CHAPTER 4 CHAPTER FOUR: PUBLIC DISTRIBUTION SYSTEM IN ...shodhganga.inflibnet.ac.in/bitstream/10603/14480/12/12_chapter 4.pdf · Chapter IV PDS in Kerala-Comparison of Pre and Post-TPDS

Chapter IV PDS in Kerala-Comparison of Pre and Post-TPDS Phases

CHAPTER 4

CHAPTER FOUR: PUBLIC DISTRIBUTION SYSTEM IN KERALA:

COMPARISON OF PRE AND POST-TPDS PHASES (An Inter-District Analysis)

4.1 Introduction

Kerala has historically been a food-deficit State and the PDS had played an instrumental role in ensuring the physical access of food grains in the State. The issue of availability of food grains is extremely important for the State considering that the chronic food deficit status of the State. Kerala PDS was widely lauded for its universal coverage, rural biased-ness, adequate physical access made possible by the wide network of fair price shops, high and progressive utilization of the System and high entitlements adequate enough to fulfill the consumption requirements of the people. The previous chapter analysed the performance of the PDS in Kerala, in terms of these very parameters. It was reasonably established through the analysis that the need for targeting PDS was not relevant in the State ot-Kerala, where the poor were already reaping the benefits of System much more than their economically well off counterparts. Further, the utilization of the rural households was more than their urban counterparts from the PDS during the universal regime.

The present chapter studies the utilization of PDS across districts. An inter-district analysis would help us in better undersJanding the region-wise differences in the utilization of the PDS over the years. The objective of the study being the contribution of PDSt TPDS in the food security, it becomes important to analyse the contribution of TPDS in meeting the food grain requirements of the population in each district. Further, given that TPDS was introduced to improve the utilization of the subsidized grains by the targeted population, it needs to be analyzed if there is equitous incidence of the PDS across districts. It also needs to be seen whether the food insecure districts in terms of the economic access criterion (larger number of poorer households) and physical access criterion (per capita production and per district food grain deficit) are faring better than the others, after the introduction of TPDS.

The chapt~r also addresses the issues of utilization of PDS across districts (in terms of allotment and offtake), the role of POS in meeting rice requirements

132


of the population across districts, impact of targeting (in terms of per capita offtake and share in the total offtake, Pre-TPDS and Post-TPDS, income gain

due to TPDS) and factors determining ration consumption in Kerala.

4.1 Food grain offtake from PDS in Kerala (1991-92 to 2005-06)

4.1.1 Offtake of rice from the PDS.

Table 4.1 A and 8 shows the total offtake of rice from the ration shops. The

district-wise offtake figures are available from the 1990s onwards. Given that

the drastic decline in the off-take from the PDS has started only from the

beginning of the current decade, an analysis of the inter-district variation in

the offtake for periods post the early 90s would reveal a comparative picture

of the Pre-TPDS and the Post-TPDS regime.

Table 4.1 A Total rice offtake from PDS in Kerala (1992-93 to '96-97) 000' MT

Dist 1992-93 1993-94 1994-95 1995-96 OFF % OFF % ALL OFF % OFF

TVM 172 97 135 88 79 55 85 -KLM 138 98 110 88 46 39 44 PTA 70 98 46 86 22 60 19 ALP 122 56 102 87 70 65 72 KTM 109 96 86 82 48 47 52 10K 72 98 56 78 46 66 66 EKM 171 97 151 83 81 45 86 TSR 170 105 156 85 117 61 103 PKO 115 97 100 85 73 69 61 MLP 189 98 199 88 179 74 178 KKD 165 96 178 92 142 70 145 WYO 41 106 39 92 42 95 48 KNR 147 98 157 89 132 68 143 KZO 63 98 61 89 45 75 47 TOTAL 1743 97 1575 87 112 62 - 1149 cv 38. 45 57 55 OFF - Offtake, % ALL- Offtake as a % of allotment.

Source; Civil Supplies Department, Government of Kerala

%

62 36 53 67

51 87 48 55 58 72 71 96 74 78 64

1996-97 1998-99 OFF % OFF

106 76 117 57 59 89 30 51 38 95 86 110 84 82 84 95 97 70 136 76 155 149 84 165 110 82 125 214 86 219 168 85 178 57 95 57 157 87 155 61 92 60

1518 82 1623 47 46

The total offtake of rice from the PDS was around 17.43 lakh MT in 1992-93

which fell to about 11 lakhs MT in the mid 1990s. This further increased to 16

lakh MT in 1998-99, followed by a consistent decline in the offtake in the

subsequent periods. In 2-005-06, the total offtake from the PDS stood at just 4.89

lakh MT, merely a quarter of it was in the earlier periods.

133


Table 4.1 B Total offtake of rice from PDS in Kerala ('00-01 to '05-06)000' MT

2001-02 2002·03 2003·04 2004·05 2005·06 015T OFF %ALL OFF % OFF % OFF % OFF %

TVM 44 22 30 13 42 18 58 20 55 25 KLLM 32 21 16 9 23 13 47 24 44 28 PTM 15 18 61 69 12 13 19 17 17 20 APZA 35 29 29 20 38 26 47 29 38 28 KTYM 31 35 34 26 39 29 37 25 26 21 IDKI 21 24 13 16 23 28 29 30 21 29 ERNK 29 20 19 9 34 17 39 16 36 18 TRSR 50 26 50 25 60 30 60 26 51 28 PLKD 32 23 37 23 41 25 44 22 32 21 MLPM 52 30 59 32 63 34 65 32 50 30 KZKD 42 27 51 31 52 32 52 29 42 26 WYND 14 22 18 37 21 13 28 44 20 41 KNNR 33 26 47 37 46 35 48 33 36 29 KSRD 19 27 24 38 23 36 25 38 21 34 TOTAL 446 25 487 35 517 25 597 31 490 26 cv 38 47 42 32 36

Source: Same as above.

Allotment figures are not available for 1998-99 & 2000-01

The offtake as a percentage of allotment decreased from around 97 percent in 1992-93 to 31.33 percent in 2004-05. The proportion was the lowest in 2001-02 at 24.51 percent. The allocation and offtake of food grains by the BPL households, AA Y households and the APL households are given in Appendix Tables 4.1 , 4.3 and 4.4. The allotment and offtake of rice by the BPL households in the State is shown in Fig 4.1.

ALLOTMENT AND OFFTAKE OF RICE IN KERALA:BPLHOUSEHOLDS

600 500 r- -

-

400 - -r- o BPL ALLOTMENT

000' MT 300 c-- f-- I-- I-- - f--

200 '-- f-- f-- I--• BPL OFFTAKE

100 f-- f-- f-- f--

0 - '-- - '-- -2001- 2002- 2003- 2004- 2005-

02 03 04 05 06

YEAR

Fig 4.1 Allotment and Offtake of rice by BPL Households in Kerala

134


The BPL offtake declined from 9.45 lakh MT in 1999-2000 to 4.41 lakh MT in

2000-01 and further to 3.22 lakh MT in the year 2002-03. Though it slightly

increased to 3.99 lakh MT in 2003-04, the increase was not sustained in the

subsequent years when it declined to 3.74 lakh MT and 2.65 lakh MT

respectively. The decline in the BPL offtake has been consistent during the

last three years.

The quantum of allotment has shown vide variation. The allotment of BPL rice

increased from 4.21 lakh MT in 2001-02 to 5.52 lakh MT in the next two years.

The allotment declined in the next two years to 3.71 lakh MT in 2004-05 and

3.34 lakh MT in 2005-06. One of the factors governing the allotment of food

grains to the State is the amount of offtake in the given State. The consistently

declining offtake of BPL rice may be one reason for reduction in the amount of

BPL rice allotted to the State. Given the variation in the allotment figures, the

offtake as a proportion of allotment shows vide variation in these years. Infact,

as shown by-Appendix Table 4.1, though the offtake as a proportion of

allotment exceeded 100 percent during the year, the reason lie not in the

higher utilization from the System but the reduced allotment with the offtake

figures actually showing a decrease from the previous year.

The State Government, taking into account the hastening decline of the PDS

decided to provide additional subsidy to all the BPL cardholders in the State

from February 2006 onwards by reducing the retail issue price of ration rice

from Rs. 6.20/ Kg to Rs. 3/ Kg (the same as that of the issue price of AA Y)

The reduced price did have an impact on the offtake from the PDS, as shown

in Appendix Table 4.2 The offtake from the ration shops are generally higher

during August-September, the month of Onam Festival. However with the

provision of additional subsidy, the offtake during February-March greatly

exceeded the offtakes in the earlier months. The picture is different when we

observe the utilization of PDS by the AA Y households, shown in the Figure

4.2 below (Appendix Table 4.3). With the exception of 2001-02, when the

offtake as a proportion of allotment was only 75 percent, in all the subsequent

years, the offtake exceeded 95 percent of the total allotment.

135

Chapter IV

250

200

150 OOO' MT

100

50

o

PDS in Kerala-Comparison of Pre and Post-TPDS Phases

ALLOTMENT & OFFTAKE OF RICE IN KERALA: AA Y HOUSEHOLDS

2001'()2 2002'()3 2003-04 2005-06

YEAR

[] AA Y ALLOTMENT

• AAY OFFTAKE

Fig 4.2 Allotment and Offtake by AA Y households in Kerala

The significantly-reduced offtake from the PDS following the introduction of

the TPDS is owing to the reduced utilization of the System by the BPL

households and the almost complete withdrawal of the APL households, as shown in Figure 4.3 (also see Appendix Table 4.4 ).

Surprisingly, despite the extremely low offtake from the System, there is no

much change in the amount of APL rice allotted to the State. Infact, it has

increased from 13.28 lakh MT in 2001-02 to 13.61 lakh MT in 2003-04, after

which the quantum of allotment has remained stable . This is in sharp contrast

to the reduced allotment to the BPL households. During 2002-03 to 2003-04,

the offtake by the APL households was almost negligible, though an

improvement can be seen in the offtake figures in the last two years .

ALLOTMENT AND OFFTAKE OF RICE IN KERALA:

160000

140000

120000

100000

80000 60000

40000

20000

0

APL HOUSEHOLDS

2001-02 2002-03 2003-04 2004-05 2005-06

[] APL ALLOTMENT

• APL OFFTAKE

Fig 4.3 A llotment and Offtake by APL households in Kerala

l36


The quantum of the offtake in a given district would depend on the population

of the district and a comparatively higher offtake may not necessarily mean

high offtake per person. Therefore the analysis of total offtake does not reveal

the complete picture. The district-wise per capita rice offtake given in

Appendix Table 4.5 and depicted in Fig 4.4 shows the magnitude of decline in

the utilization of PDS (rice) in Kerala.

In the early 90s, not much variation is seen amongst the districts in Kerala as

regards the per capita rice offtake, with average per capita offtake being

around 60 Kgs. However in the next two years, the per capita offtake of rice

declined for the state as a whole. This could have been following the rise in

issue prices of grains distributed from the PDS. The districts which saw a

continuous decline in the per capita rice offtake even prior to targeting include

Thiruvananthapuram, Ernakulam, Kollam and Pathanamthitta districts. On the

other hand in Malappuram, Kannur and Wayanad districts, the offtake per

capita increased after 1992-93 till 1998-99. Thus the decline in the offtake that

happened in the mid 90s (after which it increased in the latter years) was not

consistent for all the districts. The values of coefficient of variation can be

seen to be very high in the mid 90s implying high inter-district variation in the

per capita offtake.

70

60

....... 50 1/1

~40 I 30

5 20

Per capita rice offtake in Kerala

92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05

Year

Fig 4.4 Per capita rice offtake in Kerala

137


However, Post-TPDS and the price hiking starting from 2000-01, the per

capita rice offtake declined drastically in all the districts of the State. In 2002-

03, the per capita offtake of rice in the state fell to around 9 Kgs. In the two

subsequent years, the per capita registered slight improvements and by 2004-

05 stood at 18 Kgs. The values of the CV can be seen decreasing from the

1999-2000 to 2001-02, following which it marginally increased. The decline in

CV in per capita offtake post the TPDS is owing to the consistent decline in

the offtake of all districts. However in the last two years considered above, the

per capita offtake can be seen improving in Wayanad, followed by Alapuzha

and Idukki districts.

The following emerges from the above analysis of allotment and offtake of rice

from the PDS in the Post-TPDS phase:

First, the introduction of TPDS did not immediately decline the offtake from

the PDS as the offtake levels in the initial years of TPDS are comparable to

the earlier years. Infact the same increased from the mid 90s. Second, though

the APL prices were raised during 1998-99, BPL prices remained· unchanged

and much below the average market retail price which was around Rs. 12.5

Kg during the period. The decline in offtake that began in 2000-01 is

consequent to the increase in the prices of both the APL 1 and the BPL issue

prices2 and with the issue of same quality rice (Common) of both the APL and

the BPL households. Third, the State Government continued to provide

additional subsidy for the APL households and to cover the additional BPL

households identified by the State till July 2001, after which the same was

discontinued.

The decline in the offtake that began in 2000-01 therefore happened prior to

the discontinuation of the State subsidy. The fact is that the rise in issue

prices was significant and a one rupee subsidy for the APL households was

1 The retail issue price of APL rice increased from 8.60 in 1999-2000 to 11.40 (April 2000 to June 2000). 10.40 (June 2000 to July 2000). 10 (July 2000 to July 2001)

2 The retail issue price of BPL rice increased to 6.4 Kg in 2000.01 from 3.90/ 4kg-in the previous year.

138

l

Chapter IV PDS in Kerala-Comparison of Pre and Post'-TPDS Phases

unable to rest the decline in offtake. As for the additional subsidy for the BPL

households, additional subsidy did not mean lower issue prices but only the

extension of benefits to larger number of people. Lastly, there has been an

improvement in the levels of offtake of all households during 2002-03 to 2004-

05, after which it declined, during 2005-06.

4.1.2 Offtake of Wheat from the ration shops

As with rice, there was a drastic fall in the distribution of wheat also, post

2001-02. However by 2004-05, the per capita offtake of wheat increased to

around 9 Kgs, ~s shown in Appendix Table 4.6 (See Fig 4.5).

Per capita wheat offtake in Kerala

18,.....,..-.....",..-_~

16+'-~~~~

14~~"'+i-~,c..~~

12 +-~--'-'----~~~c'"

Offtake 10 +-'----,..'--"-",c---'---"~~ (Kgs) 8 +,.,.-c~~ __ ~~,*

6 +-.... -~~~~-c---c'"'~

4 +-.-----.......... --,.--.'-_~

2 -t--,---~__:_:_'''___:_c~~::;;=&

o~--~~--~~~~~~~~~~~~~~--~~

92-93 93-94 94-95 9&-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05

Year

Fig 4.5 Per Capita wheat Offtake in Kerala (Kg)

The district-wise offtake of wheat as a percentage of allotment is given in Appendix Table 4.7. Wheat used to be consumed predominantly by the richer community in the State earlier. In the early 90s, the per capita wheat offtake was the highest in Kottayam and Kozhikode districts, the comparatively well off districts. In 2004-05, Idukki, a district with the least percentage of people under the poverty line emerged as the district with highest per capita wheat offtake. For the poorer districts of Wayanad, Kasargode and Palakkad, there was no much change in the per capita offtake. In fact in Kasargode and Wayanad districts, the per capita offtake of wheat actually reduced post targeting.

139


As a percent of allotment, the distribution of wheat can be seen increasing in the 1990s till the introduction of the TPDS in the State, following which it declined drastically. However in the last year considered i.e. 2004-05, the

offtake exceeded the allotment.

4.2.3 Seasonality in offtake from PDS

The above section was an analysis of the offtake of rice and wheat from the PDS. With respect to the seasonality pattern of offtake from the PDS, two questions need to be answered. First, whether there is any discernible seasonal variation in the offtake of food grains from the PDS and secondly

whether the trend has changed recently.

To analyse the seasonal variation in the offtake from the PDS, rice offtakes have been decomposed using the ratio to moving average method to arrive at

the seasonal indices. The seasonal Indices of rice offtake are calculated for

two phases. The two phases considered are:

1. Phase I: 1991-92 to 1996-97.

2. Phase II: 1997-98 to 2002-03

The Seasonal indices during the Pre-TPDS & Post-TPDS phases and the amplitude of seasonal variation in the monthly rice offtakes are given in Tables 4.2 and 4.3.

Table 4.2 Seasonal indices: pre-TPDS and post-TPDS

Months 1991-92 to 1996-97 1997-98 to 2002-03 January 105.60 105.65 February 96.13 91.42 March 97.71 100.86 April 87.94 92.82 May 95.22 89.47 June 96.14 93.82 July 105.94 100.12 August 119.13 110.16 September 99.60 97.55 October 96.32 106.95 November 92.36 103.26 December 107.87 107.86

140


Table 4.3 Amplitude of seasonal variation in the monthly rice offtakes

Peak Trough Period J5.1.} Peak Month Trou_9h 15.1~ month 1991-92 to 1996-97 119.13 August 87.94 April 1997-98 to 2002-03 110.16 August 89.47 May

Agricultural activity in the State is brisk in April-May and May-June with the

field preparation and transplanting underway. In June-July, activities in the

rice fields begin tapering off as tapioca harvesting and related employment

picks up. July-August is generally a slack period when practically no field work

is done. The next two months i.e. August-September is the rice harvesting

period.

The broad pattern emerging from the seasonality factors is that the offtake

touches a peak during the month of August during both the phases. On an

average, the offtake during the month of August is 19 percent and 10 percent

higher than the average offtake during the two phases. The figures for the

month are pushed by the large "Onam" purchases by some households.

"Onam" is a festival characterized by feasts that falls immediately after the

harvest in Kerala and usually between late August and September. The

offtake remained higher than the average during December and January

months, during both the phases. In the second phase, the offtake also

remained higher than the average during October and November months. On

the other hand, the offtake from the PDS remained the lowest during April and

May months respectively in the two phases. The offtake in April during the first

phase was 12 percent lower than the average offtake during the first phase.

Similarly the offtake during May was 10.5 percent lower than the average

offtake during phase II.

We observe that the amplitude of fluctuations in the offtakes have declined in

the second phase and the explanation should lie in the reduced share of the

PDS rice in the consumption basket of the people of the state Post-TPDS.

While offtake still remained highest during August, the magnitude of variation

was almost half of what it was in the first phase.

141

Chapter /V PDS in Kera/a-Comparison of Pre and Post-TPDS Phases

4.2.4 Analysis of the causes of decline in APL & BPL offtakes from PDS

The drastic decline from the PDS, particularly of the APL consumers began in

2000-01. The policy change that would have prompted the mass exodus of

the APL consumers from the ration shops should be the rise in the issue

prices for food grains in the initial years of the current decade. The inverse

relationship between the issue prices and offtake is consistent with the

conclusions drawn in the other studies on PDS. In other words increase in the

issue prices and the resultant change in the relative prices, which is

considered to be the criteria of choosing the source of supply by most

consumers, would result in more people shifting to the market3. This lowers

the offtake from the PDS. Despite the increase in issue prices, the shift over

to the market is not easy for the people of Kerala, given the high open market

retail prices of rice, which still remains much higher than the issue prices.

Table 4.4 shows the district-wise APL offtake of rice from the PDS along with

the differences in the issue prices and open market retail price. It is clear from

the Table that there is a considerable gap between the market price and the

issue prices even for the APL house holds in all the years considered. If we

see the relative prices for these households from earlier periods, it is clear

that there have been negligible differences in the relative prices of food grains

during the period 1965-2004 i.e. prior to and post-targeting, except during the

years 1998-2000, when the issue prices were hiked and which was first of all

responsible for the massive withdrawal of the households from the PDS.

However subsequent to this period though the APL issue prices were lowered

down and has been steady at the same levels since 2002, the offtake has not

seen a corresponding increase.

3 Balakrishnan (1997) showed how the impact of the issue prices on the open market prices are dependent on the perceived ql.!ality differentials between the ration grains and the market grains by the consumer

142


018T OFF

2001-02 TVM 2664 KLM 1196 PTA 426 ALP 1448 KTM 398 10K 293 EKM 1036 TSR 2152 PKO 1324 MLP 2178 KKO 2168 WYO 741

TOTAL 21554 . Offtke & Price

gap .17

Offtke & pey -.44 Source: Same as above *Significant at 5percent level.

MP-IP

5.30

5.10

.4.88

3.50

3.98

2.35

3.71

3.74

2.44

3.37

4.31

4.93

; 4 >i , ... • ,. _ .; 4~ •

PDS in Kerala-Comparison of Pre and Post-TPDS Phases

Table 4.4 APL offtake and relative market prices in Kerala

PCY

OFF 2002- OFFTAKE OFFTAKE OFFTAKE 03 MP-IP 2003-04 MP-IP 2004-05 MP-IP 2005-06

986 5.50 399 5.50 3252 5.50 1458 13477

197 4.24 229 5.82 2349 5.82 391 11947

35 3.54 30 4.18 172 5.10 318 13049

259 3.92 239 5.12 4004 3.60 1402 12420

85 4.34 96 5.29 1586 4.72 2122 14020

80 2.88 52 4.39 2337 5.48 1269 14622

194 2.97 116 3.89 2625 4.02 1891 15583

701 3.53 291 4.18 2329 4.42 1013 13220

187 2.32 167 2.60 5468 3.10 4089 10412

380 3.49 324 4.19 7729 4.50 3129 7775

696 4.39 378 6.60 7864 4.92 3835 12036

155 2.27 1083 4.08 6815 4.55 2218 10812

5746 4302 64359 32816

.26 -205 -.301

-.20 -.44 -.68* -.55*

143

Chapter IV PDS in Kera/a-Comparison of Pre and Post-TPDS Phases

Hence to solely attribute the decline in offtake to the rise in issue prices would

not be a complete explanation and there would clearly be other factors at

work resulting in the negative relationship between the offtake and the issue

prices. It is here that the implicit costs associated with the purchases from the

PDS comes to work. The implicit costs associated with the purchases from

the PDS, which although cannot be put down to quantifiable terms certainly

guide the consumers in their purchase decisions. The implicit costs generally

associated with the purchases from PDS include the transaction costs arising

because of the distant location of the fair price shops, the time spent in

standing in a queue, the need for adequate liquidity to make weekly

purchases at one go, the usage of faulty weights and measures by the dealer

the quality differences between the PDS grains and the grains available in the

market etc. Some of these costs particularly the long distance from the ration

shops, time spent in standing in the queue may not be particularly relevant for

Kerala and what seems to have had a significant bearing on the decision to

purchase from the PDS seems to be the quality factor.

Suppose there are no quality differences between the grains distributed

through the PDS and that available in the open market, then so long as the

issue price is less than the open market price of rice, the consumers would

demand grains from the open market only after exhausting their ration

entitlements (Balakrishnan, 1997). A lower difference between the open

market price and the ration price as a result of increase in the issue prices

would result in reducing the real income gain received by the consumer and

therefore lowers the demand for food grain from the open market.

Inclusion of the implicit costs (particularly associated with the quality

differences) in the price of food grains from the ration shops would result in

the pushing the cost of PDS grains above the open market price for some

consumers and these consumers would now shift to the market. If quality of

the grains were identical, they would have chosen to buy from the PDS so

long as the issue prices remained below the market price. There would also

be a segment that would opt to remain with the PDS, considering the

reduction in the real income gain from the following the smaller gap between

144


the open market price and PDS price. For these people, the demand from the

open market and the aggregate consumption itself may reduce in the process.

Thus, following the increase in the issue prices, the sales from the PDS may

decline! increase depending on the strengths of the following effects.

1. Switchover effect: implying transfer of purchases to the open market,

considering the higher implicit costs of the PDS grains as compared to

the open market grains.

2. Reduction in PDS purchases by some consumers who are not able to

maintain their existing level of consumption at the higher price, given

the erosion in their purchasing power.

3. Higher purchases from the PDS by those who perceive no difference in

quality and hence shift whatever purchases they made from the market

to the PDS, given the reduction in their real income.

The explanation carried out above is particularly relevant for the APL

consumers in Kerala. The reduction in the offtake from the PDS has been a

result of the strength of the former two effects, with the'third being negligible

given the wide perceived differences between the qualities of grains available

from the two sources. However given that the data on open market sales is

not available, the exact amount of switchover cannot be calculated. The

decline from the PDS is generally explained in terms of the switchover effect.

However the above reasoning remains incomplete, since as explained above,

this would also comprise that section that reduce their consumption from their

pre price hike consumption levels as they cannot maintain their consumption

at the new higher price. Since targeting errors cannot be discounted for in any

targeting programme, the poor people who are wrongly classified under the

APL category (explained in the next section) may be the ones who are

severely affected in the process. Thus explaining a reduction in the offtake of

the APL category from the PDS should include both the explanation of both

the switchover effect of the consumers and at the same time the reduced

consumption effect of the poor consumers.

145


Thus the explanation for the lack of improvement in the off take despite the

fall in issue prices post 2001-02 should be on the following grounds:

First, the rising issue prices that led to the initial withdrawal of the households

from the PDS served only as an initiating factor and the perceived quality

differences and implicit costs of PDS grains were high. Second, for the

majority of the households, the implicit costs of making purchases from the

PDS along with the intrinsic differences in the quality between the open

market foodgrains and the grains distributed through the PDS, when put to

quantifiable terms, is still considered higher than the open market price.

These costs would have risen following the issue of identical quality, 'common

rice' to both the categories of the consumers. In case of Kerala, the perceived

quality differences have not only prompted the consumers to switchover to the

market, but have also prevented their return back to the system, despite the

fall in the issue prices. Third, for the poor households wrongly targeted under

the APL category, accessi'ng the PDS may still be a costly option.

Despite the quality differences, the rising food insecurity could bring back the

economically vulnerable sections back to the System. As can be seen in

Table 4.4, the offtake that had fallen to marginal levels has seen an increase

in the last two periods considered. When these figures are correlated with the

district-wise per capita income, the results were negative and significant for

the last two periods. In other words, despite the quality differentials, the

increase in the offtake levels in the economically poor regions could be partly

attributed to the rising food insecurity in these regions. However for the

System to attain the levels of offtake that e.xisted earlier, ensuring

improvements in the quality of grains distributed is vital. Also it has to be

ensured that the physical accessibility does not deteriorate further.

The problem in Kerala is not just the decline in APL offtake, rather the

withdrawal of the people at large from the System. The decline in offtake has

been consistent across the districts for BPL households as well. The BPL

offtake also remained below their entitlement for most of the years. The

146


perceived quality differences as explained above are applicable to the BPL

households as well and hence do not require further explanation.

Given the procedure for identifying the BPL households, a large number of

economically well off sections may have been included under the BPL

category and many of these households, given their economic status may

consider it more prudent to shift to the market. Thus the underutilization of the

PDS in Kerala by the BPL category would also partly explained by the

inclusion of economically well off sections under the BPL category who are

not constrained by their economic condition to access the market. A detailed

explanation of the withdrawal of the consumers at large from the PDS is

explained in Chapter 6 after understanding the ground realities. On the whole,

the general solution for the dilemma faced by the Government with regard to

the underutilization of the PDS is to keep the issue prices sufficiently below

the market price alc:mg with suitable improvements in the quality of the grains

distributed from the system. A significant improvement can also t;>e expected'

with the correct identification of beneficiaries.

4.3 Issues related to targeting of beneficiaries under TPDS

A comparison of the allotment and offtake of food grains under the PDS and

the TPDS has been made in the above section. The following sections

examine two important dimensions of the PDS and the TPDS. First, the issue

of targeting; examined in terms of the share of offtake, it is seen whether the

share of poor districts (with higher number of identified poor households) has

improved post targeting. Though it is clear from the analysis in the above

sections that the per capita offtake of food grains from the PDS has drastically

declined from the beginning of the current decade, the comparative analysis

of the rich and poor districts in terms of per capita offtake in the pre and Post-

TPDS period would help us better understand if the decline has been uniform

or biased in favor of the food secure districts.

Further, given that PDS has an important role in ensuring food availability and

prices in the State, it needs to be analyzed whether the offtake of food grains

through the PDS has been higher in the food insecure regions i.e. regions

147


with larger proportion of poor households and low per capita production. The

role of PDSt TPDS towards food security is analyzed in terms of its

contribution in meeting the food grains requirements of different districts.

Post-TPDS, it is to be seen whether the poorer districts are meeting larger

proportion of consumption requirements from the PDS than the richer districts.

Towards the above, answers are sought to the following questions in the

remaining part of this chapter.

1. What can be said about the nature of decline in the offtake from the

PDS across districts? Has the share of districts with higher proportion

of poor population increased in the Post-TPDS phase as compared to

the earlier years

2. Is the distribution of PDS offtake higher in districts with higher food

insecurity measured in terms of physical access criterion (per capita

production of rice) and economic access criterion (Per Capita Income).

Is there a significant difference between the Pre-TPDS and the Post-

TPDS periods in this regard.

3. Is the distribution of PDS benefits (income gain) progressive i.e. higher

in districts with higher percentage of population below poverty line?

4. What role does PDS play in meeting the food grains requirement of

population in various districts? Considering that the TPDS was

introduced with a view to improve targeting, the contribution of PDS in

meeting food requirements should be higher in the districts with larger

proportion of poor population.

5. What are the proximate factors influencing the ration offtake (rice and

wheat) of the APL and the BPL households in the various districts.

4.3.1 Poverty in Kerala

Poverty can be defined in an inclusive sense as consisting of a number of

elements: lack of access to,- or availability of income earning opportunities,

basic health and education, food security, lack of adequate shelter, water or

148

Chapter IV PDS in Kerala-Camparisan af Pre and Past-TPDS Phases

sanitation, lack of land or employment opportunities, and gender

discrimination. The list is sometimes further enlarged to include lack of

participation in civil society, social exclusion, alienation, political instability and

conflict. The inclusive definition however robs the concept of its specificity.

To accord specificity to the definition of poverty in India, the fulfillment of the

nutritional requirement of 2400 calories per person per day in the rural areas

and 2100 calories in the urban areas is taken as the defined criteria. The

poverty line is defined as that level of expenditure at which a person accesses

this minimal level of calorie intake. The practice has been to take the level of

expenditure corresponding to the poverty line in the base year and to update it

for subsequent years for each State using the Consumer Price Index Number

for agricultural laborers for rural areas and the Consumer Price Index Number

for industrial workers for urban areas.

The NSS Consumer Expenditure data have been used to identify the extent of

poverty in the State and the Central Government funds for the various anti-

poverty programmes are released to the State based on the estimates. As per

the NSSO 55th Round (1999-2000), Kerala had poverty figures of 9.38 percent

in the rural areas and 20.27 percent in the urban areas. These figures appear

to be gross underestimates, considering that at the official poverty line for

1999-2000 in rural Kerala, only 1440 calories could be accessed which is 960

calories short of the 2400 calories that define poverty4.

While the central funds for poverty alleviation flow based on NSS data

interpretation, at the State level, the activities are formulated and the funds

spent as per the periodic surveys of BPL families. The first full survey of the

BPL families was done in 1985 and the next comprehensive survey was done

in 1992. However this was not the survey of all the BPL families as those who

had been assisted under IRDP earlier were not included. In 1997, the GOI

took a landmark decision based on the suggestion by an Expert Group

4 Economic Review (2006), Govt. of Kerala points out that at the minimum calorific norm of 2400 calories in the rural areas, the proport!on of people who could not meet this norm was a staggering 82.5 percent. At a lower norm of 21 O~ calories, the proportion that could not access it comes to 60 percent.

149


appointed by the Ministry of Rural development. Accordingly there was to be a

census of every household with certain exclusion criteria determining the

elimination of APL households and were to be based on the expenditure in

the last 30 days on the pattern of the NSS assessment.

4.3.2 Targeting of beneficiaries under TPDS

The proper identification of the households is of utmost importance under a

targeted system given that the distributions of the benefits are to be solely

made available to the targeted households. Errors of targeting arise when

attempts are made to distribute the benefits of a welfare Scheme to a

specified target group. These errors can arise in any targeted welfare

programme due to factors such as imperfect information and measurement

and costs of participation. The existing literature on the targeting errors5 .

discusses two types of errors in targeting - inclusion errors and exclusion

errors. Exclusion errors refer to the exclusion of the genuinely poor or

deserving households from the targeted programme. These are also called

Type I errors and reflects the failure to reach the target population. On the

other hand Inclusion errors, also called Type" errors refer to the inclusion of

the non-poor in the targeted programme resulting in the excess coverage of

households in the programme. Both these errors substantially contribute to

reducing the effectiveness of the program with the non-poor receiving benefits

and the actually poor not receiving the intended benefits

High utilization of the PDS in the past, a history of active state involvement in

matters of food distribution and support for the system in the form of additional

subsidy, proverbial involvement and awareness of the local people, and

above all a larger number of people identified as poor by the State

Government (than the GOI estimates), seems to have relegated the issue of

targeting in Kerala to the back and denied the importance it should have

received. However the distribution of ration cards to a considerably larger

proportion of population than that identified by Government of India does not

mean genuineness of the targeted households. In fact given the background

5 Summary discussions of tile costs of targeting can be found in, Cornia & Stewart (1993), Sen (1992,1995) and Swaminathan (2000)

150


of the BPL identification procedure (explained in the earlier chapter), the

errors of targeting both inclusion and exclusion errors cannot certainly be

discounted for.

The analysis of targeting in the present chapter is carried out in the following

manner:

1. District-wise distribution of BPL rations card holders and the BPL

households (as per the latest BPL Census).

2. Distribution of ration cards to the Asraya families.

3. District-wise share of offtake from the early 1990s.

4. District-wise per capita offtake, Pre-TPDS and Post-TPDS periods.

5. District wise distribution of income gain from the TPDS to the BPL

households; Pre-TPDS and Post-TPDS.

6. Correlation between indicators of offtake and indicators of poverty and

income.

1. District-wise distribution of BPL rations cards and the BPL

households (as per the latest BPL Census).

Table 4.5 shows the district-wise number and share of BPL families along with

the number of BPL ration card holders. Ideally the distribution of ration cards

should be broadly corresponding to the proportion of BPL households in each

district. Though the 1992 BPL Census was taken as the base, the local

authorities were asked to update the lists based on the existing conditions in

1997, before the final lists of the targeted beneficiaries were finalized. Hence

broadly the number of ration cardholders should correspond to the BPL

Census conducted in 1997.

The districts with significant difference between their share in total BPL

households and the total BPL ration cards are Kottayam, Idukki and Palakkad.

The share of Kottayam and Idukki in the total BPL households in the State is

3.4 percent, and 2 percent, whereas their share in the total BPL ration

cardholders is almost double at 6.6 percent and 4.4 percent respectively. On

the other hand, Palakkad had the highest share of BPL population at 12

151


percent, its share in the total BPL ration cards is just 6.98 percent.6 In

Alapuzha, Wayan ad , Malappuram and Kannur too, the share of BPL ration

cards are comparatively lesser than the proportion of BPL households

officially declared under poverty line by the BPL Census.

Table 4.5 District-wise share of BPL households and BPL ration cards

2003 2001 2007 Dist No. of % total No of BPL % of total No of % of total

BPL BPL Ration BPL Ration BPL BPL RCs families- families Cards Cards Ration

1997 Cards TVM 188310 10.93 224871 11.05 .. 232518 11.15 KLM 175617 10.19 209952 10.32 211450 10.14 PTA 74856 4.34 84346 4.14 86934 4.17 ALP 156151 9.06 176756 8.68 179779 8.62 KTM 59182 3.43 132510 6.51 136728 6.56 IDK 34435 2.00 91358 4.49 92927 4.46 EKM 99521 5.77 141929 6.97 144979 6.95 TSR 158961 9.22 219711 10.79 220839 10.59 PKD 204605 11.87 136510 6.71 145459 6.98 MLP 180375 10.47 198531 9.75 199854 9.58 KKD 131781 7.65 164318 8.07 171700 8.23 WYD 64794 3.76 53467 2.63 60144 2.88 KNR 122067 7.08 134109 6.59 130769 6.27 KZD 72901 4.23 66968 3.29 71202 3.41 TOTAL 1723556 100 2035336 100.0 2085282 100 .. Source; CIvil Supplies Department, Government of Kerala

The difference between the proportion of BPL ration cards and the BPL share

of families can be broadly taken as an indicator of the targeting errors7. Thus

Kottayam and Idukki having a higher proportion of BPL ration cards than their

share in the BPL population is indicative of inclusion errors and the lower

share of BPL ration cards as compared to their share in BPL households in

Alapuzha, Wayanad, Malappuram and Kannur districts may be indicative of

exclusion errors.

6 Palakkad is the largest rice producing district in the State, which would have a bearing on the rice availabiiity in the district 7 This is considering the fact that the BPL census was more scientifically conducted. However, identification errors cannot be totally discounted for in the Census also owing to which it cannot be taken as a concrete base for comparison.

152


2. Distribution of ration cards to the Asraya families

An insig~t into the evaluation report of the 'Asraya families' undertaken by

Kudumbashree throws a great deal of light into the issue of targeting in

Kerala:

One of the recent initiatives in the democratic decentralization in Kerala is the

'Kudumbashree' programme, implemented by the local governments with

proactive facilitation by the State Poverty Eradication Mission. Under the

programme, every BPL family is organised, with each family being

represented by a woman, into a Neighbourhood Group (NHG) at the local

level with 15 to 40 families which is federated into an Area Development

Society (ADS) at the level of the Village Panchayat! Municipal Ward, which

are further networked into a registered society called the Community

Development Society at the level of the local government. Thus an inclusive

community based organization works in partnership with the panchayats to

plan and implement a partiCipatory poverty reduction programme8 in Kerala.

The Asraya project was conceptualized by the Kudumbashree, following the

finding that there were some outliers who had not benefited from the anti-

poverty projects of the local government namely the poorest of the poor

(destitutes). Asraya following the principle of empowerment of the poorest of

the poor is a community based initiative to accord social security to the

poorest of the poor. Accordingly, a two stage criteria is used to identify the

targeted destitute families under the Asraya project, as given below:

First stage of identification: Indicators considered:

1. No land/ Less than 10 cents of land

2. No House/ Living in a dilapidated house

3. No drinking water facilities within 300 meters

4. No sanitary toilet

8 There are 182081 NHGs (covering 36.44 lakh families), 16814 ADSs and 1058 CDSs in the State (2007)

153


5. No employment to any person in the family (employment for less than 10

days a month).

6. Women headed family! widow! abandoned women! presence of unwed

mother in the family

7. Presence of physically! mentally challenged! chronically ill member in the

family.

8. Family belonging to SCI ST.

9. Presence of an adult illiterate member.

The families attracting seven or more indicators are subjected to another list

of five special indicators for rural areas and urban areas respectively as given

below:

Special indicators for rural areas

1. Having no landed property to set up a dwelling place (living in a

puromboke land, forest land, side bunds of canals, and paddy fields)

2. Spending the night time in public places, streets or in the verandas of

shops for sleeping

3. Having no healthy member to win bread for the family

4. Resorting to beggary as a vocation.

5. Having women subjected to atrocities

6. Having the children below the age of 14 who work to earn money for

the family

Special indicators for urban areas

1. Spending the night time in public places, streets or in verandas of the

shops for sleeping.

2. Resorting to beggary as vocation

3. Having no healthy member to win bread for the family, below the age of 60.

4. Having women subjected to atrocities.

5. Having street children! children in juvenile homes! poor homes.

6. Having children below the age of 14 who work to earn money for the family

7. Having commercial sex workers.

154


8. Having women members who live in Abala Mandiram.

9. Living in slums.

If a given family attracts at least one of these special indicators in addition to

the seven or more from the first set of general indicators for the rural and the

urban areas, the given family is classified as a destitute family. After utilizing

the network of the poor families, the preliminary identification of the probable

destitute families is done by special groups of trained volunteers from each

NHG.

The Evaluation Report of the families assisted under Asraya project has

brought forth startling results with regard to targeting of beneficiaries under

the TPDS. The total number of sample households surveyed was 10,160

households assisted through the 'Asraya Project'.

Table 4.6 Distribution of ration cards amongst the Asraya families

Total No. of No. of No. of %AAY %APL Dist Asraya BPL AAY APL cards Cards households Card- Card- Cardho in total in total surveyed holders holders Iders

TVM 117 103 85 14 72 12 KLM 773 607 318 166 41 21 PTA 320 320 0 0 0.00 0 ALP 3093 2797 1110 296 36 10 KTM 469 416 216 53 46 11 IDK 158 138 109 20 69 13 EKM 1663 1311 466 352 28 21 TSR 385 320 133 65 34 17 PKD 218 207 164 11 75 5 MLP 285 221 122 64 42 22 KKD 630 546 414 84 65 13 WYD 354 323 264 31 74 9 KNR 967 891 311 76 32 8 KZD 728 629 332 99 45 14 TOTAL 10160 8829 4093 1331 40 13

Source: Kudumbashree, Kerala

Table 4.6 shows the ration cards possessed by the surveyed Asraya

households Given that Asraya families are the poorest of the poor, a term

used to define the AA Y households under the TPDS, ideally all these

households should have been provided BPL cards with AA Y endorsement

155


which would have entitled them to the highly subsidized food grains from the

PDS. Surprisingly only 40 percent of the total sample of Asraya households

surveyed were issued AAY cards (Table 4.6).

The magnitude of errors in targeting can be gauged from the fact that the

number of APL cardholders amongst the Asraya families (who are actually

entitled to AA Y cards) is extremely high in many districts and certainly not

negligible in the others. Shockingly, more than one-fifth of the Asraya families

surveyed in Kollam, Ernakulam and Malappuram (poorest district in terms of

per capita income) districts were in possession of APL cards.

The high exclusion errors would undoubtedly be a major reason behind the

underutilization of the PDS after the introduction of TPDS. For those wrongly

classified as APL there are twin disadvantages involved. First and foremost is

the wide difference between the APL issue price and the prices at which the

AAY households are issued food grains from the TPDS 9. Secondly, for the

extremely poor households, liquidity constraint is an associated problem.

While the local shop may give food grains for credit, such a facility is not

provided by the ration shop. Thus though the APL issue prices are still lower

than the open market retail price, availability of sufficient cash in hand is

essential for purchasing the cereals from the ration from the PDS.

The cost of exclusion errors can be extremely high especially because the

alternative available i.e. accessing the market comes at a very heavy price,

particularly for the poorest of the poor families. For the destitutes, whose

income is below the subsistence level, this would contribute to curbing the

consumption of food grains. The adverse repercussions on the health front of

these households need not be reiterated.

District-wise share of rice offtake: Pre-TPDS and Post- TPDS

Given the share of BPL ration cards in each district, it is to be seen whether

the actual offtakes in a district corresponds to their share in the BPL

9 The price of APL rice is Rs. 8.90/ Kg and that of AAY households are Rs. 3/ Kg.

156


population. Table 4.7 shows the share of each district in the total offtake of

food grains in the State during the period.

Thiruvananthapuram is the district with the largest number of BPL

households. The share of the district in the total offtake showed wide inter-

year fluctuations. For the period as a whole, the share of the district increased

from 9.8 percent in 1992-93 to 11.2 percent in 2005-06. In Kollam district too,

the share in the offtake increased from 7.9 percent to 8.9 percent during the

period. On the other hand, the share of Ernakulam district declined from 9.8

percent to 7.3 percent in the same period.

There is however no change in the combined share of the top five districts in

terms of offtake i.e. the share of Malappuram, TVM, Thrissur and Kozhikode

continued to be around 40 percent in the first and the last year considered.

Table 4.7 Share of districts in total offtake (%)

DIST 92- 93- 94- 95- 96- 98- 00- 01- 02- 03- 04- 05-93 94 95 96 97 99 01 02 03 04 05 06

TVM 10 9 7 7 7 7 10 10 6 8 10 11 KLM 8 7 4 4 4 6 9 7 3 4 8 9 PTA 4 3 2 2 2 2 4 3 13 2 3 4 ALP 7 7 6 6 6 7 9 8 6 7 8 8 KTM 6 5 4 5 6 5 7 7 7 8 6 5 IDK 4- - 4 4 6 6 4 4 5 3 5 5 4 EKM 10 10 7 8 9 10 7 7 4 7 7 7 TSR 10 10 11 9 10 10 11 11 10 12 10 11 PKD 7 6 7 5 7 8 7 7 8 8 7 7 MLP 11 13 16 16 14 14 10 12 12 12 11 10 KKD 10 11 13 13 11 11 9 9 11 10 9 9 WYD 2 3 4 4 4 4 3 3 4 4 5 4 KNR 8 10 12 13 10 10 7 7 10 9 8 7 KZD 4 4 4 4 4 4 4 4 5 5 4 4 TOTAL 100 100 100 100 100 100 100 100 100 100 100 100 .. Source: CIvil Supplies Department, Government of Kerala

The district-wise share of BPL population (in the total BPL population of the

State) the percentage of BPL population (to the total population in each

district) and the share of the districts in the total offtake in the Pre-TPDS and

the Post-TPDS periods is given in Table 4.8. There are slight improvements in

157


the shares of some districts like Pathanamthitta and Alappuzha , whose share

in the total offtake increased from 2.6 percent and 6.5 percent in the Pre-

TPDS period to 4.6 percent & 7.7 percent in the Post-TPDS period. On the

other hand , Ernakulam, Malappuram, Kannur and Kasargode , the districts

with slightly higher share in offtake than their share of BPL households saw

some decline in the share of offtake in the Post-TPDS period.

Table 4.8 Distribution of BPL households as per BPL census and BPL ration cardholders and share in offtake: Pre-TPDS and Post-TPDS

Dist Total %BPL No. of BPL % total Share in Share in total BPL card households BPL total offtake :

Ration holders '97 BPL house offtake- Post-TPDS card Census holds Pre-TPDS ('00-01 to '05-06

holders (OOO's) (92-93 to (OOO's) 96-97)

TVM 233 11 .2 188 10.93 8.1 9.1 KLM 211 10.1 176 10.19 5.6 6.8 PTA 87 4.2 75 4.34 2.6 4.6 ALP 180 8.6 156 9.06 6.5 7.7 KTM 137 6.6 59 3.43 5.3 6.5 IDK 93 4.5 34 2.00 4.7 4.2 EKM 145 7.0 100 5.77 8.8 6.3 TSR 221 10.6 159 9.22 9.8 10.6 PKD 145 7.0 205 11 .87 6.5 7.2 MLP 200 9.6 180 10.47 13.5 11 .2 KKD 172 8.2 132 7.65 11.2 9.4 WYD 60 2.9 65 3.76 3.2 3.9 KNR 131 6.3 122 7.08 10.3 8.1 KZD 71 3.4 73 4.23 3.9 4.3 TOTAL 2085 100 1724 100 100 100 .. Source: CIvil Supplies Department, Govt. of Kerala, Economic Review, Govt. of Kerala

15

14

2

o

District-w ise share in Offtake - Pre and Post - TPDS

l-I- l-

ff l- I-

I-- - HI= l- I- l- I-

I- kI- I-- I-- I-- I-- FrF RI TVM KLM PTA ALP KTM IDK E KM TSR PKD MLP KKD WYD KN R KZD

Districts

C S h a re in off take-PreTP DS

• Share in off take-Po st TPDS

Fig. 4.6 District-wise share in Offtake: Pre-TPDS and Post-TPDS phases

158


The overall scenario did not see many changes after the introduction of

TPDS. The top four states in terms of number of BPL households are,

Thiruvananthapuram Kollam, Thrissur, and Malappuram, with their combined

share in the total BPL population being 41.5 percent. The share of these

districts in the total offtake in the Pre-TPDS period was around 37 percent.

This implies that even prior to targeting, the utilization of the System as

reflected in the respective shares of each district in total offtake were mostly in

consonance with the share of poor population. In the Post-TPDS period, the

combined share of these districts in the total offtake stood at 37.7 percent. On

the other hand the bottom three districts viz. Kasargode, Wayanad and

Pathanamthitta, with a combined share of 10.5 percent of the total BPL

households saw a slight increase in their in total offtake i.e. from 9.7 percent

in the Pre-TPDS years to 12.7 percent in the Post-TPDS period.

Yet the slight variations that has happened Post-TPDS has been towards

making the district-wise share in offtakes more in consonance with the

proportion of people BPL and the BPL ration cards. Drastic improvements in

the shares of offtake were anyway not warranted given that the offtakes were

already higher in districts with higher proportion of BPL households and BPL

ration cards.

4. District-wise per capita offtake, Pre-TPDS and Post-TPDS periods.

The share of the districts in the total offtake is broadly reflecting their share in

the total BPL cards distributed and there are no major changes in this regard

after the introduction of TPDS, as seen above. However, it remains to be seen

if the per capita offtake in the various districts, in the Pre-TPDS and the Post-

TPDS phases are broadly in consonance with the degree of food insecurity or

if there are other factors at work. Broadly, the food insecurity can be

determined in terms of the physical access criterion and the economic access

criterion. The food insecure districts according to the economic access

criterion would comprise those districts with the lowest per capita income

while food insecure districts according to the physical access criterion would

include those households with lowest per capita production. The average per

159


capita offtake in the districts prior to the introduction of TPDS and the

percentage reduction in per capita offtake Post-TPDS is given in Table 4.9

(Fig 4.6):

The most food insecure regions in terms of physical access criterion

measured by the proportion of internal production meeting the consumption

requirements of the population, (as shown in Col 3 of the Table 4.9) is

Kozhikode, Idukki, Thiruvananthapuram and Kannur in both the Pre-TPDS

period and the Post-TPDS period. In terms of the economic access criterion

as measured by the per capita Income, the most food insecure regions are

Malappuram, Palakkad, Kasargode, Kannur and Wayanad.

During the Pre-TPDS period, highest per capita offtake was seen in the

districts of Wayanad, Kannur, Idukki, Malappuram and Kozhikode. Kannur is a

food insecure district in terms of both the economic and physical access

criterion, Wayanad & Malappuram by the economic access criterion, and

Idukki & Kozhikode by the physical access criterion. Thus on the above

parameters, the utilization of the system was higher amongst the regions with

higher food insecurity prior to the introduction of the TPDS.

Wayan ad continued to have the highest per capita offtake followed by

Kasargode, Thrissur and Idukki during the Post-TPDS period. While Wayanad

and Kasargode are food insecure by the economic access and Idukki by the

physical access criterion, the same cannot be said about Thrissur which

seems to be favorably placed in terms of both the criteria.

In the Post-TPDS phase, not only have the per capita offtake declined

drastically but also the magnitude of reduction is spread almost uniformly

across all districts, and even the food insecure districts of Malappuram,

Kannur and Kozhikode saw a decline of more than 70 percent as compared to

the Pre-TPDS period. Overall, the percent reduction in the per capita

distribution of rice in two time periods is around 70 percent for the State as a

whole. There are slight inter regional variations this regard. The highest

reduction is in Ernakulam district (district with the highest per capita) income

at 77.7 percent, followed by Malappuram, Kannur and Kozhikode.

160

Chapter IV POS in Kera/a-Comparison of Pre and Post-TPOS Phases

Wayanad continued to have the highest per capita offtake followed by

Kasargode, Thrissur and Idukki during the Post-TPDS period . While Wayanad

and Kasargode are food insecure by the economic access and Idukki by the

physical access criterion , the same cannot be said about Thrissur which

seems to be favorably placed in terms of both the criteria .

In the Post-TPDS phase, not only have the per capita offtake declined

drastically but also the magnitude of reduction is spread almost uniformly

across all districts, and even the food-insecure districts of Malappuram,

Kannur and Kozhikode saw a decline of more than 70 percent as compared to

the Pre-TPDS period . Overall, the percent reduction in the per capita

distribution of rice in two time periods is around 70 percent for the State as a

whole . There are slight inter regional variations this regard. The highest

reduction is in Ernakulam district (district with the highest per capita) income

at 77.7 percent, followed by Malappuram, Kannur and Kozhikode.

70

60

~ 50 ~

~ 40 III s::. II'J Q) 30 :It: III IE 20 0

10

0

Per capita Offtake - Pre and Post - TPDS

-

- - -

f-- - - - - - -

- - r--- I-- I-- r--- - - - - - - - -

- - I-- I-- I-- c- I-- - - - - - -

t I- t - I- f- r f- t t f- r- f-

TVM KLM PTA ALP KTM 10K EKM TSR P KO MLP KKO WYO KNR KZO

Districts

Fig 4.7: District-wise per capita offtake: Pre-TPDS and Post-TPDS phases

161

eP er capita offtake -Pre TPOS

. Per capita offtake -Post TPOS


Table 4.9 District wise per capita offtake of rice: Pre-TPDS and Post-

TPDS

Dist Pre- Post- % TPDS % Prod TPDS % Prod % decline Per in total PCY Per in total PCY BPL Post-capita Cons capita Cons TPDS offtake offtake

TVM 38.12 8.95 7039 13.18 2.9 27686 39 65 KLM 32.24 17.1 6879 11.25 7.3 25646 39 65 PTA 31.41 20.7 6770 15.46 8.6 26901 33 50 ALP 45.47 45. 6417 17.62 25.1 26459 46 61 KTM 40.76 26.9 6612 17.8 11.3 28622 18 56 10K 60.83 5.8 7535 18.14 5.4 31697 15 70 EKM 43.36 30.0 10824 9.72 15.0 32918 26 77 TSR 49.52 33.0 7219 18.19 22.7 27871 33 63 PKO 37.52 108.5 6508 14.37 60.5 22132 52 61 MLP 59.02 18.4 4315 16.00 8.3 16766 41 73 KKO 59.29 4.1 7179 16.90 2.2 25964 34 71 WYO 66.03 55.5 6724 25.03 29.6 24432 50 62 KNR 63.98 10.8 6818 17.82 5.9 24369 39 72 KZO 49.76 19.7 6538 18.62 10.0 23414 44 62

Source: Calculated from Offtake figures

Since the per capita offlake includes all the categories of households, the

Post-TPDS figures would be much lower than the Pre-TPDS period given the

low offtake of ration by the APL households. However what i~ ~f consequence

as mentioned earlier is that the percentage reduction in the per capita offlake

does not show much of an inter district variation. In other words, those

districts which have higher composition of poor households should not have

seen reduction in the per capita distribution as much as the other districts.

That districts like Kottayam and Thrissur, food secure districts in terms of

economic access criterion have slightly greater per capita offlake than

Malappuram and Kozhikode implies that not only have the total offtake

considerably declined Post-TPDS but also on a comparative plane too, the

consumption from TPDS is noticeably higher in some of the food secure

regions in the Post-TPDS phase.

162


5. District wise distribution of income gain from the TPDS to the BPL

households: Post-TPDS: is it equitably distributed?

Considering the large gap between the open market price and the issue

prices from the ration shops, there is considerable income gain to the

households from the purchase of the ration commodities. In this section, the

income gain is calculated from the district-wise offtake figures for the pe.riod

after the introduction of TPOS in the State. The income gain thus arrived at

may not reveal the exact gain to the households as the offtake figures does

include a part that is leaked out of the system. However allowing for the

leakages from the system, it broadly gives the gain accrued to the households

by utilising the POS.

The income gain is calculated as given below:

YG = (OMp - Rp)*Offtake.l Number of BPL ration cardholders

Where,

YG = OMp = Rp =

Annual Income gain per household Open market price of rice Issue price of rice from the ration shops

From 2001-02 onwards, AAY is being implemented in the State, whereby

each family categorized as poorest of the poor and classified under AA Y

category is given 30-35 Kgs of ration rice at Rs. 3/ Kg. The gain accrued to

the AA Y families are added to that of the BPL families to arrive at the total

income gain which is then divided by the number BPL ration card holders to

arrive at the income gain to a BPL household in the respective years.

The district-wise annual income gain is given in Table 4.10.

163


Table 4.10 District-wise annual income gain from TPDS

%

households

below

OIST 2001-02 2002-03 2003-04 2004-05 2005-06 poverty line

TVM 1234.37 1084.59 1698.26 1309.28 947.26 39.13

KLLM 1111.61 413.49 1064.96 1256.03 1039.34 39.32

KTTYM 1629.58 1892.73 2482.18 1487.33 881.98 18.1

IDKI 1874.23 2180.01 3000.34 1700.01 1023.12 15.29

ERNKM 1344.54 1118.14 1751.58 1252.86 1031.42 26.56

TRSR 1483.38 1419.68 2029.88 1329.65 868.21 33.54

PLKD 1223.08 1615.03 1991.72 1312.50 596.10 52.13

MLPRM 1603.74 1886.59 2337.14 1522.85 884.15 41.18

KZKD 1776.41 2403.23 3105.31 1542.37 994.31 34.84

WYND 2053.00 2018.20 2997.47 1367.72 589.72 49.87

KSRGD 1380.49 1630.75 1397.38 1079.78 827.17 44.46

YG&%BPL -0.23 -0.16 -0.27 -0.56* -0.68*

Source: % BPL (EconomIc ReVIew, 2004), Open market retaIl pnces (DIrectorate of Economics&Statistics), Income gain calcultd. from the offtake figs.(Civil Supplies Dept. GoK)

* Significant at 5 percent level

YG = Income. gain, % BPL- Percentage of Population below Poverty line, PCY = Per capita Income.

Negative correlation was observed between the income gain per household in

each district and the percentage of population BPL Post-TPDS. The results of

the correlation analysis were statistically significant for the last two years

considered.

The factors responsible for the inter-district variation in the quantum of income

gain to the BPL households are given below:

First, the level of offtake in a district. Higher the offtake, higher would be the

total income gain to the households. However if the total offtake in a district is

only high in absolute quantum and not corresponding to its share in the total

164


population resulting in low per household offtake, the comparative income

gain would also be low.

Second, the gap between the open market retail price and the issue prices.

Higher the gap between the open market prices, higher would be the income

gain accruable to a given district. It is seen in the case of Kerala that open

market retail prices are considerably higher than the issue prices, considering

its acute food shortage and long distance from the other states.

Third, the inter-district differences in the retail prices of rice have accentuated

in the recent years 10 and the open market retail prices are seen to be

particularly high in some districts resulting in the increasing gap between the

price of ration rice and open market retail prices of rice. .

The highest per household income gain were in the districts of Kottayam,

Idukki, Kozhikode, and Thrissur. Kottayam and Idukki have a very low

percentage of population BPL and has high per capita income in comparison

to other districts. Thrissur also has comparatively lower proportion of BPL

households. The open market retail prices of rice are particularly high for

Kottayam and Kozhikode. In Idukki, despite the high per capita incomes and

the low percentage of BPL population, the offtakes have been comparatively

higher than the other districts (the offtakes were higher Pre-TPDS also).

The above results imply that higher income gain was transferred to districts

with lower poverty and vice-versa. Thus the comparatively poorer districts with

high percentage of poor households have gained less from the TPDS than the

richer districts. Given that the income gain is substantial in Kerala and has

been known to reduce poverty by transferring the income to the poor

households, higher income gain to the richer districts is certainly inequitable

and undesirable from the distribution point of view.

To further evaluate the functioning of PDS in Kerala prior to and after the

introduction of the TPDS, a correlation matrix is constructed to analyse the

10 Detailed analysis of open market retail price of rice is carried out in the next chapter.

165


degree of co variation between the indicators of offtake with that of income

and poverty in the two phases. The results are given in Appendix Tables 4.8

and 4.9

The indicators considered are given below:

• District-wise per capita offtake of rice (PCR»

• District-wise per capita offtake of wheat (PCW)

• District-wise share of PDS in total consumption (% PDS)

• District-wise share of the offtake in total offtake

• District-wise share of BPL offtake in total offtake

• District wise share of APL offtake in total offtake

• District-wise per capita production (PCP)

• District-wise per capita income (PCY).

• District-wise percentage of population bellow poverty line (%BPL)

Analysis of the results of the Correlation matrices

Rice off take and poverty: Although higher share of food grains were

distributed to the regions with high poverty in both the phases i.e. Pre-TPDS

and Post-TPDS, this does not convert into higher per capita offtake figures in

these regions .. In fact the correlation between per capita offtake of rice and the ..

percentage of people below poverty line does not show statistically significant

results even in the Post-TPDS phase. Infact significant negative correlation

can be observed between the per capita offtake of rice and the share of the

districts in the total BPL population in the Post-TPDS phase. The offtake has

not only declined in magnitude but even the existing reduced offtake is not

progressively distributed. Thus it cannot be said that the introduction of TPDS

in the state has resulted in targeting the districts with higher number of poor

than in the past at least at the level of offtake which was what it sought to

achieve.

Share of PDS in total consumption and poverty: The values of the

correlation coefficient between the share of the PDS in total consumption and

166


the percent of population BPL were not significant for both the periods.

Negative correlation (although not significant statistically) was observed

between the two indicators in the Post-TPDS phase. It can thus be said with

certainty that there is no discernible variation in the share of PDS in

consumption of rice across the districts. Had the intended benefits of the

TPDS gone to the targeted population, the relationship between the two

variables should have shown a significant positive value in the second phase.

Wheat offtake & poverty: The per capita offtake of wheat showed a highly

significant negative correlation with the district-wise percentage of population

below poverty line. The values of the correlation coefficient could be observed

to be higher in the second phase. This implies that the offtake is higher in

those districts with lower proportion of poor people. This is further confirmed

by the highly significant positive correlation between the per capita income at

constant prices and the per capita wheat offtake in both the phases, with the

values of the correlation coefficient much higher in the Post-TPDS phase.

Given that the consumption of wheat· is higher amongst the richer sections of

the society, the above results may be a result of the voluntary decision of the

households.

APL offtake: The share in APL offtake was seen negatively correlated with

Per capita income. In other words the APL Offtake is seen to be higher in

districts with lower per capita income in the Post-TPDS. This could be partly

attributed to the rising food insecurity in these regions.

Production & offtake: No significant results were observed for the correlation

coefficients between per capita production and offtake in both the Pre-TPDS

and the Post-TPDS phases. The above results are not surprising given the

fact that the internal production is not a significant source of consumption of

rice in the state and that this applies almost uniformly across the districts of

the State.

167


3.4 Role of PDS as a source of rice supply in the State

The drastic decline in the offtake from the PDS after 2000-01 has been

explained in the earlier section. The analysis of the declining role of the PDS

and the internal production in the household consumption implies the

increasing dependence of the people of Kerala on the market. There is

however no reliable information on the supply of food grains to the state

through the import by the private traders. Since we do not have authentic

information on the private trade, we arrive at the figure by deducting the

quantum of ration rice consumption and the internal production from the total

cereal consumed in the state. The methodology made use to arrive at the

estimates is explained in Chapter I. The source of rice consumption in Kerala

as revealed in the successive NSS Surveys is given in Table 4.11 (Fig 4.7).

Table 4.11 Source of rice consumption in Kerala (Iakh MT)

Heads 1972-73 1977-78 1987· 88 1993·94 1999-00 2004· 05 Internal 12.39 11.65 9.29 9.04 6.93 6.00 production (63.94) (45.06) (29.61) (27.79) (21.10) (18.08)

6.98 11.01 12.87 14.51 14.47 5.97 PDS (36.02) (43.06) (41.02} (44.60) (44.06) (16.97) Deficit! .01 2.90 9.21 8.98 11.44 21.50 Pvt. traders (0.04) (11.35) (29.37) {27.611 (27.59) (64.95)

19.38 25.5 31.37 32.53 32.84 33.18 Total (100) (100) (100) (100) (47.25) (100) Source: NSS Reports (nce consumption and consumption from PDS), Directorate of

Economics & Statistics (Internal rice production)

Total consumption of rice: Kerala recorded the lowest population growth

rate among Indian States, of 9.4 percent in the 1991-2001. The declining per

capita rice consumption from 1993-94 onwards was shown in the last

Chapter. The fall in the per capita rice consumption combined with slow

growth of the population has resulted in the slow increase in the total rice

consumption in the State since 1993-94. The annual cereal consumption in the State is around 33.18 lakh MT

Share of internal production: While Kerala has always known to be deficient

in food grains, the state managed to produce around 64 percent of its

consumption requirements in 1972-73. However the share of the internal

168

Chapter IV PDS in Kerala-Camparisan af Pre and Past-TPDS Phases

production declined rapidly in each subsequent period, and by 2004-05, the

State produced just 6 lakh tomes, fulfilling only about 18 percent of the rice

requirements in the State. Thus presently, internal production is able to meet

less than one fifth of the requirements of rice in the State.

Share of PDS: In the early 1970s, the PDS contributed to about 36 percent of

the rice consumption in the State. It increased to around 43-45 percent during

the late 1970s to 1980s. In the 1990s, more than half of the rice requirements

of the population were being made through purchases from the PDS.

However following the decline in the offtake from the ration shops since 2000-

01, the share of PDS to consumption fell to about 17 percent during 2004-05.

Some quantum of rice is also distributed through the State run Maveli stores

(purchased from the rice milers), though they do not offer similar price

advantages like the PDS. Hence, a separate mention of this source is not

made here.

Deficit! private traders: The production of rice has been declining from the

mid 1970s. The off takes from PDS, which was also once a dominant source

of rice consumption, has drastically declined from the initial years of the

current decade. The combined share of internal production and PDS meets

just about 35 percent of the total rice requirements in the state, at present.

The drastic decline in the shares of these two sources and the resultant rising

deficit in rice availability and consumption is increasingly being met by imports

by the private traders from the other States of the country. From being a

negligible source of rice consumption in the State in 1972-73, the relative role

of the private sector increased in each subsequent decade and by 2004-05,

around 65 percent of the consumption requirements were being supplied by

the private channels through the market.

169

Chapter IV POS in Kerala-Comparison of Pre and Post-TPOS Phases

Sources of Rice Consumption in Kerala

70 .-----------------------------------------~

60 Q) 50 W 40 i 30 ~ a.. 20

10 o

1972-73 1977-78 1987- 88 1993-94 1999-00 2004- 05 Year

Fig 4.8 Source of rice consumption in Kerala

C Internal Prodn.

CDefic iti P vt. traders

The district-wise source of rice consumption is also estimated from the early

1990s to help understand the importance of different sources in the total rice

consumption of the households and the magnitude of the deficit in each district

during the Pre-TPDS and the Post-TPDS phases. The offtake from the PDS is

taken as the contribution of PDS towards rice consumption. As given above,

while some amount of approximation is present in the estimation and the exact

picture can emerge only with the avai lability of statistics on amount of food

grains imported to the state through private traders, the analysis is aimed at

seeing the broad pattern and variation in the sources of consumption in each

district over the years. The district-wise source of rice consumption is given in

Tables 4.12 to 4.15

170


Table 4.12 District-wise source of household consumption of rice (1992-95)

1992-93 1993-94 1994-95 % % % 0/0 0/0 0/0 % 0/0 %

DIST PDS PROD DEFICIT PDS PROD DEFICIT PDS PROD DEFICIT TVM 53 11 36 41 10 49 26 10 66 KLM 52 21 28 41 19 40 19 19 64 PTA 53 26 21 35 23 42 19 23 60 ALP 55 56 -11 46 50 4 35 50 18 KTM 54 30 16 42 30 28 26 30 47 IDK 60 8 32 47 6 47 42 6 55 EKM 56 37 7 49 33 18 28 33 41 TSR 56 40 4 51 36 12 42 36 25 PKD 43 127 -71 38 119 -57 30 120 -47 MLP 54 24 22 57 20 23 55 20 29 KKD 57 5 38 62 4 34 53 4 46 WYD 54 67 -21 51 61 -11 59 61 -15 KNR 60 12 29 64 12 24 57 12 34 KZD 53 21 26 51 22 28 41 22 41 TOTAL 54 29 17 45 28 28 38 25 37 .. Source: CIvil Supplies Department (Offtake), Production (Directorate of Economics & Statistics, GOK), Average rice consumption (NSS Surveys)

Table: 4.13 District-wise source of household consumption of rice (1995--99)

1995-96 1996-97 1998-99 % % % % % % % % %

DIST PDS PROD DEFICIT PDS PROD DEFICIT PDS PRO[ DEFICIT TVM 26 10 65 32 8 60 32 6 62 KLM 16 17 67 21 16 63 21 13 65 PTA 15 21 65 23 18 59 23 14 63 ALP 32 54 13 43 38 19 43 43 14 KTM 26 27 47 41 21 37 41 14 44 IDK 54 9 37 78 9 13 79 7 14 EKM 28 33 39 44 30 26 44 24 32 TSR 34 36 30 49 34 17 49 27 24 PKD 23 104 -27 41 109 -50 41 97 -38 MLP 49 18 33 59 15 27 59 13 28 KKD 50 4 46 58 4 39 58 3 39 WYD 61 59 -20 72 47 -19 72 50 -22 KNR 58 11 31 64 11 26 64 10 26 KZD 38 16 46 50 17 34 50 12 38 TOTAL 35 25 40 46 24 29 47 25 28

Source: Same as above

171


Table: 4.14 District-wise source of household consumption of rice (2000-03)

2000-01 2001-02 2002-03

% 0/0 % % % % %\ % 1\ %

DIST PDS PRO[: DEFICIT PDS PROD DEFICIT PDS PROD DEFICI

TVM 15 4 81 13 4 83 9 4 87 KLM 16 11 72 12 9 79 6 9 85 PTA 14 13 73 11 10 79 18 10 71 ALP 21 46 33 16 33 52 13 41 46 KTM 16 21 63 15 17 68 16 15 69 10K 18 6 76 17 9 75 10 7 83 EKM 11 21 69 9 19 72 6 19 75 TSR 17 26 57 16 27 57 16 28 56 PKO 13 95 -8 12 97 -9 13 87 . -1 MLP 14 12 75 13 11 75 15 10 75 KKO 15 3 81 14 3 83 17 2 81 WYO 19 41 40 16 38 45 22 37 42 KNR 15 8 77 13 8 79 19 8 73 KZO 16 14 70 15 12 73 19 12 69 TOTA 15 20 65 13 20 67 9 19 72 Source: Same as above

Table: 4.15 District-wise source of household consumption of rice (2003-05)

2003-04 2004-05 % % % % % %

DIST PDS PROD DEFICIT PDS PROD DEFICP TVM 12 3 85 17 4 80 KLM 8 8 84 17 6 77 PTA 9 10 81 14 8 78 ALP 17 28 55 21 35 44 KTM 19 13 69 18 16 67 10K 19 6 75 23 6 71 EKM 11 17 73 12 17 71 TSR 19 25 56 19 28 54 PKO 14 88 -2 15 92 -7 MLP 16 9 75 16 9 75 KKO 17 2 80 17 2 81 WYO 24 33 43 33 33 34 KNR 18 7 75 19 7 74 KZO 18 11 71 20 10 71 TOTAL 15 20 65 17 18 65 Source: Same as above

172


In the early 1990s, Palakkad, Wayan ad and to a lesser extent Alappuzha were

the only districts where the combined share of own production and PDS

exceeded the total intake of rice. Palakkad, known as the rice bowl of Kerala is

the largest rice producing district in the State and remains the only district in the

state with a negative share of the private trade in total consumption. In terms of

self sufficiency, Palakkad was the only district in the State which was self

sufficient in rice till the late 1990s. The trend reversed even for the district and

from the year 1997-98 onwards, none of the districts in Kerala are self sufficient

in rice production.

The districts with the highest deficit were Thiruvananthapuram, Idukki and

Kozhikode. These are also the districts with the lowest per capita production. A

negative correlation could be observed between the production and offtake till

1997-98, after which it turned positive. The results were however significant only

for 1992-93. In other words, to a greater extent, the deficiency in production in

these districts was compensated by the larger offtake from the PDS i.e. till the

introduction of TPDS in the State.

The decline in absolute and relative terms of both the internal production and·

PDS in meeting the total consumption requirements in the State is certainly

worrisome given its likely affect on the food grain availability in Kerala. The

dependence on the outside supplies for cereals makes the food security in the

State vulnerable to fluctuations in production elsewhere and the distant location

of the State would mean higher prices for the staple food grain of the Keralites.

Besides, given that all the districts in the state are deficit in production, the price

differential is also expected to increase.

In this regard the following needs to be answered:

1. What has been the effect of the rising deficit or increasing role of the

private traders on the retail prices?

2. Have the private traders responded to the increasing demand with a

matching supply to stabilize prices?

173


3. Have the inter district price differentials increased/ decreased in the Post-

TPDS phase (discussed in the next Chapter).

If the market is quick to respond to the changed scenario with timely increased

supply from the neighboring States, then the prices should be more or less

uniform apart from the margins allowed for transportation cost and there should

be no worry on the prices and thereby on the food security front. However a

reverse situation should be alarming for the State considering that the commodity

in question here is rice, that which satisfies more than 90 percent of the cereal

requirements of the population.

Table 4.16 shows the correlation between the district-wise rice deficit (taken as

the degree of market dependence) and the average district level retail market

price of rice. However an assumption that is made in the exercise is that only the

requirement over and above what is produced in each district and the offtake

from the PDS (offtake) is being supplied by the private traders/ market.

Table 4.16 Correlation Co-efficient: District-wise rice deficit and open

market retail price

Year Rice deficit as a % of total rice

1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05

* Significant at 1 % level ** Significant at 5% level

consumption 17.08 27.61 37.08 39.75 29.18

NA 28.30

NA 64.64 67.05 72.09 64.66 64.95

Correlation Coefficient

0.19 -0.10 -0.07 0.15 0.22 0.39 0.28 0.31 0.52* 0.60* 0.61* 0.75** 0.63*

Prior to 1999-2000, the average per capita rice deficit was about 10-40 percent of

total consumption (Tables 4.12 to 4.15). From 2000-2001, this rose to 65 to 75

percent. For the districts with the highest deficit viz. Thiruvananthapuram, Idukki

174


and Kozhikode this was as high as 85-90 Kgs in per capita terms. It can be

observed from Table 4.18 that the coefficient of correlation between deficit and

average market retail price is positive but not significant for the period 1992-93 to

1999-2000. However the increasing rice deficit has been significantly having an

impact on the market price. From the year 2000-01, the coefficient of correlation

between deficit and average market retail price is positive and significant

indicating that the market price has been particularly high in those districts with

higher market dependence! deficit. The higher prices in these districts would

particularly affect those poor households who would otherwise depend on the

PDS exclusively to meet the consumption requirements of rice but because of the

low entitlements are forced to access the market and the genuine non-targeted

households facing liquidity constraint. The consumption of these households may

even go down. The net effect of high prices of a basic commodity like rice is that

the income left for other purposes would be reduced! marginal for the income

poor households, resulting in a significant adverse effect on the general standard

of living of the· masses.

4.5 Factors influencing ration offtake

Studies on Kerala (George 1979, Nair 1993) have through empirical results

arrived at the conclusion that offtake of rice from the PDS cannot be explained by

the demand factors and that the same may be supply driven or in other words

constrained by the amount allotted to the State from the Central pool. The

econometric analysis of the factors determining the demand for PDS grains were

seen to be yielding insignificant results. In addition to the insignificant results of

the regression coefficients, the above conclusion has been strengthened by the

maximum lifting of the given allotment from the ration shops implying that when

the margin between the two prices is high and when the availability is less than

the quantity demanded by the consumers, the actual offtake of rice cannot reflect

the true demand.

175


The following equations were considered by George in his study of PDS in

Kerala11

Qrr = F (Por/ Prr, Prw, Pt)

Qrw = F (Qrr, Por, Prw/ Prr, Ptl Prw)

Whereby,

Qrr = Quantity of ration rice sold through the PDS

PorI Prw = Ratio of open market price to PDS price

Prw =

Pt =

Price of ration wheat

Price of tapioca

Prw/ Prr = Ratio of price of ration wheat to price of ration rice

Ptl Pow = Ratio of price of tapioca to open market price of wheat.

However with the underutilisation of the PDS and the greatly reduced offtake

from the PDS consequent to the introduction of PDS and the price hiking of the

ration food grains, the situation in Kerala at present is vastly different from that

contemplated above and hence requires detailed analysis. With greatly reduced

off take from the PDS and the annual offtake from the ration shops far lower than

the annual allotments, especially of the APL consumers, the offtake can hardly be

caJled a result of the supply constraint. Earlier studies on Kerala ~ave concluded

that PDS offtake in Kerala is supply determined since none of the independent

variables considered showed significant values and the offtake in the respective

years were almost equivalent to the allotment. Further, the greatly reduced share

of cereal substitutes prominently tapioca in the consumption basket of the people

of Kerala as revealed by the NSS surveys and discussed in the earlier chapter,

implies that tapioca can no longer be considered as a good substitute of rice and

hence is not to be part of the demand function.

11 (George (1979) in his study on "Public Distribution of foodgrains in Kerala: Income distribution implications and effectiveness" examined the determining factors of the quantity of grain sold through the ration shops. By using a normal demand variables model, he found that the volume of ration rice sold was influenced by supply constraints and not by variables influencing the consumer choice

176


In the following section, a multiple regression exercise is undertaken to explain

the quantity of rice and wheat sold through the ration shops. The regression

analysis is carried out on the district-wise data for all the years for which data is

available given the differences in the district-wise retail open market prices of rice

and hence the ratio between the ration price and the market price, a variable

considered in the function. Considering the difference in the APL and BPL issue

prices, the relative prices of both the categories would also be different. An

aggregate state-level analysis would not be able to reveal the impact of the

differences in the price differences if any, on the offtake. Further, separate data

on offtake for APL and BPL categories are available only for a limited number of

years.

The regression equations thus considered are given below:

PHW = F (PCOrr, POMr, BPL %,) ........ (1)

PHRsPL =. F (PorI Prr, BPL %, PCPr ).... (2)

PHRAPL = F (PorI Prr, PCY, PCPr) ....... (3)

Where,

PHW =

QRRAPL =

QRRsPL=

PCOrr =

POMr =

BPL% =

PorI Prr =

PCY =

PCPr =

Per household ration wheat offtake by all households

Per household ration rice offtake by APL households

Per household ration rice offtake by BPL households

Per capita offtake of ration rice by all households

Average open market retail price of rice

Percentage of BPL population

Ratio of open market price to ration price

Per Capita Income

Per capita rice production

WHEAT: The average consumption of wheat has been increasing in Kerala over

the years, despite rice still being the key staple item. The offtake of wheat from

the ration shops is regressed on the Average open market retail price of rice

(Porn), Per capita offtake of rice from the ration shops (PCOrr) and percentage of

177


poor population in a district. As per the availability of data, the exercise is

carried out for 1999-2000 to 2004-05. The considerations behind the inclusion of

the explanatory! independent variables considered along with their economically

meaningful! theoretically expected signs are given below.

POMr: The rice and wheat being substitutes (though not very good), a high

open market price of rice should ideally prompt the consumers to consume more

of the ration wheat. This implies a positive relation between POMr and wheat

offtake.

PCOrr: The variable is taken to see if ration rice and wheat are substituted by the

consumers. Considering that they are substitutes, an inverse relationship is

expected between the two variables.

BPL percent: Poverty percent implies the percentage of population below poverty

line in each district. A positive relationship between poverty and wheat offtake

would imply targeting of PDS wheat to the poor. On the other hand a negative

relationship would imply that economically better off districts are benefiting more

from the ration wheat. Considering the general perception that wheat is

consumed more by the economically better off sections, the expected sign of the

coefficient cannot be predicted.

BPL & APL Rice: The per household BPL and APL offtake of rice from the ration

shops is regressed over Port Prr or the ratio of open market price to the ration

price, percent of BPL population, per capita rice production and Per capita

income. The considerations behind the inclusion of the explanatory! independent

variables along with their economically meaningful! theoretically expected signs

are given below.

Port Prr: The open market prices are not only high but also there is considerable

inter district differences in the market price of rice. The relative prices are

considered among the explanatory variables to see if the offtake or the

consumption of ration rice is higher in those districts with higher relative prices.

Considering that the households are expected to buy more ration in areas where

178


the open market prices are higher, the regression coefficient is expected to have

positive signs.

BPL percent: The percentage of population below poverty line is taken as an

explanatory variable to see if the ration consumptionl offtake is higher in those

districts with higher proportion of poor population. Considering that the off takes

are expected to be high in those districts with higher level of poverty, the signs of

the regression coefficients are expected to be positive if targeting is proper and

BPL rice is consumed more by the target population.

Per capita production: The v~riable is included considering that higher production

ought to increase the availability of rice in the district and hence make people

less vulnerable to supplies from outside. The coefficients are expected to be

negative.

For APL rice, Per capita Income (PCY) is taken as the proxy indicator of the level

of economic development of the district. Considering that the issue prices for the

APL households are much higher than that of the BPL, the higher offtake is

expected in areas with low economic development.

The results of the regression analysis of wheat is given in Table 4.17.

Table 4.17 Regression Results of factors affecting wheat offtake in Kerala

Explanatory 1999-variables 00 POMr 3.413 t values 2.72* PCOrr -.098 t values -.552 BPL% -.524 t values -1.764 R<! .56 F 3.62** .. * Significant at 5 percent level

**Significant at 1 percent level

200~

01 -.055 .266 -.031 .438 .026 .405 .04

.132

2001 2002 2003 2004 -02 -03 -04 -05

-1.48 1.005 .487 .902 1.78 2.405* 1.62 .925 -.154 -.204 -.046 -.132 -.470 -2.703* .542 -.651 -.683 -.296 -;085 -.108 -2.74* -2.53* -2.27* -.330

.57 .68 .60 .12 3.64** 5.80** 3.14* .427

The analysis of the results of the regression exercise reveals that other than two

exceptional years, 2000-01 (year of exceptionally low offtake of rice and wheat

179


from the ration shops) and 2004-05, the regressors had significant effect on the

regressand as revealed by the F test and about 56-70 percent variation in the

quantities of wheat sold through the ration shops could be explained by the

explanatory variables considered in the model. All the regression coefficients

(except the open market price of rice in two years) showed meaningful directions

of change as indicated by the signs of the coefficients.

Poverty (percent of BPL households) was seen to be inversely related to the

wheat offtake in all the years and had statistically significant results for three

years 2001-02 to 2003-04. This implies that the ration offtake was higher

amongst the districts with lower proportion of the poor population in all the years.

However the fact is that though the consumption of the commodity has increased

in the recent years, it is more consumed by the economically better off sections of

the population. Therefore negative relationship does not clearly mean that there

is improper targeting, since the decision whether or not to consume wheat could

be a voluntary decision of the households.

The open market price of rice was seen to have a positive significant relationship

with the per capita offtake in two of the years considered i.e. 1999-2000 and

2002-03, the years when the open market prices of rice were comparatively

higher implying that in the years of high open market price, more of ration wheat

is consumed by the people. As to whether more of wheat was indeed substituted

for rice can only be confirmed if the total quantities demanded and consumed

from all sources including that of the market is analysed. However this is not

possible because of unavailability of data on quantities of rice consumed from the

market.

As for per capita offtake of rice (PCOrice), while the signs of coefficients were as

per a priori considerations, none of these results except that of 2002-03 are

statistically significant implying thereby that ration wheat and rice are not easily

substituted for each other generally.

The year 2002-03, was an exception in this regard. It was during this period that

the rice offtake from ration shops had touched the trough (refer figure 4.4) In this

year, as revealed by the values of R2, about 70 percent of the variation in wheat

180


could be explained by the three explanatory variables considered. While

exhibiting economically meaningful directions of change, all the three regression

coefficients showed statistically significant results for the year. The values of the

coefficients for the year can be interpreted as given below:

A rupee increase/ decrease in the price of the open market rice would increase/

decrease the per capita wheat offtake by .005 Kgs. Similarly, when per capita

offtake peo of rice decreases/ increases by 1 Kg, the per capita offtake of wheat

would increase/ decline by .20 Kgs. Also when poverty increases by one percent,

per capita offtake would decline by .03 percent. Thus it can be inferred that

during a period of extremely low offtake of rice from the ration shops, wheat was

infact substituted for rice, although a low quantum of money saved from the

reductions in purchases of rice was actually spent on wheat consumption as

revealed by the value of regression coefficients. The rest may have been

substituted for open market purchases of rice (though as explained above, it is

difficult to validate this statement in the absence of data).

To ascertain the presence and extent of multi-collinearity in the data, correlation

coefficients of all the explanatory variables is worked out and the results are

given in Table 4.18

Table 4.18 Correlation coefficients of explanatory variables of wheat

Corr X1&X2 CorrX2 &X3 CorrX3 & X4 1999-2000 .228 -.372 .033 2000-01 .209 -.232 .082 2001-02 .229 -.337 -.160 2002-03 .263 -.306 .288 2003-04 .080 -.338 -.008 2004-05 .013 -.393 .017

X1=pnce of open market nee, X2 = Per capita offtake of nee, X3 = % BPL

As we see above, the low correlation coefficients of the explanatory variables

indicates that the problem of multi-collinearity is not serious in the above

regression exercise and hence the above observations based on the regression

coefficients can be confirmed.

181


APL Rice: The regression exercise for APL rice showed that only in one of the

four years considered I.e. 2004-05, the regressors had significant effect on the

regressand as revealed by the F test, the signs and significance of the individual

coefficients and the percentage variation explained by R2 values. The results of

regression analysis carried for the year 2004-05 is shown in Table 4.19.

Table 4.19 Regression Results of factors affecting APL rice offtake

Explanatory variables Pori Prr t values pev t values pePr t values R<! F ..

* Significant at 5 percent level **Significant at 1 percent level

2004-05 -3934.80

-.605 .-832 2.97** -58.79 -1.16 .53

5.27

The APL offtake had been very low in a" the years considered and it is only in the

2004-05 that the offtake has improved to some extend from the ration shops.

Therefore it is not surprising that the regression coefficients of a" but the last year

showed a significant relationship with the APL offtake. In 2004-05, what is worth

noting is that the offtake is seen improving in the economically backward districts

of the State, as seen by the negative signs of the regression coefficients during

the period. Considering the perception about the quality of food grains from the

ration shops, it could be the result of rising food insecurity amongst some

households that is driving back the people to the PDS. However nothing concrete

can be said by analyzing results of one year and the results can be confirmed

only in the long run.

BPL Rice: In none of the six years for which the regression exercises were

carried out for the BPL households, did the regressors have a significant effect on

the regressand implying that the variation in the per household BPL offtake in

Kerala could not be explained solely in terms of the explanatory variables

considered. There seems to be diverse reasons for the inter-district variation in

the per household offtake. The exercise would have yielded meaningful results if

the poor districts were consuming more in per household terms than the

182


comparatively richer districts (as reflected by proportion of people below poverty

line) and! or if the consumption from PDS is seen considerably higher in districts

with large difference between the open market and the issue prices.

That the utilization levels are not high in the poorer districts implies that TPDS is

not reaching the targeted population. Alternatively it could also imply that that

targeting itself is not sound and! or the identification of targeted beneficiaries is

not in line with the actual poor population in each district. Table 4.8 showed that

the offtakes in the districts are broadly in consonance with the number of

identified BPL households, though wide variation was observed between the BPL

ration cards distributed and number of households below poverty line in few

districts.

Given that the variation in offtake cannot be pinpointed to just the economic

criteria or the relative price differences, a more in-depth analysis of the possible

factors affecting the offtake in various districts have to be made. The first step

would be to identify the better performing districts in terms of per household

offtake and then possibly identify the factors that may be responsible for the

better utilization of the PDS. The highest per household BPL offtake was seen in

the districts of Wayanad, Kannur, Kasargode, Kozhikode and Malappuram while

Kottayam, Thrissur and Idukki came in the above average category. On the other

hand, the proportion of population below poverty line people was the highest in

Palakkad, Wayanad, Alappuzha, Kasargode and Malappuram.

Amongst the above districts, Wayanad, Kasargode and Malappuram distri~ts had

both high proportion of poor population and also the lowest per capita income

and thus are the clear food insecure regions in terms of the economic criterion.

The higher utilization of the PDS is therefore warranted. Similarly though Kannur

has a low proportion of BPL households, the district has comparatively low per

capita income.

On the other hand, the higher utilization in Kozhikode cannot be explained in

terms of the above two criteria given that it is reasonably better placed than the

others in the above parameters. Kozhikode is however the most food deficit

district in the State with the internal production in the State meeting less than 5

183


percent of its rice requirements. The price gap i.e. the difference between the

open market price and the retail price is amongst the highest when compared to

the other districts. Even prior to the introduction of the TPDS in Kerala,

Kozhikode has been amongst the highest ration consuming districts of the State.

Hence, the higher utilization of PDS in the district may be on account of all the

above reasons viz. the historically high utilization rates, the extremely low internal

production and the high price difference between the ration and the open market

prices.

Palakkad despite having the largest percentage of BPL households, (52 percent)

and despite being the district with the lowest per capita_income is not amongst

the top districts in the utilization of PDS. This could be owing to the fact that the

district is the largest producer of paddy, producing more than 60 percent of its

rice requirements. Large number of people are able to meet their consumption

needs from their own produce and hence the low proportion of BPL cardholders

in the district.12. Given the large availability of rice, the average market retail price

is the lowest amongst the districts; and the lower utilization levels could be

explained by the above factors. The case of underutilization of PDS in Alappuzha

district, where BPL households form 45 percent of the total households can also

to some extent be explained on the above lines since the district is the second

largest producer of rice in the State.

Kottayam, and Idukki deserve special mention as these are the richest districts in

terms of the per capita income. The proportion of BPL households at 18 percent

and 15 percent in the respective districts is the lowest amongst the other districts

of the State. Though the share of BPL households (to the total number of BPL

households) in the districts are just 3.43 percent and 2 percent respectively

according to the 1998 BPL Census, the share of BPL ration cards distributed in

these districts (to the total cards distributed in the State) is almost double at 6.6

percent and 4.5 percent. Idukki, like Kozhikode has a history of high PDS

utilization. However, the case of Kottayam is not the same since in the Pre-TPDS

phase, it was not amongst the high PDS utilizing districts.

12 The district has 11.87percent of the BPL population but just 7 percent of the caidholders.

184


Hence for both these districts, inclusion errors seem to be substantial. However

inclusion errors by itself leading to higher utilization of the System does not seem

to be a valid explanation, as the possibility of the non-poor making very large

purchases from the PDS merely on account of possessing BPL cards seems

remote in Kerala13• A higher than proportionate distribution of ration cards may

pave way for illegal diversion of grains to the open market. However the extent of

diversion cannot be known from the offtake figures.

13 Chapter 6 with the help of primary' survey results explain that the utilization levels of the non-poor wrongly classified under the BPL category is extremely low.

185

Documents

CHAPTER 4 CHAPTER FOUR: PUBLIC DISTRIBUTION SYSTEM IN ...shodhganga.inflibnet.ac.in/bitstream/10603/14480/12/12_chapter 4.pdf · Chapter IV PDS in Kerala-Comparison of Pre and Post-TPDS