PDS plagued by leakage, diversion of grains: World Bank

New Delhi: Contending that benefits of public distribution system have been "limited" for the poor, the World Bank on Wednesday suggested that the idea of cash transfers instead of foodgrains can be considered in the long term.

It, however, insisted that the bank is not "taking a position" on the issue of cash transfer, which has generated a lot of debate. While the National Advisory Council is reportedly opposed to the concept, some activists claim it might ultimately bring private entities into the system.

Unveiling a report on performance of India's anti-poverty schemes, World Bank Lead Economist of Social Protection in India John Blomquist said though the PDS absorbs one per cent of GDP, it is plagued by leakage and diversion of grains.

"Only 41 per cent of the grain released by government reached households, as per 2004-05 figures," he said citing the study which used data from relevant ministries, National Sample Survey and its own independent surveys.

The report recommends improving implementation of the programme in short-term while maintaining that in the long term, households can be given option of a cash transfer, continuing food-based support for specific situation such as in areas where access is an issue, for disaster relief and for specific vulnerable groups.

It pointed to new initiatives like introduction of food stamps or coupons in Bihar and community participation and IT-based solutions in states like Tamil Nadu and Chhattisgarh.

To a question whether the Bank is suggesting scrapping of the PDS system, Blomquist replied in the negative but talked about how cash transfers are "fundamental pillar" of social protection system in many countries.

Asked about impact of inflation on cash transfer, he said a component of inflation adjustment will be needed to insulate the system from such fluctuations.

He also said there is a potential for engaging private sector in public-private participation mode for social protection. He also said debate is open on whether to go for targeted schemes or opt for universalisation.

On issue of corruption, he said leakages often occur due to "irregularities" but there are also capacity constraints.

The report recommended overhauling existing targeting mechanisms, including below poverty line (BPL) figure revision and pointed to instances of "misclassification" of BPL.

It suggested cash-based social assistance for chronically poor, connecting cash transfer to core education and health services and addressing "neglect of urban social protection".

Blomquist said states should be given "greater flexibility as one size does not fit all". They should get choice in programme mix of centrally-supported schemes, he said.

The report suggested a formula of three core pillars -- social assistance (largely cash-based transfers), public works (MNREGA and its expansion to urban areas) and basic social security (package for those outside organised sector) along with block grants for states to supplement them.