PUBLIC DISTRIBUTION SYSTEM IN ANDHRA PRADESH

CHAPTER V PUBLIC DISTRIBUTION SYSTEM IN ANDHRA PRADESH 5.1 Introduction Three important forms of social security are food, employment and health. Among these the most important social security need of the poor is food. But, food security cannot be ensured without access to adequate purchasing power. Since the means of obtaining purchases is through employment. Further to improve food security for the poor, the government relies on a set of policy instruments such as food rationing, price subsidies, and employment programmes. Public distribution is given an important role in protecting the vulnerable sections against price rise and for stabilization of prices. Andhra Pradesh is in several ways a state that provides interesting case study in its implementation of the PDS. Telugu Desam party introduced two-rupees-a-kilo rice scheme as an election promise after it wrested power from Congress in 1982-83. The main purpose of this scheme was to improve the consumption levels of the weaker sections of the SOCiety and thereby raise their nutritional standards. Several studies have analysed different aspects of the subsidized rice scheme under PDS in Andhra Pradesh; Venugopal (1992) examined the impact of the welfare scheme on the reduction of hunger whereas, Sastry et al (1990) attempted to estimate leakages in the PDS. The impact of alternative intervention policies have been analyzed by Radhakrishna and Indrakant (1988) and by Indrakant (1996). All These studies provide an interesting background material to understand the operations of PDS in the present context. Analysis of the operations of PDS provides us to understand the distributional aspect of food security in the changing circumstances. During 1990's, two major interventions have taken place in the distribution system namely the targeting of PDS and liberalisation of the economy, which in turn were expected to impact the consumption at household level. Keeping this in view we will be looking into the two broad issues: (i) How effective is the working of PDS in Andhra Pradesh in the changing context? and (ii) will the targeting of PDS improve physical and economic access to food to the poor? This is attempted in the background of analysis of the changing food security over the last five decades. 137

5.2 Trends in Procurement and Distributiol1 Government of Andhra Pradesh introduced a compulsory levy on producers for the first time in 1965/66 and entrusted the Food Corporation of India (FCI) with the responsibility of undertaking procurement directly from producers. The scheme was abandoned after a trial of barely four months. The main reason for the failure of this scheme was lack of advance preparation for its implementation. Followed by this in 1968/69, the Government of Andhra Pradesh imposed a compulsory levy on all modern rice mills operating in the private and cooperative sectors. All the 'Huller mills' and some of the non-trading 'Huller-cum-Sheller' mills were excluded from the purview of the compulsory levy. The exact proportion of the levy varied from time to time, depending on the targets set for public procurement and crop situation. The procurement policy modified in 1985/86 millers are required to give one unit to the FCI as a levy and half unit to the Andhra Pradesh Civil Supplies Corporation Ltd (APSCSC), at a negotiated price. Only then they were permitted to sell half a unit of levy-free rice within the state and one unit anywhere in the country (Radhakrishna and Indrakant, 1988). About 29.3 lakh tonnes of rice was procured from five districts of coastal Andhra Pradesh such as: East Godavari (10.4), West Godavari (7.7), Krishna (5.5), Guntur (3.2), and Nellore (2.4). Another 17.6 lakh tonnes of rice from five districts of Telangana region viz., Nalgonda (7.7), Karimnagar (5.0), Nizamabad (2.5), Warangal (2.4), and Khammam (2.1) during 1999-2000. Trends in procurement and procurement-output ratios are presented in Table 5.1. It can be seen that the procurement has risen from 0.70 million tones In 1980-81 by more than four fold reaching to amount of 3.17 million tones in 1999-2000. Procurement as a percent of production after 1993-94 increased but distribution as a percent of procurement declined during this period. The extent of procurement in the early eighties was substantially higher than that of all India. The quantity procured was doubled in 1982-83 on account of the introduction of a new welfare scheme. The volume of rice procurement depended on level of rice output and the level of procurement price in relation to the open market price, which will indirec.tly benefit mostly large farmers and millers.the two-rupee kilo rice scheme might have influenced the procurement in 1982-86. 138

Table-5.1~ Trends in procurement and distribution of rice in Andhra Pradesh I Year--- r~i-no~~em-;!ntll ~~o~~~o-nr:~~~:~~~eni-l-~~:~uti"n -, ~!~!~~~tion I production I procurement Per capita quantity through PDS (in Kgs) 1980-81 0.70 +-7m--r---9~98-1- - - - 1981-82 1.10 -+\ 7.87 t 13.97 -.J--~~~-----=--=--=-:-=--=--=----=-==:====-===: =t 1982-83 2.00 7.67 I 26.07 1.37 68.50 24.98 1983-84 2.42 ~ 8.79 _ 27.53 1.83 75.62 32.59 1984-85 2.74 6.91 i 39.65 1.89 68.98 32.91 1885-86 2.48 7.61 \ 32.58 2.15 86.69 36.61 1986-87 2.03 6.59 34.90 2.21 96.08 36.82 1987-88 2.41 7.08 34.04 1.87 77.59 30.49 1988-89 2.78 10.62 26.18 2.00 71.94 31.94 1989-90 3.59 9.96 36.04 2.12 59.05 33.17 1990-91 3.32 9.65 34.04 2.42 72.89 37.11 1991-92 2.26-9.25 24.43 1.78 78.76 26.76 1992-93 3.30 8.79 37.54 1.99 60.30 29.34 1993-94 3.30 9.56 34.51 2.25 68.18 32.50 1994-95 3.35 9.27 37.75 2.26 64.57 32.00 1995-96 3.67 9.01 40.70 2.52 68.66 31.18 1996-97 4.50 10.68 42.13 2.36 52.44 28.74 1997-98 3.85 8.51 45.24 2.28 59.22 28.24 1998-99 5.07 10.66 47.56 2.28 49.97 26.92 1999-00 3.17 10.60 29.90 2.28 71.92 26.20 00-2001 6.90 12.40 55.60 1.70 24.63NA Source: Civil Supplies Department, Government. of Andhra Pradesh. Figure- 5.1 Trends in procurement and distribution of rice in Andhra Pradesh 14 12 KJ c.b E!O 4 I 139

It can be seen from the table that procurement has a close relationship with production but not very closely associated with distribution. Rank correlations between procurement and production works out to be 0.782 whereas that between procurement and distribution is -0.22 this clearly gives an idea about the piling up of the stocks in the godowns. The quantity distributed through the PDS generally varied in the range of 2 to 2.5 million tonnes. The quantity procured is increasing with the increase in production but the quantity distributed is declining (2000-2001) which may be due to increase in prices and the quality of the rice distributed through PDS. The annual per capita quantity distributed through the PDS varies in the range of 25 Kgs to 37 Kgs. During the last five years the quantity distributed through PDS has not changed much, while the population of the state has been steadily increasing and therefore the per capita quantity distributed has been declining. 5.3 Performance of the distribution system Andhra Pradesh is one of the states pursuing a vigorous public distribution policy. Since early 1980s onwards PDS coverage has been almost universal, although the scale of rations, commodities supplied and ration prices have varied across different sections of the population. In Andhra Pradesh, Rs.2 per kilo of rice scheme was started in 1982-83. Ever since the TDP was propelled into power largely on the basis of its electoral promise of cheap rice and rice subsidies, PDS policy has become an important issue in the electoral battles. The genesis of the scheme begins from 1982 Andhra Pradesh witnessed the prevalence of acute drought conditions during that year. The state was to go to the polls in the first week of January 1983. Ever since it came into existence, the Telugu Desman Party (TDP), which was trying to wrest power from the ruling Congress (I), had been repeatedly promising that it would make rice available to the people at Rs.2 per Kg if it comes to power. In November 1982, the Congress Government announced that in order to ensure that the price of rice did not rise in the open market as a consequence of drought conditions, it would subsidise rice distributed through the PDS from December 1982 and make the three varieties of rice available at lower price (Common variety rice Rs.1.90 per/kg, Fine variety rice Rs.2.10 per/kg, and Super fine variety rice Rs.2.15 per/kg). The election manifesto of the Telugu Desam Party stressed the need for streamlining the PDS so that essential commodities could reach the villages at reasonable prices, making the sale of rice at 140

RS.2 per Kg., the central objective of this larger policy. By November 1982, rice (common variety) was sold at Rs.2.09, within an effort to translate its electoral promise, the Government reduced the price of rice (common variety) to Rs.l. 90 per Kg. The new Government's objective was to make rice available at Rs.2 per Kg to all the poor, both in urban and rural areas. It therefore, became necessary to identify poor households using a verifiable economic criterion that could be uniformly applied all over the State. The Government, as a working rule, regarded the households having an annual income of less than Rs.6000 per annum as poor and issued green cards to them. Other households were issued yellow cards. A household with a green card was entitled to 5 Kgs of rice per person per month subject to a ceiling of 25 Kgs, at Rs.2 per Kg. Besides rice, they were entitled to sugar and kerosene. A household with a yellow card, in the initial years, was permitted to purchase rice from fair price shops but at the higher price of Rs.3.50 per Kg. Later on, this facility was withdrawn. In rural areas, households having less than 1.5 acres of wetland under assured water resources or 2.5 acres of wetland under other irrigation sources or 3.00 acres of dry land under commercial crops and 5.00 acres of land under other crops were issued green cards. The Congress Government in 1991 modified the subsidised rice scheme. The ceiling on rice for white cardholder was initially reduced to 16 Kgs but it was again increased to 20 Kgs. On account of the increase in issue price of rice by the FeI, the state Government increased the ration price of rice to Rs.3.50 per Kg. Further, the green cards were replaced with white cards and yellow cards by pink cards. In 1994, the Government restored the ceiling on rice in respect of white cardholders to 25 Kgs. Further, the price was raised to Rs.3.50 per Kg and the ceiling was reduced to 20 Kgs per card. There are 40,678 fair price shops functioning in the State. Out of these 7,665 are in urban areas and 33,013 in rural areas. On an average, each shop is having 411 cards. Over 33,000 fair price shops are catering to 27,000 villages in the State. At the first stage the State Civil Supplies Corporation lifts the allotment from FeI godowns and moves the material to the Mandai-level stock points, at the second stage, it transports the material to the Villages and delivers them right at the doorsteps of fair price shops. The fair price shop dealers are given a commission of Rs.7.38 per bag of rice, Rs.4.67 per bag of sugar and 12 paise per litre of Kerosene. 141

5.4 Distributions of White cards White cards are issued to the families (households) falling below the poverty line, to provide the subsidised rice. At present there are 113.60 lakh white cardholders and 53.97 lakh pink cardholders (issued to the above poverty line families). Government of Andhra Pradesh has also introduced coupon system for all. eligible white cardholders and coupons have been issued to 1.05 lakh households. There are 39,648 fair price shops in the state, out of them 6,974 are in urban areas and 32,674 are in rural areas. Table-S.2: Number of ration cards in the state Year Number of Quantity of rice Per card white cards distributed (in distribution.(in lakhs) lakh tons.} (Kgs/Month) 1983-84 96.47 18.14 15.66 1984-85 101.03 17.76 14.64 ~_-86 104.33 20.34 16.24 1986-87 95.14 22.36 19.58 1987-88 96.25 21.98 19.00 1988-89 99.22-17.86 15.00 1989-90 99.22 21.40 17.90 1990-91 99.22 21.17 17.78 1991-92 107.16 22.42 17.43 1992-93 106.46 18.84 14.74 1993-94 100.71 22.50 18.61 1994-95 99.26 22.55 18.93 1995-96 99.26 25.20 21.15 1996-97 112.66 23.60 17.45 1997-98 112.66 21.60 15.97 1998-99 113.25 23.00 16.92 1999-2000 113.60 19.92 14.61 2000-2001 113.60 17.39 12.75 Source: Commissioner of Civil Supplies, Government of Andhra Pradesh, Hyderabad. Number of white cards distributed sharply increased during 1991-92 (Table-5.2) a sudden jump of about 8 lakh additional cards was noted. The subsidised rice scheme is covering nearly 70 percent of the population while only about 30 percent of the population is estimated to be poor. Thus, many non-poor households also enjoy the benefit of the scheme. Serious problems arose when the results of the enumeration were publicized in April 1983. Against the maximum projection of about 8 million households that were expected to be the beneficiaries of the rice scheme, the number that actually emerged was 10.85 million, which is almost the number of 142

the total households in the state (11.35 million in 1983). As a policy a drive has been launched to eliminate the ineligible households and in subsequent months, nearly 1.2 rnillion green cards meant for the identified poor households for the issue of subsidized rice were either cancelled or converted into yellow cards, meant for the non-poor households (Venugopal, 1992). To check the diversion of the PDS supplies to the open market by the Fair price dealer and to improve the targeting of the PDS the state government introduced 'coupon system' in September 2000. Coupon system was introduced to ensure that the card holders receive the commodities meant for them by preventing the diversion of those items to the open market, to weed out bogus cards in circulation and to make the fair price shop (FPS) dealer accountable for the quantities received by him. Under this scheme, the coupons are distributed directly to the white cardholders by civil Supplies Authorities. The FPS dealer is supposed to collect the coupons while issuing ration to the cardholders and handover the same to the Civil Supplies Authorities. This system enables the Civil Supplies Authorities to know the actual quantities purchased by the cardholders. On this basis, the quota for ensuing months is released to the dealer. The introduction of coupon system has resulted in reduction of the number of white cards in circulation in the State from 113 lakhs to 105 lakhs. With the decline in the number of cards, the burden of subsidy to the state Government also declined. This, however, raises many questions regarding the mechanism adopted for the distribution of coupons, difficulties, if any, faced by cardholders in collecting coupons and in their usage. In this system households having entitlement of 4 Kgsof rice were given a book containing 16 coupons of 6 Kgs denomination. Households having 8 Kgs per month were given a book containing 16 coupons of 8 Kgs denomination. A book containing 16 coupons of 12 Kgs denomination was given to a household having entitlement of 12 Kgs per month. Similarly a household having entitlement of 20 Kgs per month was a given a book containing 32 coupons of 10 Kgs denomination. Maroon colour coupon book was given to single member household, pink for 2 member household, green for 3 member household, blue for 4 member household and white for 5 member household. A micro leve! study by Indrakant (2003) shows that 20,000 tonnes of rice is saved due to this system every month and a subsidy of Rs.:1 crores on rice was saved but its impact on overall food security was not clearly analysed. 143

Figure- 5.2 120 100 Vl 80 ~ 'Vi 60 -.s:: ~ ~ 40 20 0 Number of white cards and per card distribution of rice in Andhra Pradesh.-...-.---a--...--a--- iii -...-----------.....-t t--... + ~-.-----,-- -+ r=+- per card Distribution -II-No.of.whitecards I Among the six selected districts the percentage of reduction in cards due to the introduction of coupon system was relatively high in 3 districts namely Kurnool (9.0 percent), Khammam (8.3 percent) and East Godavari (7.5 percent) while it was relatively low in remaining 3 districts such as Mahaboobnagar (1.6 percent), Chittoor (4.0 percent) and Vizianagaram (4.6 percent). But it is a well-known fact that a large number of poor households are denied of white cards (Indrakant, 2003). 5.5 Subsidy on rice scheme: Government of Andhra Pradesh introduced the subsidised rice scheme in early 80's to improve the consumption levels of weaker sections and enhance food security. The subsidised rice scheme involves the provision of subsidy by both the state and central Governments. The central subsidy per tonne increased from Rs.534 in 1982-83 to Rs.4,748 crores in 1998-99 (Table- 5.3). This increase was partly due to regular enhancement in procurement price as well as due to the rise in administrative cost of FCI. Therefore, one cannot clearly take the expenditure on food subsidy as expenditure / efforts to improve food security. 144

Table-5.3: Central and state subsidy on rice scheme in Andhra Pradesh ---r---------t------r- lrs/tonq~ Year Central I State Total Food SUbsid~ subsidy subsidy I subsidy per white card (per month) =t--- I ------- I ----r 1980-81 340 NA 340 NA ---1-1981-82 429 ------ NA 429 NA 1982-83 534 I 29 563 NA 1983-84 667 524 1191 18.66 1984-85 749 725 1474 21.51 1885-86 773 613 1386 22.51 1986-87 804 818 1622 31.76 1987-88 809 994 1803 34.31 1988-89 817 809 1626 24.39 1989-90 1242 1390 2632 47.30 1990-91 1280 1512 2792 49.64 1991-92 805 1973 2778 48.43 1992-93 869 1206 2075 30.60 1993-94 967 1504 2471 46.00 1994-95 1379 2882-4261 80.66 1995-96 1495 4133 5628 119.07 1996-97 2371 3106 5477 95.61 1997-98 3296 2608 5904 94.38 1998-99 4748 2512 7260 122.87 1999-00 3344 4803 8147 119.05 2000-01 4390 4026 8416 107.36 2001-02 5771 4138 9909 - Source: Economic survey, Ministry of finance, Government. of India Figure- 5.3 Subsidy on rice in Andhra Pradesh 12000 --- -----------------------------------~ 10000 - OJ 8000 c 6000 ~ 4000 2000 0- i E.-c;;;tral-~~bsidY - State subsidy -.-Total subsidy 1 ~~ -------_.. ------------------- Food subsidy continued to be at almost the same level (1983-84) till 1988-89 (Figure-5.3). After that it increased slightly, with slightly increased contribution 145

coming from the state g~)vernment: it declined during 1992-93 this is due to decline in state subsidy during the same period, but after 1993-94 subsidies from the Central as well the state budget increased substantially. The increase was quite Significant from the central resources than the state. But that did not get translated in to food security as per capita distribution of foodgrains through PDS changed from 15.66 kgs/month per card during 1983-84 to 12.75 kgs/month per card during 2000-01. Per card subsidy is calculated assuming only white cardholders are eligible for food subsidy. Per card subsidy increased from Rs.18.66 per/month during 1983-84 to Rs.80.66 per/month during 1994-95. The number of white cardholders increased over years and one can call this as a positive gain. It indicates that the spread of the safety net has increased but it has not probably provided sufficient foodgrains to all. The mounting of buffer stock is responsible for the increase in the storage cost and subsequently the increased subsidy. During the same period (1982-83 to 1998-99), the state subsidy per tonne increased from Rs.29 to Rs.2512. It may be noted that in 1983-84, the state subsidy per tone jumped by about Rs.500 i.e. from a low level of Rs.29 to Rs.523. This jump was on account of introduction of the subsidized rice scheme. In spite of the hike in central issue price, the Government. of Andhra Pradesh kept the retail issue price at Rs.2 per Kg. In 1991, it was raised to Rs.3.50 per Kg, but in January 1995 it was again reduced to Rs.2 per Kg. As a r.esult, in 1995-96 subsidy per tonne registered a peak level of Rs.4133. It declined during the later years as retail issue price was raised to Rs.3.50 per Kg in August 1996 now it is raised to Rs5.25 per kg. Olsen (1989) has examined the cost involved in the subsidised rice scheme. She points out that in 1987-88, the subsidy on rice scheme was more than the entire state expenditure on public health. From 1996 on wards state's subsidy began reducing when compared with central subsidy on rice. This could be because of the Targeted Public Distribution System under which a quantity of 10 kgs of rice per month per family living below the poverty line was released by the Central Government at half of the Central issue price. Consequently, the state government is able to obtain 30 percent of the requirement of rice at a reduced rate. But the question is whether this subsidy is reaching the poor or not? In 1993-94, the cost of providing one rupee of subsidy was Rs1.71 for entire population. Some portion of PDS supplies is leaked into the market, larger are these diversions, and greater will be the costs of using food subsidies to transfer income to target groups. When we compare the average per capita PDS off take to the average per capita consumption of PDS rice (from NSSO consumption survey) in order to 146

quantify the extent of leakages it shows nearly 1.S percent of rice supplies in Andhra Pradesh (1999) do not reach POS r.onsumers. This must be an important reason explaining why income transfers ure costly.the other reason why the costeffectiveness ratio is greater than one, might be that the government is inefficient as against the private trade in delivering foodgrains through the POS. Therefore, an important question crops up here about the effectiveness of these subsidies reaching the poor or the targetted population. 5.6 Targeting Errors Errors of targeting arise when attempts are made to distribute the benefits of a welfare scheme to a specific target group. Targeting errors will arise in the system. due to factors such as imperfect information and measurement. There can be two kinds of targeting errors. Errors of wrong inclusion refer to the inclusion of noneligible persons or households in a programme, which may be termed as 'Fi' mistakes. Errors of wrong exclusion refer to the exclusion of genuinely poor or deserving households from a programme. These could be called as 'F2' mistakes (Cornia and Stewart, 1993). Targeting errors are computed here by using data from various rounds of NSSO. A higher proportion of the upper deciles in rural Andhra Pradesh use the PDS.The magnitude of Fi error in urban Andhra Pradesh (4.29) and that of rural (22.35) indicates that an average per capita consumption of POS grain by the upper deciles is significantly higher in rural Andhra Pradesh during 1993. The magnitude of F2 error in urban Andhra Pradesh (36.4) and that of rural (20.42) indicates utilization of the POS, both in terms of the fraction buying POS grain as well in terms of the quantities bought, amongst the bottom deciles is significantly higher in the rural sector compared to the urban areas in Andhra Pradesh. In both the sectors inclusion and exclusion errors increased during 1999. Exclusion errors are more in urban areas, which must have impacted the food security of the poor in the region. The crucial observation out of table-s.4 is the increase in F2 errors within a span of six years and in the pha~e of liberalisation. F2 error increased from 20.42 (1993) to 24.2 (1999-00), in rural areas indicating increased exclusion of genuinely poor and deserving households from the safety nets. 147

Table-S.4: Targeting Errors in Andhra Pradesh,--,----------------------T--- t~i~~3~~i~~~~9=-iildo-_i =~r;~ooo Irl F, I 22.35 I,57.0 -_ 4.29 14.0 I F2 20:42 _ 24.2 36.4 50.3 Source: Computed from NSSO 50 I and 5S u1 rounds. A recent study covering five villages (three villages from Telangana and two villages from coastal Andhra) provides additional micro-level information on the extent of mistargeting in PDS (Indrakanth, 1996). Out of the five villages taken for study by Indrakanth (1996), two were backward villages, viz., Nettampadu and Singtham from Telangana region besides one moderately developed village from Karimnagar district of Telangana and remaining two were developed villages. Table-5.S: Targeting Errors at micro level r I Village Fl Error F2 Error (in 0/0) (in 0/0) Nettampadu 39.36 30.48 Singtham 63.08 59.85 Jaggasagar 59.32 20.66 --t--- Narasa~alem 71.94 3.41 Machavaram 80.24 0.00 Source: Indrakanth (1996) Note: (1) Type F1 means percentage of non-poor house among the white cardholders. (2) Type F2 means percentage of poor households not having white card. (3) Households having monthly per capita expenditure less than RS.182 are considered as poor households. In the developed villages the poor households are covered by the su_bsidised rice scheme. However, a large percentage (70-80 percent) of beneficiaries of the scheme belong to the non-poor category. In the backward villages, both types of errors in targeting are large. In Nettampadu, nearly 40 percent of the beneficiary households are non-poor. At the same time, about 30 percent of poor households have been excluded from the scheme. The errors in targeting appear to be higher in Singtham. This plece of evidence provides sufficient room to believe that the food security did not deteriorated exclusively on the account of non-availability of food but more so due to distributional bottlenecks and administrative lapses resulting in to the poor remaining out of the safety nets. The targeting errors are clear indicator of this fact. 148

5.7 Regional disparities in access to PDS In Andhra Pradesh, white cardholders are entitled to highly subsidised rice. The distribution of white cards across the region indicates that better off regions received a good deal compared to the backward regions. Over 47 percent of white cards are distributed in coastal Andhra, which accounts for less than 39 percent of poor people in the state. The share of coastal Andhra in white cards is higher than their share in the poor population. On the other hand, Rayalaseema region has less than 18 percent of white cards in spite of the fact that 22 percent of the poor of the state reside in Rayalaseema. Similarly, Telangana accounts for nearly 40 percent of poor households of the state but has only 3S percent of white cards compared to.the backward districts. Across the regions it is clear that the density of poverty has one to one correspondence with the issue of white cards and therefore the operations of safety net as guard against food insecurity seem to be administratively inadequate. In a similar picture the better-off districts have managed to get a larger share in white cards. For instance, West Godavari with less than 2 percent of the poor has more than 6 percent of white cards. Similarly, in East Godavari district more than 7 percent of white cards are issued while it accounts for less than 3 percent of the poor population. In contrast, the backward districts could not get their due share. Mahaboobnagar and Ananthapur each accounts for 9 percent of the poor population in the state, while their share in white cards is only about 4 percent. The share of each district in white cards more or less matches with its share in population and not with its share in poor population (Sudhakar Reddy, 1991). This pattern of distribution of white cards is unlikely to reduce the existing regional imbalances as well as unlikely to impact poverty. The inefficiency is clearly at the doorstep of administration (Figure-SA). While fixing the ceiling on land for the distribution of white cards in the state, the variation in land productivity across the districts and regions has not been given due importance, in the unirrigated area, the economic conditions of some of the households having more than 5 acres of land, is not sound as the productivity levels are low compared to irrigated lands. Because of this criterion some of the poor households are excluded from the scheme. This would indicate that a large number of households above the poverty line are enjoying benefits under the scheme. 149

Figure-S.4 Distribution of white cards and rural poverty among districts ': 1 ~ I 6. 1 5 4 3 2 ~ural poverty.white ~ --------- Regional variations in the coverage of the poor in the state are computed by using the 55 th rounds of NSSO data. The coverage of the poor is more in rural areas than in the urban areas, which indicates that there exists no urban bias in distribution of foodgrains in the state (Table-5.6). The per capita off-take is also higher in rural areas as against the urban areas. The highest coverage of poor as well as per capita off-take is higher in Coastal region, which does not have high density of poor. PDS provides more than 36.7 percent of the total rice purchase in rural areas and betv."een 30 and 35.7 percent of rice purchase in urban areas. T a bl e- 56.. R eglon wise access to P D Sb IY poor-1999 to 2000 Sector Percentage Per capita off take Percentage Poor covered of rice (Kg/month) PDS rice to total rice purchase Rural Coastal Andhra 81.0 2.56 36.7 Telangana 80.1 I 2.41 37.0 Rayalaseema 80.0 I. 2.51 40.2 Urban Coastal Andhra 60.0 2.1 30.3 Telangana 57.8 1.8 32.1 Rayalaseema 61.9 1.7 35.7 t:oul Source. Computed from NSSO;,5 round 150

.. Table-S 7: Access to PDS b1-caste gro~s in Andhra Pradesh I Sector-------~rcentage poor-[ Per capita off take Percentage PDS covered of rice (K!I/month) Rice to total ~:::U~ ~ste~~94 t~e~t~:~-~- ;~;:-oo 1993-94 1999-00 34.2 35.2 Scheduled Tnbe 85.6 79.3 2.66 2.41 40.5 57.6 Others 76.8 73.1 -- 2.65 2.21 37.0 36.0 Urban Scheduled Caste 67.0 55.1 2.31 1.8 24.1 28.0 -- Scheduled Tribe 54.8 48.0 1.96 1.56 20.3 31.9 Others 59.0 69.0 --..1:14 1.95 23.5 33.3 1tt Source. Computed from NSSO, 50 and 55 m round As could be seen in Table-5.7, coverage of Scheduled Caste households under PDS has increased in 1.999 as compared to 1993-94. However, in respect of Scheduled Tribe households the coverage shows a decline in the corresponding period. 5.8 Utilisation of PDS National Sample Survey Organization (NSSO) in its 42 nd round and 55 th round i.e., 1986-87, and 1999-2000 collected information on utilisation of PDS. The result of the 42 nd round reveals that in case of rice and sugar, nearly 60 percent of the rural households in Andhra Pradesh depend partially or wholly on PDS. In urban areas, half of the households purchase rice and kerosene from fair price shops. If the total population were considered, then the monthly per capita quantity of rice distributed through PDS would be only 2.5 Kgs. This reduction is mainly because only white cardholders are entitled for rice. Table-S.S: Dependence on PDS -1999-2000 Income grouj! Rural Urban Poor 27.5 21.5 Non poor 19.8 14 All classes 21.45 14.5 Source: Computed from NSSO 1999-2000. Table-5.8 reveals that about quarter of the households in rural area could not buy rice either because they had no entitlement or did not possess ration card. According to 55 th round in Andhra Pradesh, PDS is accessible only to 62..5 p~rcent of rural and 28 percent of urban households for rice. Of total rice and wheat purchases 21 percent of rural and 14 percent of urban households depend on PDS. 151

5.9 Extent of food security via POS The extent of food security provided by the PDS in Andhra Pradesh can be measured by (i) the percentage of PDS rice purchases in total rice purchases, and (ii) the percentage of PDS rice purchases in total cereal consumption. The analysis reveals that in rural Andhra Pradesh, nearly 32 percent of rice purchases are made from fair price shop and it forms over 18.19 percent of total cereals consumption. The percent of the PDS rice purchase has declined to 21.5 percent in rural and 12.60 percent in urban Andhra Pradesh over the ten years (Table-5.9). Table-s.9: Extent of food security provided by PDS in Andhra Pradesh Region Percentage PDS rice Percentage PDS rice purchases in total rice purchases in total purchases cereal consumption - 1988 1993-1994 1988 1993-1994 Rural 32.54 21.5 18.19 19.3 Urban 21.47 12.60 17.53 12.76 Source: NSSO (1989), NSSO (1994). Similarly, in urban areas, PDS purchases account for nearly 21.5 percent in total purchases, which forms 17.53 percent in total cereal consumption. Hence the extent of food security provided by PDS appears to be better in rural areas, though many of the beneficiaries are non-poor. The table reveals that urban poor are prone to be more food insecure when compared to rural poor. Thus the extent of food-security provided through PDS covers about one fifth (1/5 th ) of the needs and the poor satisfy their consumption demands largely from the market. That finally depends on their purchasing power. By providing subsidised foodgrains, PDS also indirectly extends income support to the poor households. 5.10 Income gain through PDS Income gain to the consumer is the difference between the value of the quantity of goods purchased in PDS when evaluated at market prices and the actual value of PDS purchases. Income gain includes gains from all purchases of rice, wheat, sugar and kerosene made in fair price shops_ Implicit prices are used to derive income gain. IG = (Pm - P f ) Qf 152

Where IG is income gain, Pill and Pr are open rnarket pr:ces and price in the PDS of the commodity and Qf is the quantity purchased from fair price shop. Income gain in rural Andhra Pradesh works out to RS.17 per month and it is Rs.1S per month in respect of rural and urban consumers respectively. Table-S.l0: Income gain through PDS in Andhra Pradesh. I Income group l Rural Urban I 1986-87 1999-2000 1986-87 1999-2000 -------------------~----- Poor S.67 17.28 7.8 16.0 Non poor 6.13 17.S3 6.0 14.34 - All classes 6.02 17.1 6.8 15.2 Source: Computed from NSSO for 1999-2000 and estimates are from 1986-87 Radhaknshna et.al (1997) Non-poor group has better income gain in rural sector whereas in urban sector poor has higher income gain. In terms of percentage to monthly per capita expenditure (MPCE) the income gains work out to be 6.6 and 3.3 percent for poor and non-poor, respectively. In urban areas it is 5.3 percent for poor and 1.7 percent for the non-poor. Radhakrishna et.al (1997) have estimated the per capita monthly income gain to the poor due to PDS for 1986-87. For the poor the percentage of income gain to monthly per capita expenditure was 6.8 percent in rural areas and nearly 7.6 percent in urban areas. It shows that over the years the income gain to the poor due to PDS remained same in rural areas and declined in urban areas. Table-S.l0 indicates increased income gain during nineties but these are at current prices and when we convert them in to constant prices the gain in the year 1999-2000 remains almost the same as that in 1986-87. Income gains are not same among the regions, and among the caste groups. -- Similarly, the market prices of rice are not uniform across the regions, and among the caste groups. Ration price also vary between the regions (Ex: Coastal Andhra Rs.3.8 perl Kg and that of in Rayalaseema it is Rs.3.99 perl Kg). From the table-s.l! it is seen that income gain is more in rural Coastal Andhra compared to other regions. Where as in urban areas Rayalaseema region has more income gain compared to other regions. Among the social groups in both rural and ur~~~_ areas others have more income gain compared to S.Cs and S.Ts. This clearly shows that better off regions and non-poor households are more benefited through the distribution system. 153

Table-5.ll: Region wise income gain through PDS -1999-2000 ~~ ~egi~n-_-~=lr=~=~sk1l~~- ± ~~=~_pe~:nt -=-J Coastal Andhra _ I 13.45 6.0 ~Jangana -L B: 5.5 Rayalaseema L 13.0 _ 6.3 Urban Coastal Andhra I 12.2 3.3 Telan~ana loa 2.8 Rayalaseema I : 12.5 3.5 Rural Scheduled Caste i 1404 6.5 Scheduled Tribe 12.3 5.8 Others 15.5 7.1 Urban Scheduled Caste 10.2 2.9 Scheduled Tribe 9.31 2.5 Others 12.27 3.3 Source: Computed from NSSO 1999-2000 5.11 Conclusions A household is said to be food secure when it has the necessary purchasing power to buy foodgrains and access to the required amount of foodgrains. The causes of food insecurity are poverty (transient or chronic) and inadequate foodgrain production. Even in the absence of these two causes, there can exist food insecurity due to market imperfections. PDS is perceived to be the main safety net to protect the poor from potential short-run, price-induced adverse effects in Andhra Pradesh. It influences the consumption of foodgrains and nutritional status through the income effect by increasing the purchasing power of beneficiary households since they can buy larger amount of food at the same cost, and through the substitution effect by reducing the price of food relative to the prices of other goods. Since the early 1980s PDS coverage has been almost universal, although the scale of rations, commodities supplied and ration prices have varied across different sections of the populations. In Andhra Pradesh Rs.2 per kilo of rice scheme was introduced in 1982-83. Even after the introduction of the Rs.2/Kg rice scheme the poor households have not gained much. Procurement of rice is increasing over the years whereas per capita quantity distributed through PDS is declining. The piling up of stocks lead to increase in the food subsidy. Our analysis indicates a large number of poor households do not have ration cards while many non-poor households have white 154

cards. Number of peopie below poverty line is declining during 1990's but on the other hand number of whlte cards distributed have been increasing which is paradoxical. The present PDS favours better-off districts and developed villages and hence is unlikely to reduce the regional imbalances in terms of poverty and food security. A higher proportion of the upper deciles in rural Andhra Pradesh use the PDS. In terms of the fraction buying PDS grain as well in terms of the quantities bought, amongst the bottom deciles is significantly higher in the rural sector compared to the urban sector in Andhra Pradesh. In both the sectors inclusion and exclusion errors increased during 1999. Exclusion errors are more in urban sector, which will affect the food security of the poor. According to 55th round in Andhra Pradesh, PDS is accessible to 62.5 percent of rural and 28 percent of urban households for rice. Income gains are not same among the regions, and between the cast groups. Our analysis clearly shows that food security did not deteriorated exclusively on the account of non-availability of food (physical and economic access to food, which we have discussed in chapter-3) but more so due to distributional bottlenecks and administrative lapses resulting in to the poor remaining out of the safety nets. The targeting errors are clear indicator of this fact. An adequate quantity of grain needs to be distributed to make a sizeable contribution to household food security. Major improvements are needed in the administration of PDS to ensure a non-corrupt and efficient delivery system. Decentralisation can improve the working of the delivery system. 155