Saturday, October 23, 2010

How to fix PDS? Abolish it. Let FCI run Food Retail shops.

PDS (public distribution system) is socialism. UID is a means to deliver freebies. apparently with better targeting. Economists from both the right and the left, have argued why targeting doesn't work, keeps beneficiaries out and instead helps the crooks/babus swindle the money. Swaminathan Aiyar has suggested self-targeting.

All the current discussion is about fixing PDS. Becos PDS is sanctioned/budgeted by parliament and hence people are trying to fix the problems. If anyone is interested in a real solution, here's a right-liberal one.

1. Govt has no business running PDS or the Minimum Support Price (MSP) racket. both disturb the free market on food grains and hence should be abolished. Abolish fertilizer subsidies too.

2. Allow FCI (Food Corporation of India) to open retail shops. PDS works somewhat better if all aspects are owned by a single entity as observed in Tamilnadu and Chattisgarh govt owned PDS shops/transport.

3. Let FCI find real estate in every corner of the country with partnerships from Amul, Nandini, Aavin, HOPCOMS, Karpagam etc. Let state govts provide real-estate in exchange for equity.

4. Let FCI procure food grains by open competitive bidding. with small farmers getting the option to match the lower price quoted by big industrial farming companies.

5. Allow 100% foreign direct investment in Food retail. Let Wal-Mart, Costco, Carrefour, Tesco compete and force Ambani/Mittal/Biyani to bring food prices down.

6. Remove all restrictions on export or import of food grains. Quantitative restrictions are so uncool in Laissez faire economics.

7. If despite all this, FCI/others can't sell food grains at reasonable prices (say wheat at 3 rupees), and remain profitable, then let parliament write off the losses of the food retail industry. Such write-off is anyday more acceptable than bailouts for the aviation industry. And those bailouts will be lot cheaper than what goes down the drain in PDS/MSP.

And all the above is not some terrible scheme against farmers. Infact its farmers who are demanding something like that. Or atleast those behind Shetkari Sanghatana and Swatantra Bharat Paksha do. (


Arun said...

I didn't follow your post fully(I didnt bother to lookup what PDS etc is). Anyway you seem to propose a free market and no regulation. I think this is good too.
But why do you say subsidies and regulation wont affect poor ppl/farmers? Wont the big guys(in retail) crush these small guys?
Subsidized food is bad for govt economically(so is our tax spent on all such similar things), but doesnt it help the poor who couldn't afford otherwise?

Balaji said...

oh, please. its a huge misconception to brand Laissez faire economics as one without regulation. Ofcourse there must be regulation.

PDS is not a regulatory body. its your ration shop. Govt runs them in two states (TN, Chattisgarh) and provides cheap food grains in all the other states. Its an abyss of corruption.

Scores of poor people don't have ration cards but number of ration cards in every state is more than the number families in the state. meaning officials/shop keepers/crooks have millions of bogus ration cards, get grains and sell it for huge profits (atleast 200%) in the open market.

my solution will result in universal availability of food grains at cheaper prices becos of competition in the market. and if food prices still don't drop, i even support a rather socialist intervention by parliament to write off the loses of FCI becos of selling food at cheaper rates.