Friday, June 21, 2013

Difference between SNAP and Indian Public Distribution System for Food

In the US food assistance program, the recipients receive coupons which they can redeem for food at qualified retailers.  The retailers get paid by the government for the coupons they collect.

In the Indian Public Distribution System for food, the government gets involved at every step from procuring foodgrains from the farmer, to transport, storage and distribution to retail stores.   There is a massive market intervention in the procurement process, and there is leakage at every step of the way whether it is wastage and rats at storage depots or corrupt officials (e.g., just read this from the tiny state of Arunchal Pradesh).

It has been repeatedly calculated that it would be much more efficient to make direct payments from a central government authority to the end-recipients and cut out all the middlemen.  The recipients would use the cash they receive to purchase food or whatever else they want. 

As Nitin Pai argues here in 2010,  (UID = Unique Identification, a system of universal ID)
The ultimate social welfare programme is a system of targeted cash-transfers to the genuinely needy. The UID project, if implemented properly can make such a programme technically feasible. It requires a high degree of incredulity to believe, however, that technical feasibility is the only, or even the main problem, holding this proposal back.
If the state retreats from the business of buying, storing, transporting and retailing groceries, it will certainly hurt socialism. It won’t necessarily hurt development.