A Land In Limbo

PM Manmohan Singh is on a visit to Bangladesh on 6 and 7th of September. This visit was touted as historic and of import by the media and there is reason to do so. This was first in last 12 years when an Indian PM was on a visit to our eastern neighbor. The visit was of crucial significance within the context of India’s bilateral agreements involving the disputed border and sharing of teesta river water between both the countries. This was aptly referred to by the economist as 'a watershed agreement in the annals of a bizarre geography'. In this context, it would be interesting to know the current state of affairs in the relations between the two countries and more interesting, to study what makes this geography so unique.

The border that we share with Bangladesh unlike our other geographical neighbors such as Pakistan, Nepal, Bhutan, Sri Lanka, Maldives or Myanmar, has one of the most bewildering feature called "enclaves complex" which exist along Bangladesh's northern border with India and is called Cooch Behar enclave complex. The story behind this enclave complex is too compelling to tell and has deep historical and political bearings.

An Enclave, as Wiki puts it, is a territory whose geographical boundaries lie entirely within the boundaries of another territory i.e. fragments of one country which are entirely surrounded by other. The word "enclave" entered into the dictionary of British diplomacy in 1868 and owes its etymological origin to Latin word "clavus" which means 'embedded and surrounded'.

In his book "Stateless in South Asia: The making of the India Bangladesh Enclaves”, Wilhelm Schendel refers to about 250 such enclaves surviving in the world today and are found mainly in three geographies - western Europe, eastern fringes of former soviet empire and south Asia. Most of the enclaves in south Asia are found along the borderland of India-Bangladesh. Cooch Behar, as the territory falling into the Indian side of the border called, is a district in north Bengal which once had been the seat of the princely state of Koch Bihar, ruled by the Koch dynasty. Cooch Behar possesses almost 200 exclaves out of which 106 are in Bangladesh. Of those, 3 are counter-enclaves (enclaves within enclaves) and world’s only counter-counter enclave i.e. a patch of Bangladesh that is surrounded by Indian Territory itself surrounded by Bangladeshi territory.

The border between India and Bangladesh runs for 4096 km where its entire stretch  splits up into flat/plains (in West Bengal, Assam-Barak Valley, Tripura), riverine (southern extremity of West Bengal border and of Assam) and hilly/jungle (in Meghalaya). Along its length it touches border with Assam, Tripura, Mizoram, Meghalaya and in the longest stretch 2,217 km with West Bengal.

In his scholarly work titled Waiting For the Esquimo, Brenden Whyte chronicles the history of Bengal and of Cooch Behar dating from Mughal and British period (1500-1950) to Indo-Pakistan period (1947-1970) till formation of Bangladesh in 1971. It would be worthwhile to spend some time on the crucial periods of this history.

The Mughal Period

About 1200 AD much of the Bengal was conquered by Muslims enlarging the Mughal Sultanate except the northern part which was overrun by local tribes called Koch. During the same time, Assam was ruled by Asom dynasty. Muslim rulers from central and south Bengal, under the patronage of Mughals tried several times to attack and occupy kingdoms of north Bengal,  but could not succeed. 1500 - 1600 AD saw the rise to power of Koch dynasty, the rulers of Behar. Around that period, Muslim rulers such as Sher Shah Suri, Suleman Kararani who ruled Bengal, invaded this region several times. Finally, Emperor Akbar removed Kararani from Bengal and added it to Mughal Empire with Koch’s help.  However, the powerful landlords of Cooch Behar retained possession of their land surrounded by the area of Mughal state giving a tough fight to the Mughals. The period between 1600 -1700 AD was chaotic due to dynastic wars and fight for succession within Koch Dynasty. Taking advantage of this condition, Mughals under Eebadat Khan begun occupying the outlying regions called Chaklas, of the dynasty. These Chaklas were established by Mughals replacing the previous divisions called Sarkars for easy administration and Zamindars of these and nearby Chaklas paid allegiance to Mughal. The remaining region remained under control of Kochs.

Whyte lays importance on the crucial peace treaties happened in 1711 and 1713 between the kingdom of Cooch Behar and the Mughal Empire which ended a long series of wars in which the Mughals wrested several districts from Cooch Behar thus leading to the formation of enclaves. This is because the Mughals were not able to remove some of the powerful overlords of Cooch Behar from some of these Chaklas. So these lands were still held by these chieftains even though they were annexed from that state and were ‘enclaved’ in Mughal land. Similarly other side, disbanded Mughal soldiers who occupied lands inside reminder of Cooch Behar retained their allegiance to Mughal Empire although detached from it and ‘enclaved’ inside Cooch Behar. The Mughal Empire never considered these enclaves as problematic as they lacked the scientific methods to earmark boundaries.

The British Period

Over time Mughal Empire disintegrated and eventually the Nawab Nazir of Bengal became the de-facto ruler till the time East India Company established itself in India in mid-18^th century. After Robert Clive defeated Siraj-ud-daula at Plassey in 1757, Mir Jafar, uncle of nawab, was enthroned who was later replaced with his son-in-law Mir Kasim. The control of Bengal was slowly passed onto East India Company with the granting of Diwani of Mughal Bengal and enclaves of Cooch Behar.

The company accidently in 1814 discovered existence of Cooch Behar enclaves, their jurisdictions being held independent of company control and had no authority of magistrate. Such regions were then natural sanctuaries for notorious offenders fleeing the police.

British indirectly ruled north Bengal, and so the Maharaja and his administration were retained under their rule and eventually Cooch Behar survived as princely state till the end of colonial rule. Being the principality, Cooch Behar saw little unrest for independence from British rule.

Post-Independence

After the colonial rule ended, princely states had only two options either to join India or join Pakistan. Cooch Behar was end up being wedged between India and east Pakistan. As Wilhelm Schendel puts it succinctly “The Mughal outliers in Cooch Behar had become part of British India and then part of Pakistan, whereas the Cooch Behar outliers in Mughal territory had become part of princely state and then part of India”. Eventually in 1971, as a result of Bangladesh liberation war and Indo-Pak war, East Pakistan seceded to form Bangladesh. Remarkably, even after being a part of such an eventful history involving frequent changes in dominion, the enclaves survived.

Post 1971

Relations between India and newly formed Bangladesh were pleasant since solving the boundary problems were not on the priority of newly formed independent state.  In 1972 signing of trade agreements led to trade movements across border in specified commodities. The agreement expired after one year and then never reinstated. In 1974, a treaty was signed between two countries called Indira-Mujib Treaty. This treaty listed 15 sectors of boundary to be demarcated and agreed that enclaves of both the countries in others region shall be exchanged expeditiously with no compensation for loss of Bangladesh and with exception to few enclaves which shall be retained by Bangladesh. India also agreed to lease an access corridor between Dehagram and Bangladesh known as Teen Bigha. Teen Bigha was one such attempt to connect the Bangladeshi enclaves to their ‘mainland’.  India ratified this agreement in 1980 after passing a bill in parliament. However, the implementation did not happen due to 1) Dispute regarding the transfer and terms of lease of Teen Bigha to Bangladesh 2) an ongoing dispute regarding use of this land by anti-India elements and illegal immigrants to cross over into India, and the agreement remained a pipe dream. After lot of political and social hullabaloo, eventually in 1992 Teen Bigha was transferred to Bangladesh.

The condition of those stuck in those enclaves is beyond what we call livable. They are virtually cut from all amenities like water electricity roads, hospitals, schools etc. They are trapped into a no-man’s land with limited ingress to their ‘mainland’ and even need a visa to get that access. This resulted in rise in illegal border crossing.

Fencing the Border

Border between India and Bangladesh is highly porous which also makes it highly conducive to illegal immigration and smuggling of goods. To curtail this, in late 1984, Indian Government announced its plan to fence the border. The construction started in two phases. Phase I began in 1987 and completed fencing only 20% of border while Phase II started in 2000. BSF was deployed to guard the border. However, the illegal immigration continued and over time condition worsened due to rise of terrorism. This border became notorious for enforcing a shoot-to-kill order against Bangladeshi migrants by BSF.

Notwithstanding the daft of agreements between both the countries, little progress has been made from both the sides raising ire of the people trapped between disputed borders. The economist puts this plight of those living in this limbo pertinently-

“A few years ago, away from Cooch Behar, on the eastern border with India, I met a man who lived smack on the border between Tripura state and Bangladesh. His living room was in Bangladesh, his toilet in India. He had been a local politician in India, and was now working as a farmer in Bangladesh. As is typical in such places, he sent his daughters to school in Bangladesh, and his sons to India, where schools, he thought, were much better. To his mind, the fence dividing the two countries was of little value. But, he conceded, “at least my cows don’t run away anymore.”

Sources: 

http://www.economist.com/blogs/asiaview/2011/02/enclaves_between_india_and_bangladesh

http://www.economist.com/blogs/banyan

Waiting for the Esquimo by Brendan Whyte

Stateless in South Asia: The making of the India Bangladesh Enclaves by Wilhelm Schendel

On the idea of 'Time'

Time is a very fascinating and elusive subject for study. The idea of time in ancient Hindu philosophy is equally baffling and complex. It is as intriguing to know that while most other civilizations and cultures were still basing their cosmological arguments on the scales of few hundreds and thousands, early Vedic period had developed highly sophisticated concept of time embracing millions and even billions of years. The numbers, they were dealing with were mind boggling. Phenomenon of Time has been central to religious and philosophical thought of all ancient great civilizations of Maya, Egyptian, Aztecs, Greeko- Roman, Chinese and Indian etc.

The Two Worlds

Examining the concept of time involves, based on the available resources, analysis at two levels as Lawrence W. Fagg discussed in his book, Two Faces Of time. On one hand we have the modern scientific interpretation of time where physics plays an important role in our understanding of the world of small (Microcosmic) and world of Large (Macrocosmic). Every scientific theory, from the foundations of classical physics (Newtonian) and its concept of absolute time to idea of relativistic time in modern physics (Einsteinian), had a profound impact in altering our preexisting notion of time and causality.  The other hand we see myriads of different interpretations of Time which are deeply embedded into the religious and philosophical thoughts of different cultures. While one idea of time is based on physical theory and objective measurement, the other is purely derived from human consciousness and subjective experience.

Measurement of Time in Hindu Philosophy

There are innumerable literary sources available on interpretations about the Hindu notion of time and its measurement.According to early Vedic thoughts, Time is described as an endless cyclical procession of creation, preservation and dissolution. This notion is closely entwined with the idea of Bramhan in Hindu Philosophy. This is evident from the following method of measurement as provided here and here :

The time is cyclical and each cycle is called a Yuga. There are four yugas and depending upon the yuga the duration varies. The four yugas along with their duration in earthly years are Satya Yuga (1,728,000 years), Treta Yuga (1,296,000), Dvapara Yuga (864,000) and Kali Yuga (432,000) which totals to 4,320,000 years of one yuga cycle, also called Mahayuga. If you observe, the four yugas maintain a ratio 4:3:2:1 of their durations.  Hence a Kaliyug if represented as K(432,000) human years, then the other three yugas can be represented as 2K, 3K and 4K years A thousand Mahayugas is called a kalpa and therefore a kalpa is 4,320,000,000 years. 71 such Mahayugas make one Manvantara. Each Manvantara  is preceded by a Manvantara Twilight. In this way time moves on in these great cycles, yuga after yuga, kalpa after kalpa, eternally.

Brahma's life span is calculated according to yuga time. One kalpa is said to be the 12 hours of Brahma’s day, so his 24 hour day is two kalpas in length. That means 24 hours of Brahma’s time is 8,640,000,000 earthly years! His year is 365 days long and he lives for a 100 years. Each Manvantara is created and ruled by a specific Manu, who in turn is created by Brahma, the Creator himself.

Based on interpretation of Puranas(particularly Bhagwat Puran),
One day of Brahma (or one Kalpa) consists of 14 manvantaras + 15 manvantara twilights (because there is an extra manvantara - twilight at the end of all the 14 manvantaras)
= 14 x 71 mahayugas + 15 x 4K
= 994 mahayugas + 60 K
= 994 mahayugas + 6 mahayugas (10K = 1 Mahayuga)
= 1000 mahayugas = 1000 x10K = 4,320,000,000 human years.

In many cultural and religious expressions we find existence of deification of time with anthropomorphic characteristics such as: the father of greek god Zeus was Kronos who manyy thought, as deified personification of Chronos, Time. In Hindu religion, we find many interpretations of deified Kāla (time) in Skanda Purāṇa and Devī Māhātmy. Kali is considered the goddess of time and change.  In Persia, Zurvan was the god of temporal Time and fate so on and so forth.

Discovering parallels between both worlds

The concept of time not only differs in the way modern scientific theories see it (i.e. assuming a linear, irreversible flow of time) but also differs in religious thoughts across eastern and western religions (such as western philosophy sees a linear time while Hindu philosophy describes a cyclical and at much more greater scale).

Notwithstanding the seeming disparity between both the points of view (scientific and religious) on subject of time, attempts are being made to seek a relationship between them in the modern world which is apparent from recent popular works on the same. One such example is Fritjof Capra’s interpretation of Dance of Shiva, Tāṇḍava, that is the source of the cycle of creation, preservation and dissolution and a central theme in the idea of Bramhan and cyclical notion of time in his book Tao of Physics. He saw it as a pictorial allegory of chaos at the sub-atomic world.

Mankind’s intellectual curiosity and the quest for finding the ultimate truth (the Holy Grail in modern terms) may eventually lead to convergence of all beliefs, scientific thoughts and theories. As prevised by the great indian scholar, Swami Vivekananda, during his lecture at Parliament of Religions, Chicago –

Science is nothing but the finding of unity. As soon as science would reach perfect unity, it would stop from further progress, because it would reach the goal. Thus chemistry could not progress farther when it would discover one element out of which all others could be made. Physics would stop when it would be able to fulfill its services in discovering one energy of which all the others are but manifestations, and the science of religion become perfect when it would discover Him who is the one life in a universe of death, Him who is the constant basis of an ever-changing world, One who is the only Soul of which all souls are but delusive manifestations. Thus is it, through multiplicity and duality, that the ultimate unity is reached. Religion can go no farther. This is the goal of all sciences.

Dodd-Frank Act: how will the Act affect IT?

Dodd-Frank Act: how will the Act affect IT?


Financial markets are at the forefront of a sea of regulations, one of such regulations is the Wall Street Reform and Consumer Protection Act (also known as the Dodd-Frank Act) which would have farreaching effect on the investment management industry, not only in USA but elsewhere!!

This would certainly present lot of consulting and implementation opportunities for Indian IT service industry

Hubble Exotica

 Here are few hubble classics to marvel. 3rd image is of Crab Nebulae which is a supernova remnant, all that remains of a tremendous stellar explosion. Observers in China and Japan recorded the supernova nearly 1,000 years ago, in 1054.
Image 4, is hubble deep field with gravitational lense effect.of Galaxy cluster Abell 383

Monetary policy and Monetary Aggregates

One of the most important functions of any central bank is to formulate and implement monetary policy. At a macro level, the importance and impact of this policy is felt when the overall prices tend to go up as, as we are witnessing now.


Looking at the earlier development in India from the mid-1980s till 1997-98, it can be characterized as a monetary targeting framework on the lines recommended by Chakravarty Committee (1985). By the late 1990s, the process of financial liberalization necessitated a re-look at the framework of monetary targeting and the efficiency of using broad money as an intermediate target of monetary policy. Because of the reasonable stability of the money demand function, the annual growth in broad money (M3) was used as an intermediate target of monetary policy to achieve the final objectives.

The monetary operations are conducted in the Money market by the central bank in its pursuit of monetary policy objectives. Banking sector plays a critical role in transmitting monetary policy action to spending decisions of consumers and investors, and ultimately affecting output and prices. The picture below based on a paper by Amaresh Samantaraya, Assistant Advisor, RBI depicts broad outline of monetary policy framework and sequence of steps involved

 
Definition of Money


'money' is the set of assets in the economy that is used regularly by the people to purchase goods and services from other people conveniently. RBI (1998) provides detailed discussion on the conceptual and methodological issues related to monetary aggregates in India.

Technically, two forms of money stock viz. (i) narrow money, and (ii) broad money are widely used in the discussion of monetary policy. However, the RBI Working Group recommended compilation of four monetary aggregates on the basis of the balance sheet of the banking sector in conformity with the norms of progressive liquidity:

1. M0(monetary base),

M0 = Currency in Circulation + Bankers' Deposits with the RBI + 'Other' Deposits with the RBI

2. M1 (narrow money),

M1 = Currency with the Public + Current Deposits with the Banking System + Demand Liabilities Portion of Savings Deposits with the Banking System + 'Other' Deposits with the RBI

3. M2 and M3 (broad money)

M2 = M1 + Time Liabilities Portion of Savings Deposits with the Banking System + Certificates of Deposit issued by Banks + Term Deposits of residents with a contractual maturity of up to and including one year with the Banking System (excluding CDs)

M3 = M2 + Term Deposits of residents with a contractual maturity of over one year with the Banking System + Call/Term borrowings from 'Non-depository' Financial Corporations by the Banking System

However, besides broad money which remains as an primary variable, a host of other macroeconomic indicators including interest rates or rates of return in different markets (money, capital and government securities markets) along with such data as on currency, credit extended by banks and financial institutions, fiscal position, trade, capital flows, inflation rate, exchange rate, refinancing and transactions in foreign exchange available on high frequency basis are used with output data for drawing policy perspectives

It is a very interesting to see monetary policy shocks (actions) administered through changes in policy instruments and operating targets influencing the final objectives. This is called Transmission Mechanism of Monetary Policy.

Why do regulations come into existence?

Over the course of an average day, our life is touched by literally thousands of regulations. They are at work from utility services, telecom services, oil and petrol, to public transport,banking, housing and other government services. Ever wondered why these regulations exist at the first place??? What is the economics behind these Regulations?

What is free in free market??
Economics explains lot of real life scenarios such as public welfare and regulations which are entwined with complex set of cause and effect phenomenas. Few such interesting concepts which explains why regulations are in existence are 'Free Market Failures and Externalities'. You will appreciate their true meaning and contribution in explaining the esoteric workings of an economic system when you see them at work in real life.

These seemingly arcane terms, work on the fundamental premises of ecomomics i.e. forces of demand/supply and efficient allocation of resources. A free market is a market where there is no intervention of a controlling authority (Government) and market is left to the forces of demand and supply. The prices of the services or products exchanged in such markets are agreed solely by mutual consent of buyers and sellers in the market. In such a market the allocation of products i.e. who gets what, is decided by purely the purchasing power of consumers and forces of supply/demand. Adam Smith, one of the influential economist of 19th century, coined the term 'invisible hand' to describe the self regulating structure of market due to invisible forces of
- Self interest i.e. doing what maximizes my profit or doing what is good for 'me';
- competition between the market participants and;
- demand and supply

Now, free market premise is based on ideal conditions in the market such as markets are perfectly competitive and no market power exists with any player eg. Monopoly, market participants are perfectly informed about choices and interchangeability exists between goods and services. The necessary components for the functioning of an idealized free market include the complete absence of artificial price pressures from any form of government intervention(other than protection from coercion and theft, and no government-granted monopolies which eventually makes it "pareto efficient'(Named after italian economist). So we see the cause and effect chain as:

Free Market - causes - Competitive forces, prices decided by market forces with no government intervention (idealized conditions)- leads to - efficient allocation of resources- leads to - Pareto Efficient market

Why Markets Fail?
In reality, we dont see a idealized scenario of a free market at work. What we see is a deviation from the equillibrium where there are lot of other factors influencing the market forces and competition which leads to an inefficient allocation of goods and services to producers and consumers. Economists have identified following scenarios when a market can fail(i.e. where individual self intretest leads to inefficient the resource allocation). Now this is the exact reason why government steps in to ensure that allocation happenes in a way that ensures equitable distribution of benefits to all participants and therefore economic and social welfare can be maximized. Market Failure eventually lead to inefficient and hence said to be 'Pareto inefficient'. Economists have defined following causes of market failures:

- Externalities: When consumers and producers come together in the market, the products/services are exchanged in return for money or the price of the goods/services. However, there could be costs/benefits associated with this transaction which is not transmitted through prices but through any other means and borne by the thrid parties not involved in this transaction.A live Eg. is Posco, steel maker,is alleged to have violated the forest act while acquiring land for a steel project near Paradip and where as Vedanta, mining company, is battling criticism from environmental groups over plans to extract bauxite in Niyamgiri hills in the state's Kalahandi district. Both firms are engaged in capacity enhancement activities which is linked to profit maximization. however, these actions have negative externalities in terms of social cost(effect on tribes and wild life in orissa) being greater then the private cost of the firms.

- Monopolies or market dominance: these occur due to imperfect competition in the market. It can happen due to various reasons. A firm gains a monopoly over market resource, Government gives exclusive right to one firm to produce or provide services or cost of production (gained from economies or scale or strategic investments)makes a single produce more efficient then others in the market.An example is BSNL as it was given exclusive rights to sell telecom service to users and entry barriers were high till the time the market was opened to private players.

- Information Asymmetry: This happenes when both buyers and sellers will have different information about the product’s attribute or one party has more or better information about the product than the other.A classic example is Financial services and Financial intermediaries.Imagine for a moment that Banks do not exist and people have no other options to search for the right lender who can lend the fund to them. Similerly lenders search for the right investors. That would be a difficult scenario. So the primary reason why people give/deposite their money to Banks/financial intermidiaries instead of lending or investing the money directly is because of the risk that is present from the information asymmetry between the provider of funds and the receiver of those funds.A seller knows more about the sale item than the buyer.Likewise, a borrower knows more about his financial condition and his future prospects than the lender.

How Government intervenes to correct Market Failure?
In a market failure scenario, an economic rationale behind government intervention is:

1) Ensuring equitable distribution of economic benefits/income/wealth to the participants as a whole.
2) Correcting the losses suffered by market failure thereby making market efficient.

A government achieves this by several means such as taxes, subsidies, bailouts, public policies etc. One of the means is Regulations also called Command and Control technique.However, government regulation does not necessarily ensure equity and efficiency and may result in what is called Regulatoy Failure which could be a negative externality of regulations.

Market Inefficiency- causes -Market Failures - Government intervenes by means of Regulations, subsidies, taxes etc - which may (or may not) lead to - efficient allocation of resources and equitable distribution of income and wealth- leads to - Pareto Efficient market

Targeting Below The 'Line'...

Food is one of the basic necessities of human being without which all other amenities would hold little meaning. And to a poor, it could mean the vary existence of his life. In a rapidly growing indian economy and a nation of  more than one billion people with per capita income crossing 40,000, more than half of the population live below the elusive poverty line (BPL).  Well that sounds alarmingly menacing isn't it? In such a scenario food security becomes one of the major developemental objectives for government.

How does one measure poverty in India?
If we go by the definition set by  Planning Commission of India, poverty line is drawn with an intake of 2400 calories in rural areas and 2100 calories in urban areas. That means, if a person is unable to get that much of calories he is considered to be BPL. However, many descrepanies have been observed in the measuring methodologies adopted by various agencies and no body has been able to nail down the exact number. The meauring methods and parameters differ from countries to countries. This vary reason has led to disparities in defining the real distribution of poor population in states of India.

How does food get to the poor?
A poor man in India has two options.Either food should be made available to him at an affordable prices by the government or Government should find ways and means to raise the income level of the poor so that they are capable enough to buy food for themselves. While employment generation programmes attempt the first solution, the PDS is the mechanism for the second option.In terms of both coverage and public expenditure the most important safety net is Public Distribution System (PDS) of central government. With a network of more than 4.62 lakh fair price shops (FPS) distributing commodities worth more than Rs 30,000 crore annually to about 160 million families, the PDS in India is perhaps the largest distribution network of its kind in the world. The FPS provide rice, wheat, sugar, edible oil, soft cake and kerosene oil at subsidized prices.With PDS, government achieves two objectives ensure food security for the needy and price stability of food.

Targeted Public Distribution System(TPDS)
The Public Distribution System in India was modified into the targeted public distribution system (TPDS) in 1997, as part of the larger reforms under the new economic policy of the 1990s. The TPDS divided the population of the country into those below the poverty line (BPL) and above the poverty line (APL); with PDS foodgrains being given to those in these two categories at differential prices. this price differential is acheived by giving greater subsidies to the poorest of poor compared to those BPL in normal sense. In 2002, another category was introduced to reach out to the ‘poorest of the poor’ through the Antyodaya Anna Yojana (AAY) which provides foodgrains at about half the BPL prices. In PDS-

· The central government, based on the population of the state and its share of below and above poverty line households, allocates state wise quota of food grains. It also decides the Central Issue Prices (CIP) for the food grains
· The state government then determines off-take, the public delivery, and the list of commodities provided. The state government is allow to add to the CIP the transactions cost of keeping the stock and district wise allocation of food grains.
·  thenBlock/ Taluk wise allocation of food grains is determined by District Administration. Location of Fair price shops are also decided at this level.
· Food grains are stored in godowns at various levels
· And finally, distribution of Food grains to the Fair Price Shops and sold to beneficiary, the poor.
But is making food grains available by TPDS, a sufficient condition to ensure food security to the poor? Given central government's poor record of public welfare schemes implementation. has TPDS managed to achieve its slated objectives?

Lacuna in TPDS

1) The very first reason being the divergent views on measurement of the poverty and number of people below poverty line. The earlier 1993 Expert Group on Poverty Estimation even explicitly specified in its report that these poverty lines should not be used for the purpose of targeting public programmes. However, in practice the exercise of setting a poverty line and estimating poverty on the basis of this has very much been linked to determining allocations for public programmes;

2) The decision that a particular household will qualify as BPL household and would be eligible for a BPL ration card is arrived at by two different processes. Firstly, the numbers of BPL households are determined based on the Planning Commission estimates of poverty superimposed on the number of households from census data. Secondly, an independent exercise of identification is conducted based on a household census using criteria determined by the Ministry of Rural Development (MoRD), with the restriction that the number of poor to be identified by this process should be within the number estimated by the Planning Commission.

3)The next immediate fallout of the above two factors is problems of imperfect targeting. That is the system is likely to include people that should be excluded and exclude household that should be included.

4) The reports of the Supreme Court appointed Wadhwa Committee point out a number of issues that make the PDS a corrupt and inefficient system. Among the issues these reports raise include corruption because of the presence of middle-men at all stages such as private storage agents, transporters, millers and so on, who are in a nexus with the politicians and bureaucracy resulting in the leakage of foodgrains meant for the PDS into the open market even before it reaches the village fair price shop (FPS).

5) Wadhwa committe report also identified following deficiencies in the system:
 · Multiple ration cards being issued under a single name
· Faulty system of issue of ration cards and record keeping
· Pilferage - PDS foodgrains find way to market and all the lot don’t reach the eligible/needy person
· No bio-matric identification for the users
· No central monitoring system to track the carriage trucks
· The delivery mechanism has no RFID (Radio Frequency Identification Device)

In addition to above glaring gaps, there are even instances where the wheat and rice provided were unfit even for cattle consumption !, but the poor are forced by these weevil ridden grains.

There have been recent reports of around 61,000 tonnes of foodgrain rotting in granaries of Food Corporation of India (FCI), the government body responsible for TPDS. Officials admit that for 65 million tonnes of food buffer stocks the total warehousing capacity in the country is only 40 MT, a deficit of 25 MT. Investment of 10,000-15,000 crore is required for additional storage capacity. 

Can Technology be a solution?
Wadhwa committee suggested major revamping of the system by leveraging technologies such as RFID and biomatric finger prints. Also, with the commencement of UID project, the databases of beneficieries could be maintained enabling digital record keeping. Use of smart card based technologies and presence of Point of Sales solutions to the Fair price Shops could make the system more efficient and could pave way for the setting successful e-governance example.

Allocations for public programmes must be delinked from the poverty line, which in spite of any number of revisions cannot avoid an element of uncertanity. How can a system be efficient of the vary foundation it is built on (measure of poverty) has the element of arbitrariness, a moving target!! Given the fact that we have the highest malnutrition rates in the world, there cannot be an alternative to provision of universal services especially in relation to food along with education, health, employment and social security.The proposed National Food Security Act should be seen as an opportunity for pressing for universalisation of PDS (along with administrative reforms) to make the system more effective. We must not allow an Act to remain an entitlement for only a few (as is being proposed), especially because as long as PDS remains targeted even the few who are entitled to it are unlikely to get any benefits.

References:
http://www.indiacurrentaffairs.com/
JUSTICE WADHWA COMMITTEE Report on Public Distribution System (PDS)
Planning Commision Report on five year plan