The Lede
Tamil Nadu Budget 2018: How Will The State Cope With PDS Burden?
Tamil Nadu

Tamil Nadu Budget 2018: How Will The State Cope With PDS Burden?

Divya Karthikeyan

With the southern state moving into the ambit of the National Food Security Act, its expenditure on rations will increase by Rs 1193.3 crore

For India, Tamil Nadu’s handling of social sector schemes is almost a model to live by. And the PDS is one of its most successful schemes to date. In 1967 when DMK (Dravida Munnetra Kazhagam) founder CN Annadurai promised almost 5 kilograms of rice free of charge through PDS (Public Distribution System), people were jubilant.

To stop a popular scheme is political suicide and the AIADMK (All Indian Anna Dravida Munnetra Kazhagam) improved on the scheme when they came to power in 1977.

From then onward, wheat, pulses, rava (cracked wheat or sooji) and palmolein were distributed apart from rice, kerosene and sugar. Tamil Nadu is also the only state where PDS outlets or fair price shops are handled by the government and not handed over to private agencies.

Tamil Nadu was unique in its PDS policy since the late 1960s. Over time a method has evolved to categorise beneficiaries according to economic status. But the PDS has remained universal, meaning that every resident of Tamil Nadu is entitled to at least some products at subsidised rates from the ration shops.

There are a number of coloured paper ration cards, each catering to one economic sub-section of the population.

  1. The Green Rice Card: Beneficiary is entitled to all commodities, including 4 kg free rice per adult in the family and 2 kg free rice per child. This free rice is made available from a minimum of 12 kg per ration card to a maximum of 20 kg.

Half a kilo of sugar at a subsidised rate of Rs 13.50 per kg is available to each beneficiary in the card, upto a maximum of 2 kg.

Every card holder can avail of 10 kg wheat at the rate of Rs 7.50 per kg at district headquarters. At other areas, 5 kg of wheat will be provided at the same rates.

A minimum of 3 litres to a maximum of 15 litres of kerosene can also be procured from PDS outlets at the rate of Rs 13.60 to Rs 14.20 per litre depending on the location of the outlet.

1 kg of toor dal at Rs 30 a month, 1 kg of urad dal at Rs 30 a month and 1 litre of fortified palmolein oil at Rs 25 a month is also provided per card.

  1. The AAY (Antyodaya Anna Yojana) Card: Beneficiary is entitled to all commodities as mentioned above, the only difference being that they get 35 kg a month of free rice. This card caters to the ‘poorest of the poor’ as well which includes widows, HIV patients and other such marginalised sections of society.
  2. The White Sugar Card: Beneficiary is entitled to all commodities as mentioned above except rice. Instead of rice, the beneficiary is entitled to an additional 3 kg of sugar per card.
  3. Police Cards: These are given to police personnel who are entitled to all commodities at PDS outlets.
  4. The White No Commodities Card: Beneficiary basically gets nothing from PDS. The ration card only serves as address or identity proof.
Type of card Number of cards
Rice card 1,67,21,538
Antoydaya Anna Yojana Cards (AAY Cards) 18,62,615
Sugar Cards 10,76,552
Police Cards 61,061
No Commodity Cards 60,827
Total 1,97,82,593

*Source: Tamil Nadu Civil Supplies Corporation

The NFSA Ball Game

The passage of the National Food Security Act (NFSA) in May 2013 was a test for Tamil Nadu’s universal PDS system. The state did not budge from its position of universal distribution while the Centre was moving towards targeted distribution, as specified under the Act. Tamil Nadu and Kerala were the only two states that refused to adopt the NFSA.

Targeted PDS involves the categorising households into ‘high priority’ and ‘low priority’. Above Poverty Line or APL families, as per the Act, were to be classified as ‘low priority’ households, and those under the Antyodaya Anna Yojana schemes and Below Poverty Line or BPL households were classified as ‘high priority’ households.

High priority households would receive upto 35 kg of subsidised rice and low priority households would receive upto 15 kg of subsidised rice. But under the Tamil Nadu universal PDS system, all households could opt for and receive upto 20 kg of free rice every month.

The Centre was thus far, through the Food Corporation of India, providing subsidised rice, wheat, sugar and other commodities to Tamil Nadu as per its requirement for PDS. The amount and cost per kg of rice alone has been presented in the table below to illustrate the subsidy.

Category Centre’s Allocation Subsidised Rate to State
APL 1.26 lakh metric tonnes Rs 8.30 per kg
BPL 1.05 lakh metric tonnes Rs 5.65 per kg
AAY 0.65 lakh metric tonnes Rs 3 per kg
Additional allocation as required by state govt 0.28 lakh metric tonnes Rs 5.65 per kg

*Source: Tamil Nadu Civil Supplies Department

For 3 years since the Act was ratified by Parliament, Tamil Nadu did not budge. Every state Assembly was required to pass the legislation and begin implementing the provisions of the Act. Tamil Nadu’s rebellion though came at a price.

On 07 October 2016, the state government received a letter from the Centre saying that due to non-implementation of the NFSA, it would no longer subsidise the APL allocation for the state and instead charge the state Rs 22.54 per kg instead of Rs 8.30 per kg. Rs 22.54 was the MSP (Minimum Support Price) for rice at the time.

Further, the Centre said there would be no additional allocations for the state, which meant a loss of 0.28 metric tonnes of rice.

Financially too the state would be forced to take a severe beating. The state government until the NFSA came into being, spent Rs 2393.3 crore on procuring rice at subsidised rates from the Centre as mentioned in the table above.

With the conditions imposed by the Centre in its October 2016 letter, the state would be forced to bear an additional Rs 2730.95 crore over and above its existing subsidy burden, meaning a whopping Rs 5124.25 crore expenditure on rice alone.

This was too heavy a price for the state governments of Tamil Nadu and Kerala to bear. Left with no choice, both state Assemblies passed the necessary legislation in November 2016. Tamil Nadu waited until after the state election of 2016 to pass the law.

“The reason for not coming under the NFSA before 2016 was that it was too much of a risk for the Tamil Nadu government,” says Dr. Jothi Sivagnanam, Head of Department of Economics at the Madras University. The risk was political in nature. The universal PDS scheme was popular and any government withdrawing even partially from it, would face the voters’ wrath.

“The Centre saw it differently from the state,” he continued. “The state saw it (targeted PDS) as resulting in exclusion of a significant population of those who needed it.”

As per the NFSA, the Centre would subsidise only 62.55 percent of the rural population of Tamil Nadu and 37.79 percent of the urban population. In practice, Tamil Nadu subsidises all residents of the state who wish to avail of it.

After passing the NFSA legislation in the Assembly in 2016, its provisions have come into effect from 01 November 2016. But Tamil Nadu announced that it would continue with its universal PDS system and bear the huge additional cost of Rs 1193.30 annually.

Now, Smart Cards

The state of Tamil Nadu is now trying to computerise the PDS process in order to eliminate leakages. In April 2017, Tamil Nadu Chief Minister Edappadi K Palanisamy declared that the state was going digital with smart ration cards instead of paper ration cards. Aadhaar details of the cardholder would be seeded to the smart card. The scheme would replace 1.9 crore paper cards in the state. According to the announcement, from 01 March 2018, paper ration cards would no longer be valid if the beneficiary wanted supplies from PDS. Smart cards have been introduced, with QR codes, that have replaced paper ration cards.

“This is to weed out corruption, pilfering and bogus billing of claims,” says Madhumathi S, Commissioner of The Tamil Nadu Civil Supplies and Consumer Protection Corporation. “Some smart cards have not been seeded with Aadhaar cards because the consumer may not possess one. These smart cards will be called ‘ghost cards’ until their Aadhaar is seeded,” she said, speaking to The Lede.

But there are teething pains as the smart card system becomes operational. Complaints are piling up of consumers being denied rations due to confusion over categorisation and the Aadhar linkage.

One example is 45-year-old Malliga from T. Nagar in Chennai, who, for the past 5 years, has bought her rations using paper ration card despite it being in her late husband’s name. Malliga also has an Aadhaar card and had expected to get a smart card linked to it. But the road to this has not been easy. “I was misled (by the ration shop officials) that I could still get rations in my husband’s name and that the next time I could get a fresh paper card in my name, but that day has never come. Now the ration shop in-charge says he cannot give me a smart card because the original ration card is in my late husband’s name. They call it a ghost card now,” she says. “It is like I don’t even exist,” she says.

Another example is that of 32-year-old Thangam who has been facing an ordeal in the process of a mere application for a smart card. She has sent in forms for her smart card 5 times over the past 7 months, and is told that the forms are missing in the process. “Because of not having smart cards, we have been told that we are low priority household and will get only 5 kg, while the others get almost 25 kg of rice,” she says. Anyone with an air conditioner and with income over Rs 1 lakh per annum is considered a low priority consumer, as per the NFSA. But Thangam has no air conditioner, lives on pension of less than Rs 1 lakh per annum and still does not get her due.

The Road Ahead

Dr KR Shanmugam, a professor at the Madras School of Economics is all praise for smart cards, but believes that the idea of the middle class is ever changing. Anyone with over Rs 1 lakh yearly income and an air conditioner being seen as a low priority family by the government, he feels, is incorrect categorisation. “Smart cards and computerisation, in my opinion, is a good idea. The issue however is the idea of the middle class. There are some who still can’t afford the market price despite being APL and not part of the AAY scheme,” he says. To focus only on AAY scheme holders and not APL or BPL can be dangerously close to the idea of targeted PDS, he feels.

Reetika Khera, professor of Economics at IIT Delhi too agrees that the categorisation of the BPL is faulty. “Households like this have to be entitled to something. As long as it is a universal system, and not uniform, it is okay. But the (Tamil Nadu) government can’t provide this delineation and behave like it is universal PDS,” she says.

The State Food Minister refused to comment to The Lede.