Cash for Food: The Need for Caution

Overview

The Union government notified the Cash Transfer of Food Subsidy Rules on 21 August 2015, without much publicity. The proposal to introduce cash transfers instead of foodgrains in the Public Distribution System (PDS), via the National Food Security Act 2013 (NFSA), is ill-conceived and, if implemented, will be harmful to food security in the country. Concerns abound in relation to a programme of cash for food replacing the current PDS. These include denial of assured minimum foodgrains to the poor, enhanced vulnerability to inflation, inadequate access to banks, and decreased public procurement at minimum support prices. In a context where leakages in PDS are steadily declining and the NFSA offers greater coverage (and hence lower targeting errors), what is required is an expansion of a strengthened PDS rather than dismantling it. Moreover, as FAO (2015) discusses, many researchers remain unconvinced that cash transfers would bring about drastic reductions in leakages in welfare programmes, as there is nothing intrinsic to cash transfers which renders them less vulnerable to leakages: irregularities are already found to be high in existing cash transfer programmes.