As a major portion of a poor family’s income is spent on food grains, an increase in its purchasing power translates itself into increased demand for food grains. This benefits the producers through increased prices. Thus a food security system that transfers purchasing power to the poor has to be in the interest of farmers. If the PDS is replaced by a system of food stamps (or food coupons) or smart cards, this is precisely what will happen.

Food stamps are cash vouchers given to the poor. The poor can exchange it for foodgrain through any registered kirana stores. Shopkeepers can redeem the coupons in banks or post offices. There being no separate delivery mechanism for the subsidised food, the question of illegal diversion to the open market does not arise. Competition among the kirana stores would ensure the quality of the foodgrain. Some might argue about the possibility of counterfeiting of coupons under the proposed scheme. But such a problem has technological solutions. Electronic redemption and monitoring will allow for early detection of abnormal patterns. Smart cards are debit cards which will work exactly like credit cards. Government will transfer the subsidy amount electronically to the smart cards.

This system could end the artificially created antagonism between producers and consumers and the unfair taxation of those participating in agriculture. Improved efficiency provides tremendous scope to increase the subsidy rate and also to bring more population under food security cover. The system will also end the dumping on local coarse cereal producers in many states of the country. The poorest of the producers are always denied the market prices as the PDS supplies only wheat and rice at subsidised rates distorting the market prices.

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