The government proposes to bring dal and edible oil under the Public Distribution System (PDS). The prices of dal and edible oils have risen sharply in recent months and are expected to remain high for some more time. A total of Rs 1500 crore will be spent by giving a subsidy of Rs 10 per litre on oil and Rs 10 per kg on pulses to BPL families.

However, a 2005 Planning Commission report that evaluated the Targeted PDS system shows that this is one of the most inefficient ways of implementing income transfers to the poor. For every one rupee worth of income transfer to the poor, the government spends Rs 3.65. In other words, only 27 per cent or Rs 405 crore of the proposed government spending of Rs 1500 crore on this subsidy is likely to reach the poor. Ila Patnaik explains

• To what extent does the PDS reach the poor?

Of the estimated 45.41 million Below Poverty Line (BPL) households in India in 2001, just over half (57 per cent) are covered by the PDS. The ‘exclusion error’ that measures the percentage of poor households excluded from the PDS is highest in Assam (47.29 per cent), Gujarat (45.84 per cent), Maharashtra (32.69 per cent) and West Bengal (31.74 per cent).

In addition to the ‘exclusion error’ the study also makes an assessment of an ‘inclusion error’ when families who are not poor are given BPL cards due to wrong classification or corruption. For example, in Karnataka 42.43 per cent families with BPL cards are not poor. In Andhra Pradesh they are 36.39 per cent of the total BPL card holders. In Kerala they are 21.04 per cent. In Himachal 20.39 per cent, and in Tamil Nadu 49.65 per cent.

... contd.