of the public distribution of foodgrains in the state of West Bengal in India.
Survey of Literature on Targeting :
The literature of targeting of social security has a long legacy. The genesis of discussions and debates centered around the issue of targeting can be traced back to the early nineteenth century . In the 1820s, the issue of targeting came to be discussed in the United States in the context of free universal public education while in the 1830s, economists in the United Kingdom debated the justification of the means tested Poor Law of 1834.
The issue once again appeared prominently in the 1930s when the world was affected by the great Depression. With the introduction of the Social Insurance for the Aged in the United States and the Beveridge Report in Britain in 1942, the debate of targeting versus universalism in social security became prominent in the developing world. The issue of targeting in the 1970s in the wake of the economic slowdown in the advanced world when the disadvantaged segments of the population demanded additional social support to withstand the economic difficulties. Akerlof (1978) in a pioneering study, concerned himself mainly with the design of tax and transfer programmes for poverty alleviation in the presence of limited information on who the poor are. Besley and Kanbur (1988) characterized two types of targeting mechanisms-indicator targeting and self-targeting. Indicator targeting relies on making the transfer contingent on some easily observable characteristics e.g. sex, age, landholding, region of residence, an extra information over and above income or consumption (Akerlof referred to this as ‘tagging’). Ravallion (1989) quantifies the gain from using additional information. Haddad and Kanbur (1991 a) developed the theory of upper limit indicator targeting where an upper cut-off of an observable variable, such as age is used to determine eligibility in a transfer programme [e.g. in Supplementary Feeding]. The other mechanism, the self targeting mechanism rely on an announced scheme that permits unlimited participation but is designed in such a way that only members of the target group find it worthwhile to participate. Thus, costly administrative screening and verification of indicators become unnecessary. The incentives to participate are themselves the screen. Such self screening has been discussed in the latest literature on imperfect information [Hoff and Stiglitz (1990), Haddad and Kanbur (1992)].
The arguments of those in favour of targeting may be summarized here.
The first argument for selective targeting emanates from the doubts about the sustainability of universal welfare schemes which eat up enormous amount of resources of the Government and shows downward stickiness by assuming the form of entitlement. Secondly, the administrative and political costs of the universal system have been found to be high as these schemes are financed by taxpayers who are a small segment of the population . Moreover, it is difficult to justify the presence of a sizable proportion of well off segments of this society as beneficiaries in universal schemes .
Universalists , on the other
Targeting in the Indian Context :
The post-colonial Indian welfare policies were devised in an over-ambitious manner where Universalism ruled the roost and adequate attention was not paid to the efficacy of targeting. Of late, there has been discussions about targeting the resources effectively. Regarding provision of health facilities, it has been found that we have created a wide network of health facilities, but the quality of services is so poor that people prefer to avail of the services of private practitioners even at a higher cost. In rural areas, cultural alienation prevents proper utilization of existing facilities. Since the mid-1970s, the state has sought to provide services to the poorer sections by reducing the hospital orientation and instead by emphasizing public health facilities through community health workers. Women’s health has also been given greater attention in recent years. The Indian policy makers have adopted a universal model of health care in the country. Adequate health care to all was the motto since Independence. This `Universal’ model of health care has been found to be ineffective. The quality of services is substandard and those who can go to the private nursing homes never to the public hospitals. Roy (1995) has studied the financial impact of universal health care.
The need for targeting public housing towards the weaker sections has clearly been spelt out in the plan documents which used to provide information regarding housing policy prior to the publication of National Housing Policy in 1988. The first five year plan clearly spelt out the major goal of public housing activity:
“Private enterprise is not in a position to do the job as far as low income groups are concerned. They cannot afford to pay the economic rent for housing accommodation for even the minimum standards. The State, has, therefore, to fill the gap and assist the construction of suitable houses for low and middle income groups in urban and rural areas”.
Over the entire plan period, this remained the central objective of public housing. The Government, in order to fulfill this objective, devised a large number of social housing schemes to cater to the weaker sections of the society. These schemes, in spite of receiving considerable amount of publicity failed to make significant dent into the housing problems of the weaker sections. According to the Official estimates the housing conditions for the masses improved only marginally since independence.
Public housing activity has always been conceived as a welfare activity by the planners. The major share of public housing expenditure was supposed to benefit the weaker sections of society. The private housing market, comprising of profit maximizing entrepreneurs, automatically excluded the poorer sections through the high interest rate structure, short repayment period and strict requirements of collateral security. Hence, stepping up of public housing expenditure seemed to be the only way out of the acute shortage of housing facilities facing the weaker sections.
Roy (1995) studies the cumulative impact of housing activities of the central, state and Union Territory Governments, central public Sector Undertakings and Other public institutions engaged in public housing activities like Life Insurance Corporation, Housing and Urban Development Corporation, General Insurance Corporation, Commercial Banks and Apex Cooperative Housing Societies in the mid –eighties. He finds that Government Employees emerge as the most important beneficiary group getting 61.39 per cent of the net public housing expenditure ( net of inter-institutional transfer ). This group is not certainly the most distressed group as they are looked after by pay revisions, dearness allowance, medical re-imbursement, LTC and a plethora of other fringe benefits. So, from the distributive point of view, the housing policy has failed to serve its purpose. The poorer sections, comprising of the Economically Weaker Section and the Low Income Group, received 20.68 per cent of public housing expenditure covered in our study. The two major sources of housing for the poor are the Social Housing Schemes and the Priority Sector Lending by Commercial Banks.
Food : poor Targeting
Poor targeting in foodgrains distribution is a widely discussed theme. The Government has time and again stressed the need for making available subsidised foodgrains to the weaker sections of the population and not to the middle and higher income classes. The Government has , in fact, taken major initiatives to restructure the public distribution system . A Revamped Public Distribution System to cater to draught-prone and Tribal areas have come into force. People in those vulnerable areas are given foodgrains at half the market price while for others, one can observe a thinning of the spread between issue prices and open market prices.
A large amount of research has been carried out over the years on the quantitative and financial impact of a well targeted public distribution system.. Raj Krishna (1967) pointed out that a well-targeted PDS covering poorest 25 per cent of the Indian population would require an additional 40 per cent of foodgrains for distribution. Gulati and Krishnan (1975) stated that to provide food to the non-cultivating population less income tax payers, the food distribution through PDS has to be enhanced 3.65 times. National Commission of Agriculture (1975) stated that if the urban poor and flood and draught prone areas are covered by PDS, this can be achieved through diversion of PDS foodgrains from the non-poor. Roy (1992) found that to provide 400 gms per adult per day of cereals, to the poorest 30% of urban and agricultural households would entail a 40% increase in food distribution. It can be seen from these studies that restructuring PDS is well within the financial and physical resources available to the Government.
Public Distribution System in West Bengal
The Public Distribution System was first launched in 1939, immediately after the outbreak of the Second World War to deal with the supply shortages of essential commodities. The scheme has continued to exist since then, though there have been significant changes in its form. Essentially, we have seen three variants of the programme : a) Statutory Rationing – under which the Government takes the entire responsibility of supplying the rationed commodity and no free trade is allowed in the region, b) Modified Rationing/Non-Statutory Rationing – where fair price shops and markets co-exists, complements and at times competes with each other. c) Non statutory interventions by the Government in food distribution by allocating specified quota to a certain group of people considered to be in need by the State. West Bengal is one of the forerunners almost 17 per cent of the population in the State was under Statutory Rationing. Statutory Rationing of diverse form and strength with varied coverage of areas existed in the State since Independence except during a phase from 10 July, 1954 to 5 January 1965 when the system was withdrawn in conformity to other decontrol measures in the economy. The rest of West Bengal was under Informal/Modified Rationing in which PDS played a supporting role in a market economy.
5.2 Volume of PDS :From the mid sixties, the distribution of foodgrains through the PDS has been quite significant as a proportion of total PDS issues in the country (Table V.1). On a per capital basis also, the distribution of foodgrains
via PDS in West Bengal was substantial relative to the offtake in other states (Table V.2).
5.3 Shares of Statutory and Modified Rationing :The offtake of cereals under PDS in West Bengal comprised of provisions to Statutory Rationing, Modified Rationing and to other categories which included Tea Gardens, employment generating programmes like NREP, RLEGP, ITDP as also allocations to Relief camps. The shares of Statutory, Modified and Other segments during 1951-1989 are given in Tables V.3 and V.4. A graphical representation is given in Graph V.I. One finds a perceptible rise in the share of Modified Rationing and other targeted schemes (including provisions for employment generation programmes, integrated tribal development programmes etc) from 18.9 per cent in 1951 to over 45.4 per cent in 1989. This seems to indicate that the extension of fair price shops in rural areas led to an improved distribution of PDS foodgrains among urban
centres and rural belts. During the period 1965-89, number of ration shops increased from 2281 to 2746 in Statutory Rationing Area while in Modified Rationing Areas, the number of ration shops increased from 9963 to 17155. Population served by PDS network grew from 72 lakhs to 98 lakhs in Statutory Rationing Area while in Modified Rationing Areas in population coverage has gone up from 109 lakhs to almost 5 crores during the identical period (Table V.5).
5.4. Issue of Cereals through PDS :The issue of cereals through Public Distribution System has been much more consistent in the Statutory Rationing Areas due to the nature of intervention in Statutory Rationing Areas. While the quota declared could not be fulfilled in Statutory or Modified areas, the provision in Statutory Areas have been more consistent as revealed by Table V.6. The quantities distributed per ration card holder is also much more than the quantity distributed per ration card holder (Table V.6). Table V.7 shows a number of commodities distributed per ration card holder in Statutory and Modified rationing areas. As is evident a ration card holder residing in Statutory areas receives 3.56 times more the quantity of rice, 2.68 times more the quantity of wheat and 11.33 times more the quantity of edible oils as compared to the average ration card holder in modified rationing localities. This shows the lack of targeting of resources distributed through PDS. As a proportion of the balanced diet norm suggested by Food and Agricultural Organization [FAO (1973)] the actual supply of cereals per beneficiary stood at 42.7 per cent in 1989 in Statutory Rationing areas while for modified rationing areas it was only 14.3 per cent. (Table V.8)
5.5 : Targeting of PDS : A District-wise Analysis : In order to understand the distribution of cereals within West Bengal, we have attempted a district-wise study of the quantities supplied through public distribution system in 1986. The focus of this study is on the benefits going to the average consumer living in a particular locality. The selection of the year 1986 may be supported on the ground that it was a normal year while distribution through Public Distribution System ranged between 1.56 to 2.91 million tons, in 1986 2.04 million tons of cereals were issued.
5.6 Methodology : The consumers benefit has been defined by the extent to which a consumer is implicitly subsidised from not having to buy from the market. This is denoted by
Si = Qi (CR x RSpi + Cw x WSpi)
where
Si Subsidy going to the ith region/district.
CR Share of Rice in the amount supplied through PDS.
Cw Share of sheet in the amount supplied through PDS.
RSpi Spread of Open Market and Issue Price of Rice in
the ith region.
WSpi Spread of Open Market and Issue Price of Wheat in
the ith region.
5.7. The Issue price is a price determined by the Government which changes several times a year. Therefore the weighted issue price has been taken by using the number of months as weights.
Symbolically
P = Weighted Issue Price
P = ith Issue Price,
i = 1…n is the number of issue prices announced in a year.
Mi = number of months
M = Total number of months in a year i.e. twelve
5.8 Open Market Prices :For rice, the high and low monthly average retail price for districts have been taken as open market price whereas for wheat, the monthly average retail price have been taken. This has been done because the price of rice fluctuates whereas that of wheat remain relatively stable. Monthly average is expected to remove the seasonal fluctuations.(Table V.9).
5.9 Spread :The spread or the unit consumer subsidy is the difference between Open Market retail price and the weighted issue price.
5.10 Population of the districts – 1986 : The Compound rate of growth of population per year during the period 1981 to 1991 was 3 percent. Accordingly, the blowing up factors for the year 1986 was 1.0628. After multiplying the blow-up factor with the population of 1981, we get the estimated population of the respective districts for 1986.
5.11 Estimation of Adult Equivalent :While calculating the adult equivalent i.e. number adults in the state or its districts, it has been assumed that persons below 14 years of age consume half the amount of those above 14 years of age. No distinction in consumption is made between the genders though it may be pointed out that various nutrition committees have assigned the weight 0.8 for female when the male adult is considered as an unit. Thus the Adult Equivalent is
A = 0.50 x Persons below 14 years + Persons above 14 years
We find what in 1981, approximately 40 percent of the popular were below 14 years so
A = 0.50 x 40% of population + 60% of population.
5.12. Findings : It is apparent from the distribution of subsidy per person and subsidy per adult equivalent that although the population of the statutorily rationed areas constituted 16.2 percent of the adults in West Bengal, over 40% of the total consumers subsidy accrued to them (Table V.9).This unequal scenario is also evident from the distribution of subsidy per person and subsidy per adult equivalent. Subsidy per person per year in the statutory Rationing area was Rs. 29.33 (Low) and Rs. 53.66 (High) while in modified rationing areas the per capita subsidy was in the range Rs. 7.63 to Rs. 13.96 per year. Subsidy per adult equivalent in Statutory Rationing areas was in the range of Rs. 31.65 to Rs. 57.90 per year whereas for modified Rationing belts it was Rs. 9.59 – Rs. 17.45 per capital per year (Table V.10).Within the districts too considerable amount of inequity was noticed as in evident from the inequality indices presented below :
| Item | Mean | S.D. | C.V. |
| Quantity distributed | 63.29 | 45.92 | 72.55 |
| Subsidy per person | 8.31-16.06 | 7.39-16.03 | 88.95-99.85 |
| Subsidy per adult eqv | 1.13-21.51 | 9.12-19.99 | 81.96-92.95 |
Note : See Table V.11 for details.
Therefore, it is evident that the public distribution system in West Bengal has suffered from poor targeting and hence the benefits have been unequally distributed among districts.
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