The committee, headed by C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, suggested that as an alternative to the existing PDS a switch over to the use of smart cards could be beneficial. This simply meant that the food subsidy could be directly transferred to the beneficiaries instead of the owners of the PDS stores.
This in turn would give the people an opportunity to go to any store of their choice and use their smart cards or food coupons to buy food. With the biometric identification system, people would have the freedom to migrate to any part of the country without the fear of losing their food rations.
Since under this system the poor would be paying the same price for food grains as the others, the shopkeeper, including the PDS store owners, would have no incentive in selling adulterated grains to the poor. This would finally lead to a system where there would be no leakages and distortions of food grains and would create incentives for the PDS stores to be more efficient.
In terms of the fiscal burden, the smart cards would not impose an additional burden and the subsidy may in fact reduce. The committee gave the example of rice, which constituted an important PDS commodity. Rice was proposed to be supplied at Rs 3 per kg, as per the government's earlier promise. Since the average market price was currently around Rs 20 per kg, a subsidy of Rs 17 would be needed to fill in the price-gap.
However, the economic cost of procurement worked out to be Rs 20.43 per kg, which indirectly implied a subsidy of Rs17.43 per kg.
In other words, the subsidy under the current system and the subsidy given under the smart card system would be virtually the same. However, given that under the smart card system there would be virtually no leakage, while under the present system there existed a large leakage which the subsidy under the smart card was likely to reduce.
Moreover, as the smart card based system would permit huge quantities of subsidised grain to go through the normal market channels, it would also reduce the burden on the government procurement and the PDS network. Inflation may in time erode the real value of this subsidy which could be tackled by annual (or six monthly) revisions of the subsidy amount.
The introduction of the smart card could be done in two stages. In the first stage, keeping the current method of food grain allocation to the FPS (fair price shops) unchanged, smart cards could be introduced for the beneficiaries only. Depending on the success of the first stage, the scheme could be extended to the non-PDS retail shops in the second stage.
These biometric cards may simply contain details of the beneficiary and his entitlement. Only when the beneficiary would swipe the card at the FPS, it would be deemed that the targeted grain had been delivered. Allocations to the FPS would depend on the electronic proof of delivery of the grain to the targeted beneficiary.
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Quelle/Source: fnbnews, 18.01.2011
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