India spends almost 1 percent of its GDP on providing food subsidy to the poor. This is India’s largest welfare programme both in terms of the budgetary outlay and the number of people covered under it. Afterall, the recent National Food Security Act (NFSA), 2013 aims to cover 75 percent and 50 percent of rural and urban population respectively. However, a large number of studies have shown that the Government hasn’t been able to develop a system that can effectively deliver the subsidized grains to the intended beneficiaries. In fact, the performance of this programme has been traditionally poor in the states with greater poverty. However, in the recent years, some of poorest states of India -- Chhatisgarh, Odissa, Bihar -- have undertaken a wide range of reforms to improve the functioning of the Public Distribution System (PDS).
As the Government mulls over whether to replace the current PDS with a cash transfer programme, it’s important to study the nature of reforms undertaken in these states and whether they are associated with lower level of leakages in PDS. This study aims to document the supply side reforms in Bihar's PDS and explain why or why not these changes have been effective. Broadly, we wish to answer the following questions:
- What is the level of leakage in PDS after implementation of NFSA?
- Is there any variation in the way the supply side reforms have been implemented and whether the areas with better implementation are associated with lower leakages?
- Is there any effect of an information campaign -- SMS alerts on foodgrain delivery to PDS and voice calls-- on foodgrain leakages?
Bihar is one of the poorest states in the country and a well functioning subsidized food program with minimal leakage can act as a crucial safety net to the poor. Over the past few years, Bihar has undertaken several supply side reforms in the PDS that have the potential to substantially reduce leakages: computerization of supply chain, door step delivery using GPS enabled trucks, SMS alerts to beneficiaries and real time tracking of vehicle movement at Bihar State Food Corporation (BSFC) headquarters. This study will use existing supply tracking data from the BSFC to shed light on the status of NFSA implementation on ground and identify the processes and operational challenges that have the potential to lead to any leakages.
We propose to collect primary data from PDS dealers and beneficiaries to estimate leakages in the delivery of food grains. Most studies use an indirect method of estimating the leakages in the PDS (which is calculated at state level by matching the offtake data from the FCI with the household purchases of PDS grain from the National Sample Survey). This estimation method is imprecise because it relies on approximations (such as a multiplier to aggregate per capita PDS purchase to the state level) and it's possible that a small change in the assumptions may result in substantial differences in the estimates of leakages. Studies based on the Indian Human Development Survey or other household data typically relate to the period before NFSA and often not representative at the state level.
The study also aims to contribute to the policy debate on improving service delivery and explores whether an information campaign (via SMS and voice calls) can help promote greater monitoring of the system so that corruption might be reduced. To test the effectiveness of such measures, we plan to conduct a randomized control trial and hope that we can inform the discussion on governance and public good provision in weak institutional settings.