Wadhwa Commission Report on Orissa PDS

CONSTITUTION OF CENTRAL VIGILANCE COMMITTEE ONPUBLIC DISTRIBUTION SYSTEM AND ITS CHARTER

EXECUTIVE SUMMARY

The Hon’ble Supreme Court of India, in a Writ Petition No. (C). 196 of 2001, passedan order constituting a Committee to be headed by Hon’ble Mr. Justice D. P. Wadhwa,Former Judge, Supreme Court of India, to look into the maladies affecting the properfunctioning of the public distribution system (“PDS") and to suggest remedialmeasures. In particular, the Committee was directed to focus on:

(a) The mode of appointment of dealers;

(b) The ideal commission or the rates payable to the dealers;

(c) Modalities as to how the Committees already in place, can function better; and

(d) Modes as to how there can be transparency in allotment of the food stock to be

sold at the shops.

The Hon’ble Court further directed that while dealing with the question of the mode ofappointment, the Committee shall also suggest a transparent mode of selection of thedealers. The Committee was also directed to indicate as to how more effective actioncan be taken on the report of the vigilance committees already appointed.

The Hon’ble Court’s direction was initially given for the Government of Delhi to befollowed on an all India basis.

The constitution of the Committee was notified on 01/12/2006. The Committee,pursuant to the Hon’ble Court’s order commenced its work in right earnest. It held aseries of meetings with all the stake holders, invited representations/petitions frommembers of the public, visited fair price shops godowns of the Food Corporation ofIndia (“FCI”) to examine their functioning, held consultations with the officers of theDepartment of Food, Civil Supplies and Consumer Affairs (“Department”), FoodCorporation of India, Delhi State Civil Supplies Corporation (“DSCSC”), NationalInformatics Centre (NIC), Delhi State Election Commission, individuals connected withNGO’s, and representatives of FPS dealers associations. The Committee also examinedofficial records connected with the items falling within the mandate given to it. By afurther order dated 17/04/2007, the Hon’ble Court was pleased to extend the time forsubmission of the report till 31/08/2007.

Based on the work done by the Committee and in compliance with the Hon’ble Court’sorder, a detailed report covering all issues tasked to the Committee is beingsubmitted. The Report is divided into three parts. Part I is an executive summary ofthe Report. Part II contains the main body of the Report and examines each of theissues, duly chapterized at length, identifying the weaknesses in the existing PDS andmakes detailed recommendations for toning up and streamlining its functioning inDelhi. Part III contains relevant documents annexed to the Report.

The full forms of certain abbreviations, which have been used repeatedly throughoutthe Report are given below for the sake of convenience:

1. APL : Above Poverty Line

2. BPL : Below Poverty Line

3. AAY : Antodaya Anna Yojana

4. TPDS : Targeted Public Distribution System

5. FPS : Fair Price Shop

6. SFA’s : Specified Food Articles (issued under the PDS)

The important recommendations under each of the chapters contained in Part II ofthe Report are summarized herein under:

1. LEGAL REGIME

1.1. In the chapter dealing with the Legal Regime the existing provisions governingthe PDS, that is to say, the Essential Commodities Act, 1955, the Delhi SpecifiedArticles (Regulation of Distribution) Order 1981, the PDS (Control) Order 2001 (asamended in 2004), and the relevant notifications and circulars which govern theimplementation of the said Act and the PDS (Control) Order, 2001 in Delhi aredetailed. This chapter is intended to be a ready reckoner which would help inappreciating the other chapters wherein relevant clauses of the PDS (Control) Order2001, notifications and circulars are dealt with in detail.

2. APPOINTMENT OF DEALERS OF FAIR PRICE SHOPS (FPS)

2.1. This chapter discusses at length the existing guidelines for allotment of FPSlicenses and the modifications introduced in these guidelines from time to time, inter-alia, highlighting eligibility conditions in respect of applicants, shop premises, timeframe prescribed for completion of the selection process and the procedure forrenewal of FPS. This chapter also incorporates the Committee’s findings on how theexisting instructions and provisions of the PDS (Control) Order, 2001 are beingviolated with impunity by FPS licencees due to laxity or complicity on the part of theofficials who are required to monitor the functioning of the FPSs. This chapter alsodeals with the Committee’s findings that were arrived at pursuant to the perusal ofsome of the files pertaining to allotment of licensees of FPS. The chapter providesinstances of blatant violation of norms in allotment of FPS and reveals extraneousconsiderations come into play in such cases, resulting in some FPS having ration cardsin excess of the norm of 1000 ration cards per FPS and some FPS having ration cardsmuch less than the said norm, which in turn, affects their viability.

2.2. The broad recommendations of the Committee include:

(a) consolidation of the existing guidelines and giving them due publicitythrough press and on the web site of the Department for information of generalpublic;

(b) compression of the time involved in completion of the selection processfrom the existing 56 days to 42 days;

(c) requirement of being a resident of the concerned circle where the FPSvacancy has arisen should be substituted with the requirement of being resident ofthe locality for which vacancy is notified;

(d) adherence to the Department’s guidelines dated 29.8.1997 stipulatingcreation of a vacancy only when there are 1000 cards available to be attached to anFPS;

(e) allotting of new vacancies for a FPS to cooperative societies or womenself help groups.

3. VIABILITY OF FAIR PRICE SHOPS

3.1. The Committee examined in depth the question of viability of FPS’s, which isclosely linked with the issue of the rate of commission to be paid to FPS dealers. TheCommittee discussed this issue threadbare with the licencees of FPS, theirassociations, representatives of NGOs, government officials and also invitedsuggestions from various sections of society. The findings and recommendations ofthe Committee are contained in this Chapter 3 are summarized as under:

3.2. The following table graphically shows the commission rates earned by FPS

licencees under the extant orders governing the sale of wheat and rice to the

Above Poverty Line (APL), Below Poverty Line (BPL) and Antyodaya Anna

Yojana (AAY) beneficiaries.

Category CostPriceperQuintal

SellingPriceperQuintal

DifferenceB/w CostPrice andSellingPrice

Cartagepaid toDSCSC perQuintal

Commission perQuintal paid to FPS

APLWheat

Rs.610/-

Rs. 680 Rs. 70/- Rs. 35/- Rs. 35/-

APL Rice Rs.830/-

RS. 900 Rs. 70/- Rs. 35/- Rs. 35/-

BPLWheat

Rs.415/-

Rs. 465 Rs. 50/- Rs. 15/- Rs 35/-

BPL Rice Rs.565/-

Rs.615/-

Rs. 50/- Rs 15/- Rs. 35/-

AAYWheat

Rs.200/-

Rs.200/-

Nil Rs. 15/-paid toDSCSC byDelhiGovernment

Rs. 35/-

paid to FPS by DelhiGovernment

AAY Rice Rs.300/-

Rs.300/-

Nil Rs. 15/-paid toDSCSC byDelhiGovernment

Rs. 35/-

paid to FPS by DelhiGovernment

3.3. Keeping in view the existing guidelines of the Department requiring 1000 food

cards to be attached to an FPS unit and assuming full off take of wheat and

rice as per entitlement (25 kgs of wheat and 10 kgs of rice per month) of each

category of card holder subject to the condition of the FPS unit getting its full

allocation, a FPS owner would earn Rs. 15,750/- per month. This amount

includes income derived from the sale of gunny bags at the rate of Rs. 5 per

bag. However, this income projection changes to the FPS owner’s disadvantage

if there is a reduced allocation as is currently the position. While there is 100

per cent allocation in BPL category, allocation under APL category works out to

35 per cent of the entitlement. Assuming that the BPL and APL card holders are

evenly distributed in an FPS and assuming the current rate of reduced

allocation in respect of the APL category, the income of a FPS comes down to

Rs. 7,369/- per month. The situation is worsened if the number of food cards

attached to a FPS unit is much less than 1000 cards. The table provided in para

5.6 of the chapter dealing with viability shows at a glance, the unequal

distribution of ration cards in Delhi.

3.4. The estimated average expenditure of a FPS on a conservative scaleincluding expenditure on rent, commission payable to banks on demand drafts,stationery items, salary paid to helpers, labour and electricity charges etc. works outto approximately Rs. 6,000/- per month. The absence of a steady income over andabove the monthly expenditure incurred in running the FPS erodes its viability. Hence,the representatives of FPS dealers associations raised the demand for increasing therate of commission. It was also suggested that the commission of the FPS should beincreased to Rs. 70/- per Quintal. Other views touched on entrusting PDS work to aperson already in business, making the PDS attractive enough for more persons toavail of this facility and ensuring that a FPS dealer earns at least Rs. 10,000/- overand above expenses incurred by him in running the shop. One NGO representativesuggested that an option should be given to cardholders for purchasing SFAs fromany FPS and the competition generated through this process will improve the viabilityof FPS.

3.5. The Committee has observed that there are other factors impacting on theviability of a FPS. Some of these are:

i) Delay in supply of SFAs;

ii) Losses suffered by FPS dealers due to blockage of working capitalinvested for the stock and transport, for long periods;

iii) Losses suffered on account of short supply of goods;

iv) Unequal distribution of ration cards;

v) High transportation costs;

vi) Commission being too low to generate moderate income.

3.6. Keeping in view the Committee’s wide ranging interaction with stake holders,knowledgeable individuals, government officials and its own findings and also with aview to avoid any significant additional burden on the system, the Committee hasexplored other available options for improving the viability of the FPS instead ofincreasing the rate of commission. The main recommendations of the Committee areas follows:

a) There will be substantial gain for FPS dealers if the cost involved intransportation of SFAs is based on actual cost in terms of tender floated by theGovernment. Elsewhere in the Report, it has been recommended that theresponsibility for transport arrangement through open tendering process be takenover by the Department in place of the DSCSC.

b) The Department should take urgent action to rationalize the ration cardposition of the FPS and ensure that the present anomaly of unequal distribution ofcards is reduced to the minimum.

c) End to end automated system in the PDS chain should be introduced toplug leakages and improve viability of the FPS. Further, recourse to E-banking is afavoured option for cutting down delays in depositing money with FCI/ DSCSC. Thiswill be a substantial improvement on the existing practice.

d) Incentive should be given to FPS dealers for selling other commoditiesin conjunction with SFAs. Other commodities should, however, not include SFAs i.e.wheat and rice available in open market. This will improve the viability of FPS.

e) Accountability should be fixed for any delay in delivery of SFAs.

f) The question of amalgamating Kerosene Oil Depots (though an equallydiscredited and corrupt system) and FPS on the Maharashtra model and providingboth the facilities to consumers through the FPS window needs to be examined tofurther improve the viability of FPS.

g) The Committee would also like to emphasize the need to provide adedicated place on the lines of milk depots, post offices, multi-purpose kiosks for theFPS at a very nominal rent. The State Government of Delhi should take the initiative inthis regard.

h) As far as the BPL category is concerned the State Government mustbear the responsibility to provide door delivery of SFAs to the FPS at its own cost. Thisobligation arises from the PDS (Control) Order, 2001 itself where Clause 6(3) readwith Clause 4(6) of the Annexe to the PDS (Control) Order 2001, casts a duty on theauthorities to ensure physical deliveries of SFA’s to the FPS. Further, in the 9-pointaction plan formulated by the Government of India, doorstep delivery has beenhighlighted as one of the urgent measures to prevent diversion. Once the State

Government undertakes this obligation the FPS owner is relieved of the burden ofpaying a sum of Rs. 15/- per Quintal towards transport of BPL stock which amountautomatically increases his profit.

4. VIGILANCE COMMITTEES AND GRIEVANCE REDRESSAL MECHANISMSIN THE NATIONAL CAPITAL TERRITORY OF DELHI

4.1. The PDS (Control) Order, 2001 provides for monitoring and vigilance includingconstitution of vigilance committees. There are extensive provisions in the said ControlOrder regarding the role of these committees, followed by detailed instructions issuedfrom time to time by the Department for operationalizing the vigilance initiative. Someof these initiatives include setting up of Circle Advisory Committees to advise onstreamlining the functioning of PDS, holding of public audit, public hearings forresolution of public complaints, constitution of Citizens’ Watch Committees formonitoring distribution of SFAs and matters relating to availability of SFAs, theirquality and quantity etc. and reconstitution of FPS vigilance committees to attend tocomplaints regarding non-availability or short supply of SFAs. Provisions/ instructionsexist which describe their role, functions and responsibilities of the vigilancecommittees and have been discussed at length in the main body of Report dealingwith the subject.

4.2. In addition, there is an Enforcement Branch of the Department to enforcevarious control orders and the circulars issued by the Department. There is also anAnti – Hoarding Cell that is a part of the Enforcement Branch, to check malpracticesand initiate action against guilty persons. The Enforcement Branch and the Anti –Hoarding Cell, in the Committee’s view have miserably failed in discharging theirassigned responsibilities. Their role has been discussed in detail in the main Report. ATask Force for each revenue district under Deputy Commissioner (Revenue) has alsobeen constituted to conduct surprise checks/ raids. There is also a model Citizens’Charter on TPDS defining particularly the role and functions of vigilance committees towhich the Central Government has drawn attention of State Governments fornecessary compliance.

4.3. In furtherance of the Model Citizens’ Charter on TPDS, the Delhi Governmenthas also constituted a State vigilance committee, with the objective of preventingblack marketing and diversion of SFAs, attending to complaints regarding non-availability of wheat, rice, sugar etc. and other related deficiencies in the operation ofthe PDS in Delhi.

4.4. The Committee has observed that while there are numerous entities involved insmoothly steering the course of the PDS in Delhi, their impact is virtually non-existenton the ground and as a result, malpractices abound to the great discomfiture of the

common man. It has been squarely admitted by Commissioner: Food Supplies andConsumer Affairs that vigilance committees in Delhi are defunct and ineffective.Meetings of FPS vigilance committee are not being held separately and insteadwhatever meetings are held go under the name of joint meetings of Circle AdvisoryCommittees and FPS vigilance committees. The Committee has found that thesemeetings, apart not from being held on a regular basis, do not serve the intendedpurpose and have degenerated into a routine affair without focus.

4.5. The multiplicity of entities entrusted with more or less similar tasks with noneof them performing their assigned functions has gravely undermined the credibility ofthese bodies and contributed in no less measure to existing deficiencies in PDS.

4.6. The Committee, therefore, has made detailed recommendations in the mainchapter for revamping the vigilance machinery. Some of the importantrecommendations are as follows:

a) The Circle Advisory Committees and Citizens’ Watch Committees, intheir present form, may be scrapped and in their place, district-wise vigilancecommittees may be constituted, vesting them with appropriate powers, functions andresponsibilities.

b) No meeting of a vigilance committee should be postponed on accountof non-availability of the area M.L.A. to chair the meeting. In the absence of an areaM.L.A., the meeting may be chaired by the Assistant Commissioner of the concerneddistrict.

c) The State level vigilance committee should be reconstituted byretaining the existing composition with the only change that the Commissioner, FoodSupplies and Consumer Affairs be made the member/convenor of such reconstitutedcommittee. This Committee should meet once in a quarter to review the functioningof the district level vigilance committees.

d) The process of selection and appointment of members of the vigilancecommittees be made more transparent with greater involvement of the public,stakeholders and household women. The majority of members of the committeeshould be women who are ration card holders of the concerned FPS. As far aspossible, the member from SC/ST should also be a woman.

e) There are other recommendations given in the main chapter on thissubject which detail the modalities of the functioning of vigilance committees, suchas, periodicity of holding of these meetings, what should constitute the agenda forsuch meetings and nature of follow – up action to be taken in respect of suchmeetings.

f) The Committee has recommended a toll free Help Line for attending toconsumer complaints relating to the PDS.

4.7. The Committee has also focused on the need to set up an independentmonitoring mechanism for addressing consumer complaints along with a host of otherrelated issues. This mechanism may be in the form of an “Ombudsman/ Regulator” tobe created under para 6(1) of the Annexe to Clause 8 of the PDS (Control) Order,2001. The PDS (Control) Order, 2001 may be further amended to give greater clarityto the role and responsibilities of the Ombudsman/ Regulator. The structuralframework of this institution along with powers, functions and responsibilities andother related issues have been discussed in detail in the chapter dealing with vigilancecommittees.

4.8. The complaints received by the Ombudsman/ Regulator may be referred byhim for a report from the district vigilance committee or FPS vigilance committees, asthe case may be. It is clarified that this power of the Ombudsman/ Regulator to makea reference shall be in addition to and not in derogation of the powers of theOmbudsman/ Regulator to conduct an independent enquiry into the complaints.While, the reports so received, will assist the Ombudsman/Regulator in providingsolution, these reports will not be binding upon the Ombudsman/ Regulator.

4.9. The Anti – Hoarding Cell should be independent of the Enforcement Branch.The Anti Hoarding Cell should be headed by an officer holding the rank of not lessthan a Deputy Commissioner of Police who will also select the other personnel of theCell. A “Special Flying Squad” would also be constituted into the Anti – Hoarding Cellfor taking prompt and immediate action, as and when the need arises. This Squadshall be functional round the clock without exception. The Anti – Hoarding Cell shoulddirectly report to the Commissioner, Food Supplies & Consumer Affairs.

5. TRANSPORTATION OF SPECIFIED FOOD ARTICLES UNDER THE PUBLICDISTRIBUTION SYSTEM

5.1. The Delhi State Civil Supplies Corporation (DSCSC), a public sector companyunder the administrative control of Food and Civil Supplies Department, DelhiGovernment, has been entrusted with the responsibility of transportation of SFAs fromthe six FCI godowns to 2772 functional FPS spread over in 70 circles located in 9districts in Delhi. This responsiblity is discharged by the DSCSC by engaging trucksthrough an open tendering process on an annual contractual basis.

5.2. The Delhi Government fixes the cartage rates pursuant to which DSCSCreceives the charges @ Rs. 35/- per quintal for the APL category and Rs. 15/- perquintal for the BPL category from FPS dealers. Cartage charges in respect of the AAYand the APS is paid to the DSCSC by the Delhi Government. The Committee is of the

view that the cartages charges recovered from the FPS dealers are excessive anddisproportionate to the actual cost incurred by the DSCSC in engaging trucks fortransportation of SFAs. This will be apparent from the fact that the DSCSC made a netgain of Rs. 1.59 crores during the financial year 2005-2006 out of PDS operationsafter meeting administrative expenses.

5.3. The Committee has further observed that the transportation rates fixed as aresult of the tendering process vary in the range of Rs. 6.22 to Rs. 25.50 per Quintal.Such a large variation in the rates is a sad commentary on the tendering process andleads to the inescapable conclusion that losses suffered in quoting unrealistic rates fortransportation by transporters are sought to be made good by indulging in diversionof SFAs on a large scale.

5.4. The Committee has noted that there is a plethora of instructions/guidelinesissued by the DSCSC to streamline the transportation system, ensuring timely deliveryof SFAs and for preventing diversion of SFAs. But the very fact that variousmalpractices connected with these activities are being committed in a blatant mannergo to show that there is utter laxity in supervision, lack of accountability at all levelsand that there is a deep-rooted and flourishing nexus between transporters, officialsand FPS dealers to defeat the objective behind the PDS and derive pecuniary gains bysubverting the PDS operations.

5.5. The main body of the Report makes references about sting operations carriedout by different TV channels, which among other things, is a pointer towards theprevalence of a benami tender practice for contracting trucks for transportation ofSFAs.

5.6. The Committee has further noted in its findings that the DSCSC is notadequately discharging its responsibility of supervising/monitoring the transportationof SFAs from FCI godowns to FPS. Lack of strict supervision over transporters andtruck movements virtually derails the PDS in as much as this adversely impacts timelydelivery of SFAs at the FPS and leads to the diversion of SFAs. No doubt, DSCSC hasintroduced PDS ON LINE to keep an eye on the status of transportation and lifting offood grains from FCI godowns as also availability of ration items at various FPSs andother relevant information but this software alone would not suffice to ascertain theactual movement of PDS trucks and the direction in which they are going. Hence, inso far as transportation of SFAs from FCI godowns to the FPS is concerned, it wouldnot be an exaggeration to say that vigilance and supervision are nil.

5.7. The Committee has examined at length the Mumbai model of transportation ofSFAs in the main body of the Report along with its merits and demerits. TheCommittee, however, is not convinced whether it can be adopted mutatis mutandis inDelhi.

5.8. Important recommendations of the Committee emerging from a close study ofsystem being followed in Delhi for transportation of SFAs are as follows:

a) The present system of entrusting the responsibility for transportation tothe DSCSC is flawed and it would be appropriate for the Department/DelhiGovernment to take over this responsibility. The Department should work out detailedmodalities for discharging this responsibility without apportioning administrativeexpenses in the transport charges to be paid by FPS dealers. The Committee hasdiscussed the role that the Assistant Commissioners of Department have to play inthis context.

b) The net gain on the transportation account currently being made byDSCSC could very well go to FPS dealers, which will improve the viability of FPS.

c) E-banking should be introduced for payment of cartage charges andcost of SFAs by the FPS.

d) The Committee also recommends availing of funds provided by thePlanning Commission for strengthening the PDS operations by providing a mobile FPSfor areas where the number of food cards/ration cards does not justify opening of aFPS as per norms.

e) The Committee further recommends zero tolerance in cases of breachof contract by transporters and imposition of deterrent monetary penalty for infractionof contract.

f) The GPS should be used on trucks carrying SFAs to track theirmovement and installation of the GPS should be made a part of tender conditions.Any tampering of GPS should be severely dealt with and for this purpose the PDS(Control) Order, 2001 if necessary may be amended. The Ombudsman should also begiven a role in monitoring the functioning of the GPS.

6. COMPUTERISATION

6.1. The core objective of the TPDS, which was introduced by the Governmentin the year 1997, is to ensure that the underprivileged/needy segment of thepopulation, which depends on the supplies of SFAs for its day to day sustenance, isprovided its full-allotted quota on time. The Committee is of the view that there isrampant corruption at every level of the distribution chain and the most effective wayto deal with this cancerous and all pervading corruption in the system is to introduce acompletely automated system based on information technology with minimal or nohuman intervention.

6.2. Para 6(6) of the Annexure read with Clause 8 of the PDS (Control) Order,2001[1], the State Government is obliged to monitor the functioning of the FPSthrough the computer network installed in the district NIC centres. The clause furtherstates that computer codes would be provided to each FPS. However, the Committeehas found that the Delhi Government has not setup any system for monitoring theworking of the FPS through the network of NIC or otherwise.

6.3. The Committee invited various organisations and also studied modelscurrently being implemented by different state governments. Various presentationswere made before the Committee and the Committee had wide range of discussionswith experts in this respect. The various systems studied by the Committee are:

i. Existing computerisation in the FCI.

ii. Coupon System/ Food Stamps.

iii. Card System

a) Machine Readable Cards

b) Biometric Cards

c) Visual Crypto Cards (Grid Cards)

iv. Iris Technology.

v. Automated System using Online Technology.

vi. Automated System using Smart Cards.

6.4. The Committee studied many types of technologies that weredemonstrated and suggested by different agencies. Some of them have beenimplemented by some State Governments. On the basis of the above-suggestedtechnologies the Committee recommends the following:

a) An automated computerisation model has been suggested for the TPDS.It is submitted that the proposed model has been prepared after consulting varioustechnical professionals in the field of information technology. It is recommended thatthis model may be introduced initially on a pilot basis in one circle in Delhi.

b) The only solution to the ills plaguing the PDS is to introduce acompletely automated system based on information technology, which would result inminimum human intervention.

c) A database of genuine beneficiaries rectifying all inclusion andexclusion errors must be created by door-to-door verification entrusted to a credibleindependent agency. This will result in elimination of bogus cards.

d) A complete automation of the PDS has to be achieved in a time boundmanner.

e) A pilot study in terms of the suggested model of automation may beimplemented in a few circles.

f) Further, till full automation is achieved, the system of coupons assuggested in para no. 3.4.1(c)(iii) of the chapter may be implemented. The system ofcoupons may also, in the first instance, be tested in a few circles.

7. MAKING TARGETED PUBLIC DISTRIBUTION SYSTEM MORE REALISTIC

7.1. The PDS has evolved as an intrinsic part of Government policy for managementof scarcity of SFAs and for ensuring distribution of SFAs to the vulnerable sections ofthe society at subsidized prices. The responsibility for managing, operating andimplementing the PDS rests jointly with the Central and State Governments.

7.2. Responding to the need of vulnerable sections of the society in regard toavailability of SFAs at affordable prices, the PDS has graduated from being a generalentitlement scheme till 1992 to the Revamped Public Distribution System (RPDS) andnow to TPDS which was launched by the Government of India in June 1997, with aspecial focus on the poor.

7.3. The three schemes that are being operated currently under TPDS are:

(i). Antodaya Anna Yojana (AAY): This covers the poorest families fromamongst the below poverty line families entitling them to 35 Kgs. SFAs per month i.e.rice @ Rs. 3/kg. and wheat @ Rs. 2/kg. As on 31/12/2006, there are in all 57,336 AAYcard holders in Delhi.

(ii). Below Poverty Line category (BPL): This covers those poor families whoseincome is below Rs. 24,200/- per annum. BPL card holders are entitled to 25 Kgs. ofwheat @ Rs. 4.65/kg. and 10 Kgs. of rice @ Rs. 6.15/ kg. per month. As on31.12.2006, there are 3,78,947 BPL ration card holders in Delhi.

(iii). Above Poverty Line category (APL): This covers families whose annualincome is in excess of Rs. 24,000/-. Each APL cardholder is entitled to 25 Kgs. ofwheat @ Rs. 6.80/kg. and 10 Kgs. of rice @ Rs. 9.00 /kg. As on 31/12/2006, thereare 22,85,513 APL cardholders in Delhi.

7.4. The functioning of the TPDS and in particular the above three schemes hasbeen discussed in depth in this chapter of the Report. It will suffice here to say thatgaps abound and the functioning of the TPDS leaves much to be desired. Somedeficiencies identified by the Committee are as follows:

a) There are serious gaps in coverage of people below poverty line and theexisting number of beneficiaries under the AAY/ BPL categories does not seem torelate to the number who should have been covered.

b) There is a large number of bogus ration cards in BPL category whichdistorts the BPL matrix and places avoidable burden on the system. There is alackadaisical approach towards weeding out ineligible persons.

c) APL is the most sought after category and the biggest leakage in thesystem is in this category as the beneficiaries under this category do not avail of PDSfacility, by and large.

d) Data furnished in respect of lifting of SFAs under different categories bythe Delhi Government between April 2006 and March 2007 itself shows that largescale diversion takes place in respect of SFAs meant for APL category. The lifting ofSFAs during this period under APL constitutes almost 72 per cent of total quantities ofSFAs lifted.

e) Targeting is not serving its real purpose as the beneficiaries do not getSFAs in accordance with their entitlements.

f) The system lacks proper accountability at each stage of operation,otherwise how does one explain continued commission of malpractices with impunityand flourishing nexus between officials, transporters and FPS owners to milk thesystem to their advantage.

g) The existence of the APL category in an open ended manner has dilutedthe euphemism “Targeted” and made the system virtually universal, detracting fromits main focus of catering to the poor and destitute.

7.5. The Committee has made several recommendations in the main body of itsReport, the important ones being:

a) launching a time-bound door-to-door drive to identify genuinebeneficiaries under AAY/BPL categories and provide due coverage to them.

b) There would be an amnesty period of four weeks where personsholding bogus cards could surrender them without liability. However on the expiry ofthis period the above mentioned intensive door-to-door verification would beconducted and during that verification if any bogus card is detected both the holder aswell as the concerned officers who had recommended the card would be prosecutedunder Section 7 and other Sections of the Essential Commodities Act, 1955 withoutexception.

c) Revisit the income criterion for the BPL category keeping in viewimprovement in the poverty scale.

d) Do away with the APL category and restrict TPDS to the poor namely persons

below the poverty line i.e. BPL and poorest of the poor i.e. AAY. It is needless

to say that it is this category of persons who need food security. While doing

away with the APL category the Committee also recommends increase in the

income threshold of the BPL from the present Rs. 24,200/- to Rs. 49,284/-.

This based on the minimum wage payable to an unskilled workman in Delhi as

per the order No. F.12 (142)/02/MW/LAB/1016 dated 13.3.07. The break up of

the said amount is as follows:

Minimum wageper month

= Rs. 3470/-

Add: 13.6% EPF = Rs. 472.26Add: 4.75% ESI = Rs. 164.82Total: = Rs. 4107/-

e) The Committee is aware of the fact that there is going to be a greatdeal of opposition from the FPS dealers and other vested groups against the abolitionof the APL category. If the Court is of the view that it may not be possible or desirableto abolish the APL category altogether, it may consider limiting the APL category tohouseholds whose annual income is Rs. 1,00,000/-. This is based on the fact that aclass IV employee of the Central Government in Delhi gets a consolidated salary ofabout Rs. 8,000/- per month making it Rs 96,000/- per annum. This category may becalled “Marginally Above Poverty Line (MAPL)”.

f) Clear delineation of responsibilities and functions of each positionconnected with PDS; provide benchmarks for performance levels, and introduce theconcept of personal liability in case of lapses.

g) Introduce an end-to-end automated system in the PDS chain asdiscussed in the Computerization Chapter to minimize human intervention in the PDSoperations and reduce the scope for manipulation.

8. INTRODUCTION OF FORTIFIED ATTA (WHEAT FLOUR) IN THE PUBLICDISTRIBUTION SYSTEM

8.1. The Committee is of the considered view that fortified Atta along with wheatshould be made available through PDS outlets which would immensely benefit thevulnerable sections of society and increase off take by consumers of PDS foodgrains.Even today, persons without BPL ration cards, despite being eligible for the same, andother persons with BPL ration cards are purchasing wheat flour from the open marketas a matter of convenience and to save on the time and cost involved in grinding ofwheat into flour. The system of distribution of wheat flour is in vogue in the district ofDarjeeling where enriched wheat flour is given @ Rs. 6.80 per kg. In the openmarket, packaged wheat flour weighing 10 kg costs anything up to Rs. 150/- andtherefore, it should be possible to price a packet of fortified 5 kg or 10 kg wheat flourat a much lower price which may be any price between Rs. 7/- and Rs. 8/- per kg.This will definitely be much less than what may be available through the open market.The advantages would far outweigh a somewhat increased price that may have to bepaid. At least, providing this option to the vulnerable sections of the society throughthe PDS network will be a step in the right direction.

8.2. The Committee has also suggested modalities for operationalising thisinnovative step in the main chapter dealing with this subject.

8.3. Fortified Atta would also improve the general health of the vulnerable sectionsand reduce instances of Vitamin A deficiency and iron deficiency Anaemia. It has alsobeen suggested that general instructions may be given to sell only fortified Atta bothunder the PDS as well as the open market as this will make implementation easier andprevent diversion.

9. IMPEDIMENTS IN EFFECTIVE ENFORCEMENT OF PROVISIONS OF ESSENTIALCOMMODITIES ACT, 1955, PDS (CONTROL) ORDER, 2001 AND DELHI SPECIFIEDARTICLES (REGULATION OF DISTRIBUTION) ORDER, 1981—ANALYSIS ANDRECOMMENDATIONS.

9.1. Impediments in the enforcement of provisions of the above Act/ Ordershave been identified as follows:

i. Insistence of police authorities to act only on complaints made by theDepartment;

ii. Disinclination of police authorities to conduct investigation againstviolators of the above Act/Orders;

iii. Failure of the Department to launch timely prosecutions against theviolators including the errant FPS dealers;

iv. Failure to hold delinquent officials accountable for their acts of omissionand commission; and

v. Delay in Court proceedings.

9.2. All the above factors have been discussed in detail citing instances in thechapter on the subject in the main body of Report. The Department vide Letter No. F.10(393)/Misc/F&S/Vig./681 dated 20/04/2007, has furnished a list of 42 pendingdisciplinary proceedings as on 19/04/2007. Most of these cases are pending since thelast six to seven years with oldest pendency back to the year 1987. The list, which isannexed, is an eye-opener. None of these cases relate to complicity in diversion ofSFAs, fudging of FPS records regarding stocking and sale of SFAs etc., which havetoday become an intrinsic facet of PDS operations.

9.3. The Department has also furnished a list of 37 disciplinary proceedings thathave been disposed off during the years 2005 – 2007. Most of the disposed off casesrelate to unauthorised absence, malpractices in sale and receipt of BPL ration cardapplication forms, preparing non – genuine ration cards, unauthorised absence fromduty etc. It is seen from the list that even in a case of a serious offence likepreparation of non – genuine ration cards, a meagre penalty of censure or reductionby one stage in time scale has been imposed.

9.4. It has been observed by the Committee from an analysis of court files thatthere are inordinate delays in trials under the Essential Commodities Act, 1955,defeating the very object and purpose of Section 12A(2) of the Essential CommoditiesAct, 1955 which provides for a summary trial.

9.5. After in-depth analysis made in the chapter on this subject, the Committeehas made the following recommendations:

a) The police department should be directed to act on complaints inconsonance with Section 11 of Essential Commodities Act, 1955.

b) The police department should be directed to exercise their powers ofsearch and seizure without exception.

c) Prosecutions should be instituted against persons involved incontravention of statutory provisions.

d) Action should be taken without loss of time to seal the FPS if foundcontravening statutory provisions and the license of such FPS should be revoked ifenquiry in the matter confirms commission of offence unless a superior court staysthe proceedings.

e) A fast track Court should be constituted in respect of cases pertaining toviolations of Essential Commodities Act, 1955. There should be a special prosecutorfor handling such cases.

JUSTICE WADHWA COMMITTEE ON

PUBLIC DISTRIBUTION SYSTEM IN ORISSA

INDEX

SL.

NO.

PARTICULARS PAGE

A. Preface i-B. Broad Overview i-xxx1. Introduction 1-3

2. Legal Regime 4-16

3.

A.

B.

C.

D.

Wholesale Distribution

Orissa State Civil Supplies Corporation

Storage Agents.

Diversion.

Observations

17-46

17-24

25-41

41-44

45-46

4.

A.

B.

Retail Distribution (Fair Price Shops)

Appointment of retail outlets

Viability and condition of Retail Outlets

47-63

47-50

50-60

C.

D.

Problems faced by beneficiaries

Observations

60-61

61-63

5 Transportation 64-66

6.

A.

B.

C.

D.

Vigilance, Enforcement and Complaint Mechanism

Composition and Functioning of Vigilance Committees

Complaint Mechanism

Ombudsman/Regulator

Enforcement

67-90

67-75

75-77

77-86

86-907. Identification of Beneficiaries

Observations

91-112

112-115

8. Computerization 116-118

9. Recommendations 119-125

PREFACE

In the matter:

Writ Petition (C) No. 196/2001 – People’s Union for Civil Liberties

V/S

Union of India and Ors.

1. Hon’ble Supreme Court of India by Order dated 12.7.2006 in the aforesaid Writ

Petition constituted a Committee to be headed by me to look into the maladies

affecting the proper functioning of the Public Distribution System (PDS) and to

suggest remedial measures.

2. Hon’ble Court’s direction was initially given for the Government of Delhi to be

followed on an all India basis.

3. Committee submitted report on Delhi on 21.8.2007. By order dated 10.1.2008,

Hon’ble Court while accepting the report, directed the Committee to do the similar

exercise in terms of earlier order for the entire country.

4. Scope of the task assigned to the Committee thus having been enlarged, then

Committee projected to the Department of Food & Public Distribution, additional

requirements of staff, space and delegation of financial powers for its smooth

functioning. The Department dilly dallied and did not meet the requirements. The

Committee had to approach the Hon’ble Court time and again. It was only after a

peremptory Order dated 25.8.2008 was passed by the Hon’ble Court that the

Department started taking steps for creating necessary infrastructure. It was only

thereafter that the Committee could start functioning in right earnest. The Hon’ble

Court extended the time for submitting the report till April 2009.

5. The Committee is submitting report of the State of Orissa. The Committee is

also submitting a separate comprehensive report on ‘Computerization of PDS’.

6. No one has doubted the utility of PDS being the need for supply of food

grains to the poor of the country at affordable rates. Procurement and

distribution of food grains is a huge and gigantic task but then the whole

system is built on corruption. There are more leakages and maladministration

and benefits to the poor are low. Inefficiency and corruption has made PDS

corrupt at several levels. The system lacks transparency, accountability,

monitoring and enforcing. Survey is not being conducted regularly and

properly, with the result people Above Poverty Line (APL) have been issued

Below Poverty Line (BPL) cards and those eligible for BPL cards have been

ignored. Bogus cards are in abundance. Immediate measures are required to

reduce the diversion of food grains. Delivery systems under the PDS have to

be improved so that the real beneficiary gets its due entitlement at fixed price,

fixed quantity, fixed time and wholesome quality. Innovative methods are

required to improve the system. The whole system has to be totally revamped

and modern technology would appear to be the only answer.

7. Committee has suggested that in order to combat corruption and strengthening

PDS there has to be zero tolerance approach.

Based on the work done by the Committee and in compliance with the Hon’ble

Court’s orders, a detailed report covering all issues tasked to the Committee is

being submitted. The first part of the report is a Broad Overview. The report is

then divided into 9 Chapters. Last Chapter contains the recommendations.

9. The task before the Committee has been quite stupendous particularly

considering the time schedule. In this task Legal Team headed by Mr. Dayan

Krishnan and Mr. Dinesh Dayal, Advocates and assisted by Ms. Neeru Vaid, Mr.

Gautam Narayan, Ms. Meenakshi Chauhan, Mr. Anant Garg and Mr. Aman R.

Nath, Advocates, rendered invaluable assistance. Mr. Ullash Chandra Mohanty

& Ms. Deepali Mohapatra were engaged by the Committee as local lawyers and

they also rendered invaluable assistance. Mr. Biraj Patnaik helped in organizing

public meetings and was helpful in interpreting the Oriya language.

10. For the Committee to complete its task, it got full support and cooperation

from the officers of the State of Orissa particularly Dr. Satya Narain, Resident

Commissioner; Mr. R.K. Sharma, Commissioner-cum-Secretary, Food Supply &

Consumer Affairs; Mr. R.N Das, Commissioner-cum-Secretary, Panchayat Raj;

Dr. A.K. Panda, Commissioner-cum-Secretary, H.U.D. Mr. R.R. Patnaik,

Additional Secretary, F&C.S. Mr. S.K. Roy Chairman O.S.C.S.C; Mr. D.K. Das

Managing Director, O.S.C.S.C.; Mr. B.R. Samal, General Manager, FCI; Mr.

Girish S.N. Collector Angul; Mr Narayan Chandra Jena, Collector Khurda; Mr.

Kishore Kumar Mohanty, Collector, Cuttack; Mr Bishnu Prasad Panda, Collector

Nuapada; Mr P.K. Patnaik, Collector, Sambalpur; Mr. Santhanagopalan R.,

Collector, Kalahandi.

11. Mr. S.C. Rawal, former Registrar of Delhi High

Court performed the functions of the Secretary to the Committee. He handled

all the correspondence of the Committee and looked after the requirements of

the Legal Team attached to the Committee.

12. Mr. K.K. Mittal, Dy. Registrar (equivalent to Director in Central Government)

helped the Committee in going through the draft reports. He also looked after

the administration and staff attached to the Committee and handled

correspondence with the Department of Food & Public Distribution,

Government of India.

13. There may be some overlapping on various points in the report and that is so

because an attempt was made to make each chapter self-contained. It is also

possible that there might have been some inadvertent errors which crept up in

the report but the whole report is an attempt to present the correct picture of

the ground realities keeping in view the directions of the Hon’ble Court.

The sum and substance of the recommendations are given in Chapter 9 of the report.

(Justice D.P. Wadhwa)

Chairman, Central Vigilance Committee on Public Distribution System

Delhi Dated: 23.2.2009

BROAD OVERVIEW

1. By an order dated July 12, 2006 passed in Writ Petition (Civil) No. 196/2001

Supreme Court constituted this Committee and directed that the Committee

shall look into the maladies which are effecting the (public distribution) system,

and also suggest remedial measures.

2. In particular the Committee was asked amongst other things to focus on;

a) The mode of appointment of the dealers,

b) The ideal commission or the rates payable to the dealers,

c) Modalities as to how the committees already in place, can function better,

and

d) Modes as to how there can be transparency in allotment of food stock to be

sold at the shops

3. It was further ordered that while dealing with the question of mode of

appointment, the committee shall also suggest as to a transparent mode in

selection of dealers. The Committee was also directed to indicate as to how

more effective action can be taken on the reports of the vigilance committees

already appointed. The Committee was required to invite suggestions from the

general public, organizations and consider suggestions, if any received, in the

proper perspective.

4. The Supreme Court observed that there is large scale corruption involved and

hardly any remedial steps are taken to put an end to this. The ultimate victim is

the poor citizen who is deprived of his legitimate entitlement of food grains.

The Public Distribution System is intended to ensure that a citizen gets the food

grain at a reasonable price keeping in view the economic standards.

5. These directions were initially given for the Government of Delhi and to be

followed on all India basis.

6. The Committee submitted the report relating to Delhi to the Supreme Court on

21.8.2007. By an order dated 10.1.2008 the Court accepted the report and

directed that in terms of the earlier order similar exercise be undertaken by the

Committee for the entire country. The Committee then proceeded to take up

the study for other states. In the process the Committee visited the State of

Orrissa from 15th November 2008 to 24th November 2008. The Committee

invited suggestions from the public through news papers, held public meetings,

met the representatives of various organizations like the FPS owner’s

associations, transporters, Storage Agents and NGO’s. The Committee held

meetings with the Senior Officers of the State Food and Supplies Department,

Panchayat Raj Department, Urban Development Department and District

administration. The Committee also visited the office of the Orrissa State Civil

Supplies Corporation. The Committee had discussions with the officials of the

Corporation. The Committee also visited the godowns of the Storage Agents,

and the Fair Price Shops.

7. The maladies affecting the Public Distribution System in Orrissa can be broadly

classified into the following categories.

Identification of the beneficiaries Below Poverty Line (BPL)

Diversion of food grain meant for Targeted Public Distribution System (TPDS)

Failure in the processes of implementation

Failure of the vigilance mechanism

Non existent machinery for enforcement

Each of these problems have been dealt in detail in the report under separate

chapters.

I. IDENTIFICATION OF BPL

1.1 The PDS Control Order 2001 provides that the State Governments shall

(i)formulate guidelines for the purposes of identification of families living Below

Poverty Line (BPL) including the Antyodaya families as per the estimates

adopted by the Central Government. (ii) Care will be taken to ensure that the

families so far identified are really the poor. (iii) Exercise of identification of BPL

and Antyodaya families, wherever it has not been done already to be

completed within three months of the issue of the PDS Control Order, 2001.

1.2 In the meeting held with the senior Government functionaries in the State of

Orissa on 16th November, 2008 it was revealed that the State Government had

not formulated any guidelines for the purposes of identification of families

living below poverty line (BPL) including the Antyodaya families. It appears

that the State Government adopted the BPL Survey of 1997 conducted by Rural

Development Department of the State.

1.3 The Central Government laid down the following guidelines for implementing

the Targeted Public Distribution System:

(I) Identification of beneficiaries of the Targeted Public Distribution System

(TPDS) namely the population Below Poverty Line (BPL) and issue of food

grains at specially subsidized rates are the most important features of the

TPDS. To work out the population Below Poverty Line (BPL) it is proposed to

adopt the provisional estimates arrived at by the Planning Commission for the

year 1993-94 adopting the methodology of constituted by the Planning

Commission under the Chairmanship of Late Prof. Lakdawala (Expert Group).

According to the official methodology so far adopted, the number and

percentage of Below Poverty Line population for 1993-94 works out to 14.98

crores persons and 16.82% respectively. As per the Expert Group

methodology this works out to 32.03 crores and 35.97%. The Expert Group

methodology according to the Deputy Chairman, Planning Commission gives

“poverty estimates closer to ground reality” and as such it is proposed to adopt

them for the Targeted PDS.

(II) While these estimates give the number of persons and percentage of BPL

population at State Level, identification at the micro level of the population Below

Poverty Line can be done as indicated below :-

i) The quinquennial surveys made by the Ministry of Rural Areas and

Employment for Implementation of IRDP, etc. on household living Below Poverty Line

can be a basis. However, the overall number identified should be limited within the

population Below Poverty Line as fixed by the Union Planning Commission adopting

the methodology of the Expert Group by Late Prof. Lakdawala.

ii) Gram Panchayats and Gram Sabhas should be involved in the initial

identification of eligible families.

iii) Final identification should be made after verification of doubtful cases.

iv) As regards urban population, slum dwellers will generally qualify for the Below

Poverty Line. Applications, if any, received from non-slum areas should be verified to

identify eligible beneficiaries.

v) The thrust will be to include only the really poor and vulnerable sections of the

society such as landless agricultural labourers, marginal farmers, rural artisans /

craftsmen such as potters, tappers, weavers, blacksmiths, carpenters, etc. in rural

areas and slum dwellers and persons earning their livelihood on a daily basis in the

informal sector like porters, coolies, rickshaw pullers and hand-cart pullers, fruit and

flower sellers on the payment etc. in urban areas.

vi) The above criteria is indicated only by way of illustration and is in no way an

exhaustive list of those who could be brought within the ambit of the Below Poverty

Line. The total number identified, however, should be within the limits of Below

Poverty Line population indicated by the Planning Commission.

1.4 The perusal of these guidelines would show that the Survey made by the Rural

Development Department of the State could be a basis but the overall number

of BPL identified by the State had to be limited within the limits prescribed for

BPL by the Union Planning Commission adopting the methodology of the Expert

Group headed by Late Prof. Lakdawala.

1.5 The State Government adopted the Ministry of Rural Development (MoRD)

survey of 1997 without laying down any criteria or undertaking any BPL survey

which resulted in large number of inclusion and exclusion errors. The Central

Government thereafter approved the MoRD survey of 2002 in 2005 to form the

basis of BPL census. The State Government has yet not adopted the same

though more that three years have passed. This has resulted in a clamour for

BPL cards and problem is now becoming a headache for the District

Administration. Further the failure of the State Government to provide

guidelines to work out the BPL population has resulted in the number of BPL

ration cards exceeding the estimates of the Planning Commission.

1.6 To work out the population below the poverty line under the TPDS, there was a

general consensus at the Food Minister’s conference held in August 1996, for

adopting the methodology used by the expert groups set up by the Planning

Commission under the Chairmanship of Late Prof. Lakadawala. The BPL

households were determined on the basis of population projections of the

Registrar General of India for 1995 and the State wise poverty estimates of the

Planning Commission for 1993-94. The total number of BPL households so

determined was 596.23 lakh. Guidelines for implementing the TPDS were

issued in which the State Governments had been advised to identify the BPL

families by involving the Gram Panchayats and Nagar Palikas. While doing so

the thrust should be to include the really poor and vulnerable sections of the

society such as landless agricultural labourers, marginal farmers, rural

artisans/craftsmen such as potters, tappers, weavers, black-smith, carpenters

etc. in the rural areas and slum dwellers and persons earning their livelihood on

daily basis in the informal sector like potters, rickshaw-pullers, cart-pullers, fruit

and flower sellers on the pavement etc. in urban areas. The Gram Panchayats

and Gram-Sabhas should also be involved in the identification of eligible

families.

1.7 The number of BPL families has been increased w.e.f. 1.12.2000 by shifting the

base to the population projections of the Registrar General as on 1.3.2000

instead of the earlier population projections of 1995. With this increase the

total number of BPL families is 652.03 lacks as against 596.23 lack families

originally estimated when TPDS was introduced in June 1997.

1.8 The food allocation to the State is made by the Centre according to the

numbers of BPL estimated on the basis of the findings of the Expert Group

headed by Late Prof. Lakdawala. As a result, each BPL family in the State

which is entitled to 35 Kg of grain per month is getting only a reduced quantity

of 25 Kg of grain for month.

1.9 The PDS Control Order 2001 provides that the State Governments shall get the

list of BPL and Antyodaya families reviewed every year for the purposes of

deletion of ineligible families and inclusion of eligible families.

1.10 It was admitted before the Committee by the State Government functionaries

that no such review of BPL families is being done in the State of Orissa. This

provision was made keeping in view the fact that the number of BPL families in

any State can not be static. Some families have an increased income during

the course of time and become ineligible for the benefits given to the BPL.

Similarly, some families have loss of income or new families come into

existence during the course of time that may be entitled to the benefit given to

BPL. Over a period of time, these numbers have grown since 1997. The

position has changed drastically and at present there are a large number of

BPL families who do not have any BPL card or any card at all where as there

are also a large number of families enjoying the benefits of BPL though they

have sufficient incomes to disentitled them to the BPL benefits.

1.11 The PDS Control Order 2001 provides that the State Government shall ensure

that no eligible applicants is deprived of a ration card under the PDS.

Apparently, due to the absence of proper criteria and the absence of review

large number of people entitled to the benefits under the PDS have been

denied such benefits.

1.12 The PDS Control Order, 2001 further provides that the State Government shall

conduct periodical checking of ration card to weed out ineligible and bogus

units in ration card. Ration card shall be valid for a period of five years from

the date of its issue unless it is suspended or cancelled earlier. A ration card

shall be issued afresh or reviewed after fresh verification of and such other

checking as may be prescribed by the State Government in this regard.

1.13 No such exercise has been undertaken by the State Government. No checking

for weeding out of ineligible or bogus ration cards or bogus units in ration cards

has been undertaken by the state.

1.14 The PDS Control Order 2001 also provides that elimination of bogus ration

cards as well as bogus units of ration cards shall be a continuous exercise by

the State Government to check diversion of essential commodities. This

exercise has never been undertaken and hence there is a complete failure on

the part of the Government to reach at a correct estimation of BPL families in

the State.

1.15 High exclusion error means a low coverage of BPL households. Large inclusion

errors imply that the APL households receive an unacceptably large portion of

subsidized grain.

1.16 The Supreme Court by order dated February 14th 2006 has now directed that

the survey methodology for the next BPL census will be designed by the

Ministry of Rural Development in consultation with the Supreme Court

Commissioner’s in the Right to food matter Case No. 196/2001 along with other

sections of the society latest by the beginning of the XIth Five Year Plan and

that provision will be made to allow new names to be added and ineligible

names deleted from the BPL List 2002 on a continuous basis during the period

that the list will be applicable; This committee in its report has discussed the

issues of identification in detail and its recommendations made there apply

across the board to all states. The committee in essence has recommended

that the need for proper identification is an urgent and necessary measure and

requires time bound implementation.

1.17 It may also be pointed out that there has been a problem due to the nomenclature of

the survey. The survey conducted for providing ration at subsidized rates should be

called by a different name to avoid this confusion. A single BPL list does not

appropriately represent various types of deprivations faced by the people. The

objective of the MoRD is to identify the poor beneficiaries for its programmes and it

can not become a universal list for delivering all programmes. The State Governments

are therefore required to formulate separate guidelines for identifying beneficiaries.

These guidelines should take into account the ground realities in the State.

II. DIVERSION

2.1 Food grain is procured for the Public Distribution System on behalf of the

Central Government by the Food Corporation of India (FCI). State of Orrissa

has also been allowed to do procurement for the Central Pool under the

Decentralised Procurement Scheme. The entire food grain so procured either

by the FCI or the State comes into the Central Pool. The Central Government

then allocates food grain to each State as per their entitlement under the

Scheme.

2.2 Diversion of food grain takes place at every level of the system. The different

ways in which diversion takes place would show that Government Officials, Storage

Agents, Godown Keepers, Transporters and retailers are all involved in the diversion

of food grain in some manner or the other. The malady of diversion is prevalent in the

system in such large scale that it has become a menace and threat to the system.

2.3 The first and foremost reason for diversion is the difference in the price of

TPDS grain and market rate. This serves as an incentive for the unscrupulous persons

connected with the implementation of the system to connive with the traders to divert

the TPDS food grain into open market. The difference in price is also an incentive for

people who are not otherwise eligible under the scheme to get the benefit of the

lesser rates of grain.

2.4 The second reason for diversion is the lack of any system of accounting for the

grain allocated under the system. Ideally there should be a system by which

the grain allocated to the State can be equated with the grain distributed to the

beneficiaries. Since the scale of distribution and the number of beneficiaries is

very large this can not be achieved manually. Thus there is need for complete

automation and computerization of the Public Distribution System.

2.5 The third reason for diversion is that the functions of implementation,

enforcement and vigilance are not clearly demarcated and implemented.

2.6 There are two ways in which diversion takes place. Firstly by selling the TPDS

grain in the open market, and secondly by substituting the TPDS grain by grain

of inferior quality.

2.7 The Targeted Public Distribution System when introduced was intended to

benefit about 6 crore poor families for whom a quantity of about 72 lakh tones

of food grains was earmarked annually. Over and above the TDPS allocation,

additional allocation of 103 lakh tones of food grain was earmarked annually

and provided to the States as ‘transitory allocation’. This was intended for

continuation of benefit of subsidized food grains to the population Above

Poverty Line (APL) as any sudden withdrawal of benefits existing under PDS

from them was not considered desirable. The allocation for APL has continued

till date and has proved to be one of the greatest sources of diversion. At

present the allocation for the APL to any State is 14.6% of its APL requirement.

It is common knowledge that most APL cardholders do not get any food grains

under the PDS. Rest do not bother to draw their entitlement. Since full quota is

not being allotted for the APL most of the States have adopted the ‘first come

first serve’ principal. This enables the FPS dealer to put off any card holder on

the plea that the APL stock has been exhausted and divert most of the stock

meant for APL.

2.8 This Committee in its Delhi report has already suggested abolition of APL

subject to the view that the Court may take. We reiterate the suggestion and

maintain that APL should be abolished and the subsidy provided for APL should

be utilized to increase the BPL and make it more realistic and beneficial to the

poor.

2.9 In the State of Orrissa the Committee learnt about the A system of diversion

notoriously known as ‘Re-cycling’. The government or its agencies procure

paddy from the farmers and give it to the millers for extracting rice. The millers

after extracting the rice return it to the Government. It is then allocated to the

State pool and passed on to the (private) Storage Agents. There is a nexus

between the Storage Agent and the millers. The Committee learnt that the

Government Agencies, Storage Agents and Millers work in close co-ordination

with each other and in fact at many places the procurement is done by the

millers on behalf of the agencies of the Government. The Millers exaggerate

the quantities that they contract to supply. They procure lesser quantities or

withhold and divert certain quantities received for milling and supply a lesser

quantity. When this grain is allocated and reaches the storage agent it is

returned to the miller who again supplies the same to the government or its

agent. For example where a miller agrees to supply 100MT of rice, he would

supply 70 MT and then wait till allocation is made and the food grain reaches

the storage agent. 30 MT of rice would then be transferred by the storage

agent to the miller who would again supply it to the government or its agency.

2.10 As already stated above private storage agents are the major source of

diversion in the State of Orrissa as there is virtually no control or checking on

their activities.

2.11 The retailers also indulge in diversion. APL food grain can be easily diverted by

them as already shown above. They also use bogus ration cards for diversion.

Besides this the committee received complaints showing that the FPS dealers

retain the ration cards of the poor people and indulge in short weighing. As a

matter of fact diversion at any stage has to be ultimately accounted for against

some ration card. This makes the FPS licensee an accessory to all diversion

done at any level and provides scope for him to indulge in diversion on his

own.

2.12 The weighing systems at different levels also provide large scope for diversion.

The Committee found that that at most places manual weighing scales of very

small capacities are used.

2.13 There are provisions in the PDS Control Order, 2001 regarding quality Control.

It is provided that the State Governments shall make arrangements for taking

delivery of essential commodities issued by the Central Government by their

designated agencies or nominees from the FCI.

2.14 Depots/godowns should ensure further delivery to the fair price shop within the

first week of the month for which allocation is made. Before making the

payment to the FCI the representatives of State Governments or their

nominees and the FCI shall conduct joint inspection of the stocks of foodgrains

intended for issue to ensure that the stocks conform to the prescribed quality

specifications. The FCI shall issue to the State Governments stack-wise sealed

samples of the stocks of foodgrains supplied to them for distribution under the

Public Distribution System at the time of dispatch. State Governments shall

exercise necessary checks to ensure that full quantity lifted by them reaches

their godowns and in turn the fair price shops. State Governments shall ensure

that stocks of essential commodities under the Public Distribution System, as

issued from the FCI godowns, are not replaced by stocks of inferior quality

during storage, transit or any other stage till delivery to the ration card holder.

2.15 The Committee found that there was no system of quality control in the state.

No samples were found even at the whole sale distribution points. No samples

were supplied to the retailers. There was no check on quality of grain being

supplied to the beneficiaries. The Committee found insect infested grain at one

of the Storage Agents in Orrissa and rotten grain lying in the godown of BSFC

in Jharkhand.

2.16 It is suggested that there should be complete automation of weighing systems

at all levels. Weigh Bridges should be used at all FCI and whole sale

distribution points. These weigh Bridges should be connected to computer

systems to generate weight check memos automatically. Stock inventories

should also be automatically generated. The system of sampling should be

strictly observed. The State Government has to obtain stack wise samples from

the FCI after a joint inspection of the grain. The whole sail distribution point

must issue samples to the retailers to show the quality of grain supplied. The

retailer must display the sample at his FPS shop so that the quality can be

checked by the officials, vigilance machinery, enforcement machinery and the

consumer.

2.17 The committee also learnt that at every stage of storage and transportation

some pilferage of food grain takes place from the jute bags. It was shown to

the committee how easy it is to poke a jute bag to take out grain from it and

then close the opening created by the poker. A jute bag received from the FCI

was found to contain an average weight of 48.5 Kg against 50 Kg. The same

bag then gets reduced to about 45-46 kg at the whole sale distribution point.

2.18 During the visit to Chandigarh a suggestion was given to the Committee that

the PDS foodgrain should be packed in non pilferable, tamper proof bags of

smaller sizes. Rice and wheat flour is sold in open market by private companies

in such smaller HDPE packaging.

2.19 It is felt that in case TPDS food grain is packed in non pilferable, tamper proof

bags of 10kg and 5 kg the same can be delivered to the beneficiary in sealed

packing. This measure along with automation in weighing and use of

computerization and smart cards would go a long way in eliminating or at least

reducing pilferage. It would also ensure a more hygienic handling of food grain

and help in ensuring that the food grain of proper quality reaches the

beneficiary.

2.20 The Committee feels that diversion of PDS food grain can be largely curbed by

use of information and communication technology (ICT) based solutions.

Suggestions in this regard have been given in separate recommendations made

by this Committee.

III. IMPLEMENTATION

3.1 Licensing

A. The distribution under the PDS in the State is being done through the Orrissa

State Civil Supplies Corporation. The whole sale distribution of essential

commodities is done through storage agents.

B. During the course of the visit of the Committee to the Office of the

Corporation, a case relating to the district of Angul was noticed the applicant

had been recommended by a Minister of the Sate Government. The District

Collector and the Board of the Corporation did not recommend the name of the

applicant. But the State Government appointed the said applicant as a storage

agent. During the visit to Angul, the Committee obtained the file relating to

this case. The matter had been referred to the Sub- Collector for verification

after the orders from the State Government. The complaint was that wife of

the applicant was a public representative and therefore, the applicant was

ineligible for appointment. The applicant submitted an affidavit before the

Sub-Collector that he has been divorced for the last five years and had been

living separately from his wife. This affidavit was accepted by the Sub-

Collector as sufficient proof of divorce.

C. This case is a glaring example of political interference in the implementation

process of PDS.

D. The process of appointment of a retailer as per the guidelines of the State

Government is that a retailer should be appointed for the population of 2000 in plain

areas and one retailer should be appointed for the population of 1000 in hill and

inaccessible areas. It is provided that marginal variation from the population may be

made in case where fair price shops established on this basis would be inaccessible to

some consumers to that outlet or the distance between the retail below and the

village / hamlet is more than 2 Km.

E. As a general principle, the maximum number of retail centers to be opened in

Gram Panchayat areas was not to exceed three, however, in inaccessible areas the

number in a Gram Panchayat may be increased to a maximum of five.

F. The applicant desirous of obtaining retail license has to submit an application

before the Sub-Collector and satisfy him that the applicant has adequate financial

resources to run a retail fair price shop and has suitable premises for functioning of

the retail shop. It has to be ensured that the location of the retail shop is convenient

to the consumers. The financial viability of the applicant has to be examined with

reference to the value of essential commodities that retailer would be required to lift

in a month.

G. After the enquiry is conducted in the District or sub-divisional office by the SCSO

or other designated officer the application is required to be put up before Block Level

Advisory Committee (BLAC) or Taluk Level Advisory Committee (TLAC) for

consideration.

H. The Block Level Advisory Committee (BLAC) or Taluk Level Advisory Committee

(TLAC) makes a recommendation after passing a resolution. The appointment is then

made by the concerned Sub- Collector / ADM. In case of Gram Panchayat / WSFG and

Corporative, no recommendation of the Block Level Advisory Committee (BLAC) or

Taluk Level Advisory Committee (TLAC) is required.

I. Committee observed that:-

1.There is rampant political interference in the selection of storage

agents and retailers and all procedures are given a gobye by the department if there

is a ‘political’ recommendation.

2. The Committee found there is no transparent mode of appointment of

FPS dealers as no advertisement is issued whenever there is a vacancy.

3. The Taluk and Block level advisory committee would meet only when a

‘convenient’ application is received and what is worse is that only the

‘convenient’ application is considered and the previous applications are just

ignored.

J. It may be mentioned here that in the State of Orissa the Vigilance Committees

envisaged under the PDS Control Order 2001 are named as the Advisory Committee

on PDS. There are District Level Advisory Committee (DLAC), Block Level Advisory

Committee (BLAC) , Town Level Advisory Committee (TLAC) and Rural Level Advisory

Committee (RLAC) both for urban and rural areas. The State has adopted, the system

of one Retail Advisory Committee for each Gram Panchayat in rural areas and each

FPS areas.

K. It may be noticed that the PDS Control Order 2001, envisages the formulation of

Vigilance Committees to perform the functions of keeping a vigil and for monitoring

the working of the PDS at the State/ District / Block and FPS level. However, in the

State or Orissa the Committees have been designated as Advisory Committees and

perform an active role in the implementation of the PDS. The overlapping of functions

ensures that these Committees are unable to perform vigilance which is the main

purpose of these Committees. It was also revealed that these Committees rarely

meet as required and only indulge in interference in the implementation of the

system. A perusal of the files relating to the appointment of retail Licensees and

enquiries from the officials revealed that Vigilance Committees do not meet regularly.

Applications for license are received by the sub- collector and keep lying with him.

Only when an application is received from a convenient person the meeting of the

Vigilance Committee is convened. The only agenda for the meeting is to recommend

the licensee. These Committees are not actually doing any vigilance work.

L. The State Food and Supplies department should frame/ amend the rules

regarding allotment of licenses in order to re-define the role of the vigilance

committees in allotment of licenses. Any vacancy for an FPS should be properly

advertised. The applications received can be scrutinized by the officials to ensure that

they comply with the eligibility conditions. Names of the applicants can be made

public and objections invited from the public and bodies responsible for vigilance. Spot

verification can be done by officials of the department. There can be a committee to

take a final decision.

M. The State Government has introduced a system of distributing the food grains

on fixed dates i.e. 5th, 6th, 7th, 20th,21st and 22nd day of every month. This

system may be convenient for the State Government officials but causes many

difficulties for the beneficiaries. It should not be forgotten that the Public

Distribution System is for the benefit of the public and not for the convenience

of the implementing authorities. There are long queues at every FPS on the

distribution days. If some beneficiary who is daily wage earner comes to get his

ration he has to forego his earnings for that day. The beneficiary is compelled

to take his entire entitlement on one day. This system is clearly violating of

the directions of the Supreme Court contained in the order dated May 2, 2003

in Writ Petition (Civil) No. 196 of 2001. The Supreme Court has directed that

Licensees who do not keep their shops open throughout the month during the

stipulated period shall make themselves liable for cancellation of their license.

This order also provides that in order to facilitate the supply of grain the BPL

house hold should be permitted to buy the ration in installments. Both these

directions are thus being flouted because of the distribution of ration only on

fixed dates.

IV. ALLOCATION AND DISTRIBUTION

The Orrissa State Civil Supplies Corporation

1. Under the TPDS procurement of grain is to be done by FCI. However, in some

states like Orrissa the Central Government has allowed Decentralised

Procurement under the Decentralised Procurement Scheme. Under this scheme

the State Government, on its own or through its agencies procures paddy in

account of FCI. Allocation is done to the State from the grain purchased by

them. If there is deficiency further allocation is done from the grain procured

by FCI from other States. In case there is excess it is allocated to other States

by the FCI.

2. Orrissa is having large cultivation of Paddy. After procuring Paddy the

Government agencies give it to the Millers for extracting rice. The Millers return

the rice to the State Government which is distributed through the Storage

Agents.

3. As per the rules the Millers should not be related to the storage agents. In

practice it was found that all the millers and storage agents belonged to one

community and work in close co-ordination with each other. There were

complaints that in fact the procurement was being done by the Millers on

behalf of the OSCSC. Thus the officials of OSCSC, Millers and Storage Agents

were all involved in diversion.

4. The State has adequate storage facilities. Orrissa State Civil Supplies Corporation

owns 161 godowns in the State. The State Government has transferred 50

godowns to the Corporation. It has also hired several godowns from CWC,

OSWC, RMC MARKFED and private persons. Besides this the Panchayat Raj

Department owns 6000 godowns of 50 MT capacity and 300 godowns of

100MT capacity which they are prepared to put at the disposal of the

Corporation. The Panchayat Raj Department and the Urban Development

Department are also prepared to construct more godowns. However, it appears

that the Corporation is not interested. It even lets out its godowns to storage

agents.

5. The Committee strongly feels that the system of Storage Agents in the State is a

major source of diversion and should be done away fourth with.

6. The Committee found that the Chairman of the Corporation was a political

person. He would naturally be in a position to exercise influence in the functioning of

the Corporation especially in the matters of appointment of Storage Agents. The

Chairman in the meeting with the Committee also informed the Committee that he

tours the State regularly. This would show that he was certainly in a position to

exercise influence over the distribution system in the State.

7. The Committee is of the view that the Chairman of the Corporation should not be

a political person. The earlier practice of having the Secretary of the Food and

Supplies Department as the Chairman of the Corporation needs to be

immediately restored.

V. VIABILITY, SCALE OF ISSUE AND PRICE

1. Since 1997, the Scale of issue of the BPL families has been gradually

increased from 10 kg. to 35 kg. per family per month. The scale of issue

was increased from 10 kg. to 20 kg. per family per month with effect from

1.4.2000. The allocation for APL families had been retained at the same

level as at the time of introduction of TPDS (i.e. 10 kg. per family per

month). The allocation of food grains for the BPL families has been further

increased from 20 kg to 25 kg. per family per month with effect from July,

2001. Initially, the Antyodaya families were provided 25 kg. of food grains

per family per month at the time of launching of the scheme. The scale of

issue under APL, BPL and AAY has been revised to 35 kg per family per

month with effect from 1.4.2002 with a view to enhancing the food security

at the household level.

2. State of Orrissa has introduced Rs. 2/= rice scheme w.e.f. 1.8.2008. Under

this scheme all persons in the BPL and AAY categories are to be supplied

rice at Rs.2/= per Kg. Further all non BPL i.e. APL cardholders in the KBK

region are to be treated as BPL and supplied rice at Rs. 2/= per Kg. This

has increased the number of beneficiaries from approximately 30 lakh to 55

Lakh. In order to meet the requirements of larger numbers the State has

reduced the quota from 35 Kg to 25 Kg for BPL beneficiaries. The AAY

cardholders are still getting 35 Kg rice under this scheme at Rs. 2/= per Kg.

3. The Committee was informed that at the initial stages this scheme worked

well. However, this scheme has increased the demand for BPL cards. Extra BPL

cards mean that the real beneficiary gets less than his entitlement and persons

not entitled to the benefit are getting foodgrain at subsidized rates. The

Committee was not apprised of any reason why the State took the decision to

sell BPL rice at Rs. 2/- per Kg. However, the Committee was informed that the

State would meet the expenditure from its own budget.

4. CENTRAL ISSUE PRICE (CIP) :- The present Central Issue Price (CIP) of

food grains being supplied under TPDS is as under: -

(Figure in Rs. per kg.)

Commodity APL BPL AAY

Rice 8.30 5.65 3.00

Wheat 6.10 4.15 2.00

5. The Scale of issue and the issue price also raises the question of Viability of

the Storage Agents and Retail Licensees.

6. The Storage Agents are paid remunerations for their services as per the

Government approved rates per Quintal. i.e. Storage Commission Rs. 3.20

(BPL) and Rs. 1.60 (AAY), incidental charges Rs. 2.50, interest on investment

Rs. 0.80 (BPL) and 0.40 (AAY) and Transportation charges Rs. 10/- upto 19 Km

and Rs. 0.35 per Km. Beyond 10 Km. Prior to 1197-98 the Storage Agents were

allowed to lift the essential commodities, without pre-deposit of cost but from

1997-98 the agents can lift the essential commodities only after prepayment as

per the policy of the Corporation.

6. The case of Kailash Chandra Aggarwal of Talcher Block is a vivid

example to justify the abolition of Storage Agents. At the time of visit by the

Committee he first tried to project that he was running into losses but on being

prompted by an official of the department accompanying the team members of

the Committee, he changed his stances and provided calculations showing

profits. This case is only an example to show that all is not well with the system

of storage agents. The Committee is of the view that the system of private

storage agents should be abolished and the State Government should take the

responsibility of whole sale storage and distribution through its own

departmental mechanism or through the OSCSC.

7. The calculations of profit margins of FPS shops in Salepur, District

Cuttak and Bada Danda Sahi, Talcher in Angul District clearly show that that the shops

are not viable entities. It is necessary that these shops have some additional income

to make them viable. The commission of the retailers can only be increased by

ensuring that they do not have to spend on transport and door step delivery is

provided to them. It is also necessary that FPS shop keepers are also allowed to do

business in other non PDS items of grocery as it is not possible to ask the Government

to increase the subsidy nor it is desirable to increase the burden on the consumer by

increasing the price of PDS grain.

8. Door step delivery of food grain has to be given to the FPS dealers both in

urban and rural areas. This would not only in accordance with the scheme and

provisions of the PDS Control Order, 2001 but eliminate the expenses incurred by the

FPS dealer on transportation thus increasing the viability. It is suggested that the

licenses for the FPS should be given to persons running grocery shops. This business

of FPS can supplement their income as they will not have to incur additional

overheads for acquiring a shop, electricity etc. It would also help to increase their

customer base as more customers would be coming to their shops to get PDS grain.

The experiment of Women Self Help Groups was found to working well. In case no

such shop keeper is available in the area FPS may be given to WSHG. The Committee

also found that mobile Vans were doing well in distribution of PDS grain in remote

areas or where the license of an FPS is suspended or cancelled. The number of mobile

vans should be increased for distribution.

9. When the Committee suggested to the FPS owners to sell other items of

grocery from their shops to add to their income they showed disinclination. Reason is

not far to seek. It is the diversion of PDS food grain by them. In fact ownership of the

Kirana shop should be made a condition of the license.

VI. MONITORING

The monitoring of the Targeted Public Distribution System can be divided into

two parts

A. VIGILANCE

B. ENFORCEMENT

A. VIGILANCE

1. Awareness and availability of information is the key to vigilance. The PDS Control

Order, 2001 provides that a copy of the allocation order made to the Fair Price Shop

shall be simultaneously sent to the Nagar Palika, Gram Panchayat or the Vigilance

Committees or any other body nominated for monitoring the functioning of the fair

price shop. It further provides that the bodies nominated for monitoring the

functioning of the FPS by the State Government shall display the stocks of essential

commodities allotted during the months to the FPS on a notice board outside their

office.

2. Vigilance under the TPDS is envisaged through the Vigilance Committees, Gram

Panchayats, Nagar Palikas, and the Consumer.

3. The provisions regarding Vigilance Committees have been ignored if not flouted by

the State Government. Either the Vigilance Committees envisaged under the PDS

Control Order, 2001 have not been formed or they have not been meeting and

performing their duties. This is because there is no accountability for any one to

ensure that the meetings of the Vigilance Committees take place regularly. The PDS

Control Order, 2001 provides that the meetings of the Vigilance Committees on Public

Distribution System at the State, District, Block and FPS level shall be held on a

regular basis. The date and periodicity has to be notified by the State Governments.

However, the periodicity has to be not less than one meeting a quarter at all levels.

4. The State Government is therefore duty bound to ensure that meetings of the

Vigilance Committees at all levels take place at least once in three months. However,

no authority has been made responsible for ensuring that such meetings take place. It

has also been seen that most of the Vigilance Committees formed by the State

Government are too large and unwieldy. The State Government should fix the

responsibly of the officials of the administrative machinery to convene the meetings

and ensure the presence of the members. Rules can provide that any member who

does not attend two consecutive meetings would be replaced. The Secretary of the

Department of Food and Supply should be responsible for convening the meetings at

the State level, the District Magistrate should be responsible for the District level

Committee, Block Development Officer should be responsible for the block and FPS

level committees.

5. The PDS Control Order, 2001 also requires the State Governments to make rules

regarding furnishing of copies of the specified documents, namely ration card register,

stock register, and sale register. Any ration card holder desirous of obtaining extracts

from the records of the FPS owner can make a written request to such owner along

with the fee specified by the State Government and the FPS owner has to supply the

copies of the record within fourteen days from date of receipt of the request.

6. The right to information thus provided under the PDS Control Order, 2001 has

been negated by the States by not making rules regarding the fees payable for

obtaining the copies. Such rules should be made immediately and wide publicity given

to educate the beneficiary.

7. The Panchayat Raj Institutions and the Nagar Palikas should be actively involved

in the vigilance. The elected representatives of the people must perform their duty in

keeping a vigil on the activities connected with the Public Distribution System.

8. The purpose of providing that the copies of the allocation order for each FPS shop

should also be sent to the Gram Panchayat or Nagar Palika and should be displayed

on their notice board is to prompt their members to be vigilant and check the

activities of the FPS licensees.

9. As already stated earlier, the involvement of political persons in the

implementation of the scheme should be strictly avoided and they should play a

greater role in vigilance. In case the political persons are involved in the

implementation process it becomes difficult to take any action against the defaulting

license.

10. The involvement of the political persons in the process of implementation

minimizes and negates the provisions regarding vigilance by the Panchayats, Nagar

Palikas or the Vigilance Committees.

11. Another aspect of the Vigilance mechanism is the complaint system. In Orrissa a

helpline has been set up but the complainant has no way to find out if any action

has been taken on his complaint. It is necessary that there should be 24 hour

dedicated helpline set up in the state so that any one can lodge a complaint

against any the person involved in the implementation of the Public Distribution

System.

12. There should be a machinery to verify the complaints and take action against the

guilty. The complainant should be able to follow up his complaint. The identity of the

complainant should be protected. The committee has also recommended the setting

up of an independent watchdog in the form of a regulator/ombudsman to oversee the

smooth functioning of the system.

B. ENFORCEMENT

1. The enforcement under the Public Distribution System is dismal and ineffective.

This is the reason for the improper implementation of the system and large extent of

diversion. No system can succeed if there is no fear of punishment.

2. The Committee found that the States did not have any enforcement mechanism.

Any vigilance set up can not succeed without a proper enforcement mechanism.

Section 7 of the Essential Commodities Act, 1955 provides punishment for violations

of the Control Orders issued under Section 3 of the Act. These provisions are technical

in nature and require specially trained personnel to enforce them. The normal police

have proved ineffective in enforcing these provisions.

3. It has also been observed that the cases filed under the Essential Commodities

Act, 1955 keep on pending in courts indefinitely and a large majority of cases end up

in acquittal of the accused persons. It is necessary that special courts and specially

trained prosecutors are appointed for the trial of these cases.

4. The license granted to the dealers lay down certain conditions. The violation of

these conditions makes the licensee liable for cancellation of his license. The Supreme

Court has also ordered that licensees

• who do not keep their shops open throughout the month during the stipulated

period,

• fail to provide grain to BPL families strictly at BPL rates,

• keep the cards of BPL households with them,

• make false entries in the BPL cards,

• engage in black-marketing or siphoning away of grains to the open market, and

• hand over such ration shops to other person/organizations, will make himself

liable for cancellation of his license.

5. This order was passed on 2.5.2003 but no action has been taken by the State to

enforce this order. It is therefore necessary that the special squads consist of persons

drawn from the administration and the police and should be placed directly under the

District Magistrate. These squads should be responsible for conducting raids,

launching criminal prosecutions and also for recommending departmental action for

suspension or cancellation of license, or imposing penalties No action appears to have

been taken against any official though it is can not be denied that no diversion of food

grain is possible without the connivance of the officials of the department. . It is also

important that these squads should have the powers to recommend action against

officials in whose jurisdiction violations are detected or who are found to be involved

in diversion of food grain. The Committee feels that there should be dedicated Special

squads in every District for enforcement of the penal provisions of the Essential

Commodities Act, 1955. The Committee has suggested Zero Tolerance in the matter

of enforcement in the Public Distribution System. Similarly a special squad should also

be created at the State level for surprise checks whenever there is complaint requiring

such action.

6. It must not be lost sight of that the Public Distribution System is meant to

provide food security to the poor people of the country and diversion of

food grain can not be tolerated.

REPORT

CHAPTER 1

INTRODUCTION

The State of Orissa, which is situated in eastern India is bounded by the State of

Jharkhand on the north, by the State of West Bengal on the north east, by the Bay of

Bengal on the east, by the State of Andhra Pradesh on the south and by the State of

Chhattisgarh on the west.

The majority of Orissa’s population i.e. almost 85% is rural and the balance 15% is

urban. Orissa is divided into 30 Districts and 6234 Gram Panchayats.

The M.S. Swaminathan Foundation Report on Food Insecurity Atlas of Rural India has

classified Orissa as one of the 4 severely food insecure States, the others being

Rajasthan, Uttar Pradesh and Chhattisgarh. According to the Report by World Bank

titled “Orissa in transition: from fiscal turnaround to rapid and inclusive growth” 45%

of Orissa’s population still remains mired in poverty.

It is stated that Orissa has been periodically exposed to starvation deaths. The State

has a high proportion of tribal population and has palpably low literacy rates. In terms

of percentage of lives lost to total lives lost in two years as per data in the year 2001,

Orissa dominates with 62.3%. In terms of number of persons per thousand with zero

meals per day, in the lower expenditure groups the national average is 20 %. Tamil

Nadu, Orissa, Karnataka, Haryana, Bihar and Assam appear to suffer the most

inadequacy.

The UNFP Food Insecurity Atlas of Orissa suggests that Orissa is the worst state in

terms of poverty. The districts of Phulbani Boudh Koraput, Kalahandi, Dhenkanal,

Bolangir, Keonjhar, Mayurbhanj and Sundergarh are the worst hit by poverty. More

than 65% of rural households live below the poverty line. Among the states, Orissa

has the highest incidence of poverty that is 31 % higher than the all India average.

The Orissa Human Development Report says that one of the most significant factors

in food insecurity is access to the Public Distribution System (PDS) and its limited

utilization by the poor. The Report also points out that although the availability of food

is fairly comfortable yet food insecurity is chronic.

Keeping in mind these various reports as mentioned above the Committee decided to

visit the State of Orissa and accordingly visited the districts of Khurda, Cuttack, Angul,

Sambalpur, Bolangir, Kalahandi and Nuaparha from 15th November 2008 to 24rd

November 2008. The present report is based on the empirical study of the Committee

and its observations in the State.

CHAPTER 2

LEGAL REGIME GOVERNING THE PUBLIC DISTRIUBTION

SYSTEM IN ORISSA

I. ENTITIES INVOLVED IN THE SUPPLY OF FOOD GRAINS TO

CONSUMERS:-

There is clear division of responsibility for TPDS for the Central Government

and the State/Union Territory Governments. Central Government is responsible

for procurement, storage, transportation upto principal centers of FCI,

allocation to State and Union Territories and maintenance of buffer stock.

State and UT Governments are responsible for identification of AAY and BPL

families; issuance of ration cards to eligible families; storage in State/UT

godowns; licensing and supervision over Fair Price Shops; distribution of ration

to ration card holders through FPSs and eliminating of leakages/ghost cards

etc.

For the purpose of distribution, State/UT Governments have constituted

separate Corporations which are Government Companies under the Companies

Act 1956.

The Committee during its visit to Orissa from 15-11-2008 to 24-11-2008 found

that various entities are involved in the process of distribution of food grains.

Their roles and functioning are set out hereunder in brief:-

1.1 Food Corporation of India (FCI), Orissa Region.

Food Corporation of India set up under the Food Corporation Act, 1964 for

procurement and distribution of food grains for the entire country has

established Zonal Offices and Regional offices across the nation. FCI, Orissa,

falls under the East Zone. FCI, Orissa meets the State requirement for

procurement, storage and issue /disposal of stock under the various schemes.

The Committee examined the records of the FCI for the financial year 2006-

2007 & 2007-2008 regarding allocation of food grain. Orissa being primarily a

rice eating State, the main figures in focus were of allocation & off take of rice.

1.2 Department of Food Supplies and Consumer Welfare, Government of Orissa.

The Committee during its visit was informed that the main functions of the

Food Supplies and Consumer Welfare Department are :-

i) Formulation and implementation of policy relating to procurement, storage

and distribution of food grains.

ii) Implementation of the Targeted Public Distribution System (TPDS).

iii) Administration of Essential Commodities Act, 1955; prevention of Black

Marketing and Maintenance of Services of Essential Commodities Act 1980;

various Control Orders of Central Government and State Government .

iv) Procurement of Paddy.

v) Collection of information and monitoring of prices of various essential

commodities in the market ; and

vi) Implementation and enforcement of Standards of Weights and Measures

Act and Standards of Weights and Measures (Enforcement) Act and Rules

made there under.

The Committee found out that the Department of Food Supplies & Consumer

Welfare (FS&CW) was engaging in overall supervision as with the existence of

Orissa State Civil Supplies Corporation (OSCSC) since 1980, the detailed

distribution of PDS was taken over from the Department of FS&CW by the OSCSC.

1.3 Orissa State Civil Supplies Corporation (OSCSC)

1.3.1 The Orissa State Civil Supplies Corporation (hereinafter ‘OSCSC) is a fully

owned Government undertaking incorporated as a Government Company under

the Companies Act 1956 on 3rd September, 1980.

1.3.2 In alignment with the food policy of the then State Government, OSCSC has

been established to take over from the FS &CW Department, Government of

Orissa the Public Distribution System in the State. The loss incurred by the

Corporation after taking into account revenues generated and expenses

incurred is being borne by the State Government by way of subsidy.

1.3.3 The Committee examined the Profit & Loss accounts/Income & Expenditure &

Balance Sheet of OSCSC for the past three financial years: 2005-2006, 2006-

2007 & 2007-2008 and found that the Corporation runs on huge subsidy from

the State Government and still the Corporation had been running in losses.

1.3.4 OSCSC as per its Memorandum of Association engages either on its own or

through any other firm, company corporation or Institution for promoting,

improving, development, counseling or financing production, purchase,

storage, processing, movement, transport, distribution and sale of food grains,

food stuffs, sugar and other essential commodities and to provide assistance,

advise and services connection thereto.

1.3.5 Thus consequent upon the incorporation of OSCSC, the commercial activity and

functioning of the FS&CS Department has been taken over by the OSCSC.

1.3.6 The Committee during its visit to the State found out that the Chairman of

OSCSC was a member of a political party. He not only presides over the board

meetings but also plays a supervisory & critical role in major decisions of the

Corporation. Under the law, a chairman of company/corporation is supposed to

preside over the annual general meeting of the company/corporation and the

Board of Directors meeting.

(OSCSC has a Managing Director who is presently a senior officer of State

Administrative Service.)

1.3.7 OSCSC has also been engaged in procurement of rice under the decentralized

procurement scheme adopted by the State. The OSCSC also appoints storage

agents. The storage agents are the penultimate link in the distribution chain.

They collect and transport the stock from the allotted FCI Godowns and food

supply depots (FSD) of the Corporation and store in their concerned Block and

Municipal Depots of the Districts. A detailed analysis of the role of storage

agents is dealt with in a separate chapter on the subject.

1.4 Fair Price Shops & Mobile Vans:

In the State there are 29,443 retail outlets or Fair Price Shops operating out of

which of 4382 are in urban areas and 25061 in rural. They are being run either

by private persons or self help groups or gram panchayats, or as cooperatives

or being run as model fair price shops called Maitris. A detailed analysis on this

aspect is given subsequently in this report. Apart from this there are mobile

vans operated by the OSCSC which also distribute PDS food grains.

Mobile Vans/Hat Sale- The committee was informed that 90 mobile vans have

been deployed under hat sale/ Gram Panchayat sale/Door step delivery schemes in all

integrated tribal development programme. To run each van, the corporation has

engaged one driver, one Sales Assistant (SA) cum Godown Assistant (GA) and helper

–cum kantawalla. Commodities like rice, wheat sugar, kerosene etc. are also made

available to the consumers at subsidized rates in remote / inaccessible Gram

Panchayats (GP) in the Integrated Tribal Development Programme (ITDP)/ Drought

Prone Area Programme (DPAP) blocks at their door step.

Model Fair Price Shops (Maitree)- Model fair price shops (herein after

called MFPS) are opened in different urban areas of the state to make

availability of essential commodities at reasonable price to consumers. One SA

cum GA and one kantawalla mans each shop. Each shop has been tagged with

ration cards in the scale of 1500-2000 so that these shops are made

economically viable to the consumers. At present 40 such shops are run by the

Corporation. It would appear that during market intervention, in the event of

price hike of any commodity, these MFPS called “MAITREE” play a significant

role.

II. Broad Description Of Channels Involved In The Public Distribution

System

2.1 The Food supplies and consumer welfare Department allots on monthly

basis PDS commodities to every district as per the card position.

2.2 On receipt of the allotment, the Collector of the district distributes the

same to all Blocks and Municipalities.

2.3 On receipt of Block-wise and Municipality–wise allocation of PDS commodities,

the district manager, OSCSC makes financial arrangement with FCI

towards cost of commodities and obtains release orders to lift the stocks from

the base depots of FCI.

2.4 Thereafter, the District Supply Officer who is ex-officio District Manager,

OSCSC allocates the commodities to the storage agents to lift the stocks from

Food Supply Depots (FSD) / FCI.

2.5 The storage agents deposit the prepaid cost of PDS commodities at

government fixed price with the District Manager, OSCSC and obtain delivery

order from the District Manager, OSCSC to lift the stocks from the allotted

FSD/FCI.

2.5.1 The Assistant Civil Supplies Officer (A.C.S.O) is kept in charge of F.S.D. point to

effect delivery of stock to storage agents.

2.6 The storage agents are required to transport the stocks and store in their

godowns situated at concerned blocks and Municipality depots of the Districts.

2.7 The Block level and Municipality issuing officers distribute stocks on

receipt of allotment from the Collector to the retailers according to the ration card

strengths tagged to each retail centre.

2.8 The Inspector of Supplies / Marketing Inspectors endorse the quantity in

the tally registers of retailers to enable lifting of food stuffs from storage agents on

payment of cost of commodities with the storage agents.

2.8.1 The retailers after lifting of commodities, issue stocks to the consumers on

production of cards tagged to them as per the price fixed by the Government.

In so far as the channel of distribution is concerned the finding of the

Committee as discernible hereinafter reveals that in order to ensure smooth,

timely and efficient disbursal of stocks to the target population much requires

to be done.

III BROAD OVERVIEW OF THE STATUTORY REGIME

The statutory framework governing and regulating different aspects of the

Public Distribution System is contained in the Essential Commodities Act, 1955,

PDS (Control) Order 2001 as amended in 2004, the Orissa Public Distribution

System (Control) Order, 2008 as notified on 13.3.2008 and various Government

Orders and circulars issued from time to time by the Department of Food

Supplies and Consumer Welfare, Government of Orissa on aspects of PDS. A

brief summary of the Orissa Public Distribution System (Control) Order, 2008

and other relevant instructions/orders are set out hereunder:-

3.1 The Orissa Public Distribution System(Control) Order 2008.

The Orissa Public Distribution System (Control) Order, 2008 came into effect on

13th March,, 2008. It contains 27 Clauses with three enclosed forms, as under:-

• for grant / renewal / reissue of license;

• for operation as retailer ;

• for filing returns by the licensee.

The Orissa Public Distribution System (Control) Order, 2008 has replaced the

Orissa Public Distribution System (Control) Order.2002.

a. Obtaining of a licence for a dealer under the order is a pre-requisite. (Clause

3). However this does not apply to the dealerships directly operated by the

OSCSC.

While separate license is required for each place of business, in case of ‘Gram

Panchayats’, they are not required to obtain separate license for opening sub-

centers for sale within the Gram Panchayat area. [Clause 3(2)]

b. Clause 4 provides for appointment of dealers and grant of license.

The Government is to prescribe procedure for appointment of dealers. [Clause

4(1)]

First preference for appointment and for grant of license as retailer shall be

given to Gram Panchayats followed by women- self help groups Cooperative

Societies and other self - help groups in that order of preference. [4(3)]

Sub-clause (5) states that the renewal of license to persons other than those

mentioned in the sub-section (3) & (4) shall not be granted.

c. The Committee during its visit to the State found that the appointment of

Retailers was a mechanical exercise. No advertisement is issued regarding the

vacancies. Names are recommended by the Block Level Advisory

Committee/Taluk Level Advisory Committee & the Sub-Collector on their

recommendation issues the license. The Committee also found that the Gram

Panchayat running the shop may not be the most efficient thing.

d. No dealer shall hold a license under the Act if he or his family members have a

commercial interest in a business or are commercial users of the said

commodity or a commodity closely related to the said commodity or is a

member of any Advisory or Vigilance Committee or any other Committee

entrusted with supervision of the Public Distribution System. (Clause 5) (The

penalty for violation is cancellation of the License & forfeiture of security

deposit. The offender can be asked to surrender the license within three

months.)

e. While Clause 6 provides for issue of license and renewal of license, Clause 7

provides that the duration of the license shall be on yearly basis and can be

further renewed. A provision exists for the fees chargeable from wholesaler and

Retailer for issue of license/ renewal of license. [(Clause 7(2)]. While Clause 8

makes the provision also for deposit of security deposit.

f. Then there are grounds for the licensing authority to refuse renewal on

different grounds. In case performance is not satisfactory or there is

contravention of any provisions of the Act, Order or the terms for grant of

license or the license has a commercial interest detrimental to the functioning

of PDS or the expected size of operations of the dealer is not economically

viable or the renewal will not be in the interest of efficient functioning of PDS.

[Clause 9(a)]. Sub-clause 2 provides for refusal or grant of license to a private

dealer in case other categories under sub-clause 3 (Women self help group

etc.) are available. There are exhaustive check list of responsibilities and duties

of the FPS licensees. (Clauses 10-16).

g. While Clause 21 read with Clause 2(j) provides for identification of BPL, AAY &

Annapurna beneficiaries in accordance with the State Government guidelines.

h. Clause 22 of the Control Order provides the statutory basis for issue of Ration

Card. The Clause spells out the broad basis for issue of Ration Card. Sub-

clause (c) of the said clause 22 prohibits duplication, misrepresentation or

tempering. Sub-clause (g) provides that normally a ration card shall be valid for

five years after which it can be renewed.

i. Clause 23 gives power for entry, search & seizure to the licensing authority or

authority with delegated powers.

IV. GOVERNMENT INSTRUCTIONS ON ISSUANCE OF RATION CARDS

4.1 Guidelines governing the issuance of Ration Cards.

Instruction No. 35124(27) F&CS dated 28-9-1993 contains guidelines for issue

of Ration Card. These guidelines were issued for elimination of ghost cards

and for making the procedure for issue of Ration Cards uniform. The Ration

Card is required to contain the name of the fair price shop. There is a

requirement of tagging at least 200 ration cards to one shop. An interesting

guideline is that on transfer from one place to another there would be no

necessity to cancel the existing card but the same card would be re-registered

in the new station after having the same endorsed by the issuing authority of

the old station.

4.2 Instructions regarding selection of beneficiaries under the Antyodaya Anna

Yojana (AAY).

Instruction No. /PL III 16/2000/1345 dated 12.01.2001 contains instructions on

selecting beneficiaries under the Antyodaya Anna Yojana (AAY). It provides

that under the Scheme 5,05,000 number of poorest of poor families will be

supplied foodgrains under the Scheme. Para 3.4 of the Government

instructions states that only landless labourers who figure in the BPL list of

1997 survey will be considered under the AAY scheme. Households with

woman head and families having handicapped members shall be given

preference. Family having pucca house, a luna, motor cycle of any power

driver vehicle will be excluded. Families having Government servant and

Government undertaking employees shall be excluded. Families who have

been beneficiaries under the Indira Awas Yojana will be excluded. Persons

covered under National Old Age Pension (NOAP) & State Old Age Pension

(SOAP) schemes and under Annapurna Scheme shall be excluded.

One of the problems in the State of Orissa is that it is still following the

statistics of 1997 & there are no additions made thereafter, even though there

has been increase in the number of families which would fall under BPL & other

categories.

Para 4.1 states that distinctive ration cards shall be issued to the AAY families.

The word “Antyodaya” Ration Card shall be inscribed on top of the front page.

It shall be issued after receiving an undertaking from the beneficiary that he

fulfills all conditions and that he is a landless person.

4.3 Criteria for eligibility for selection under the expanded AAY.

The Instruction No. 22152/FSCW/PL-III-PD 6/2005 dated 7.10.2005 contains

eligibility criteria for selection of family under expanded AAY. Clause 2 provides

a list of persons who will be considered as falling under the AAY category.

Besides the landless labourers, widows, it contains an exhaustive list such as

potters, snake charmers, rag pickers, destitute, terminally ill persons, persons

over 60 years of age, single woman or single men with no means of

subsistence and primitive tribal households.

4.4 The Rs. 2 per kg rice scheme

The State of Orissa has also introduced a scheme for supply of PDS rice at Rs.

2 pr kg. Under this scheme the BPL entitlement has been scaled down to 25

kgs. As against the scale of issue which is 35 kgs. It appears to be opposed to

the TPDS and has been disapproved by the Planning Commission in

‘Performance Evaluation of Targeted Public Distribution System (TPDS) – 2005’.

In this report, It has been suggested by them that “the Government of India

may insist that the entitlement to food grains for a BPL household in any State

should not be lower than that stipulated by GOI ”.

CHAPTER 3

WHOLESALE DISTRIBUTION MECHANISM

This Chapter deals with the process of wholesale distribution of PDS grain in the State

of Orissa and the inferences that the Committee has drawn from its field visits to

various godowns in the State and discussion it had with the officials of the

Department, the Corporation (OSCSC) and in various Public Meetings. In this Chapter

the Committee would deal with issues pertaining to the Orissa State Civil Supplies

Corporation (OSCSC) and storage agents who are entrusted with the task of ensuring

that PDS grain in the State reaches the retail point.

The study of the OSCSC and the storage agents appointed by it has to be understood

in the background of the fact that the State admittedly has more than 6000 godowns

of its own and inspite of that fact the concept of storage agents has been devised and

storage of PDS grain has been sub contracted to private individuals at the

intermediary stage of distribution.

I. Orissa State Civil Supplies Corporation

a. The Orissa State Civil Supplies Corporation (hereinafter ‘OSCSC’ or

‘Corporation’) is fully owned Government undertaking incorporated as

Government Company under the Companies Act 1956 on 3rd September, 1980.

In alignment with the food policy of the then State Government, OSCSC has

been established to take over from the FS &CW Department, Government of

Orissa the Public Distribution System in the State.

b. The OSCSC Ltd. functions as an authorised agency of State Government and

ensures availability of adequate quantities of essential commodities to the

entitled consumers.

c. The loss incurred by the Corporation after taking into account revenues

generated and expenses incurred is being borne by the State Government by

way of subsidy.

The Objectives of the OSCSC as stated in its Memorandum of Association are as

follows:-

1.1 Main Objectives

a. OSCSC engages either on its own or as the agent of Government of Orissa or any

other firm, company Corporation or Institution for promoting, improving,

development, counselling or financing production, purchase, storage processing

movement, transport, distribution and sale of food grains, food stuffs, sugar and other

essential commodities.

b. To provide assistance, advice and services, therefore, including capital credit, means,

resources, technical and managerial services.

1.2 Ancillary and Other Objectives

a. To take over from the Government of Orissa any of its projects or services that have

been established in connection with any activity or enterprise relating to Civil Supplies

and with objectives of this Company in view.

b. To enter into any arrangements with the Government of India and Orissa or any other

State Government, Company or Corporation or local authority for the purpose of

carrying out the objects of company or furthering, its interest.

c. To act as agent for Government or other authorities or any manufactures, merchants

and others and to transact and to carry on agency business of every kind and of any

description relating to the purpose of the Company.

d. Thus consequent upon the incorporation of OSCSC, the commercial activity and

functioning of the FS&CS Department has been taken over by OSCSC.

e. The OSCSC also appoints storage agents. The storage agents are the

penultimate links in the distribution chain. They collect and transport the stock

from the allotted food Supply depots (FSD) and store in their concerned Block

and Municipal Depots of the Districts.

1.3 MANAGEMENT

a. The Corporation is managed by the Board of Directors consisting of Senior

Government officials and non-official Director as Chairman.

Following are presently the Board of Directors as nominated by the government

• Chairman at present non official director.

• Commissioner cum secretary, F.S and C. W Department.

• Commissioner cum secretary, agricultural department.

• Managing director OSCSC.

• Registrar of Co-operative societies, Orissa.

• Additional Secretary, Finance Department.

• Additional secretary, P.E Department.

• Financial Advisor (F.A) and Chief Accounts Officer (C.A.O), OSCSC.

b. Managing Director is the Chief Executive of the Corporation. The Board of

Directors is the authority of the Corporation to decide matters on the

management and administration of the Corporation subject to the directions

and the policy of the government.

c. Legal Provisions Regarding Appointment Of Chairman, His Powers And Duties

1. Section 175 of the Companies Act provides that the members can elect

one of themselves to be Chairman of the meeting. However, the Articles

can provide ‘otherwise’ & may permit a non-member to be the

Chairman. It has been noted by the author A.Ramaiya that since the

Chairman presides at every general meeting of the Company, appointing

a person who is not a member as Chairman of the meeting can lead to

an absurd result.

2. Article 87 of the Article of Association, OSCSC states that the Chairman

of the Board shall be nominated by the Governor from amongst the

Directors.

3. Article 85 of the Article of Association OSCSC, states that the Governor

shall determine from time to time number of Directors. Article 86 says

that Governor shall also have the right to nominate the Directors.

4. The Article of Association, OSCSC does not prescribe any qualification

for being a Director of OSCSC.

5. As per Table A of the Companies Act, Chairman seem to have the

power to adjourn meetings, to demand a pool, to rule on the validity of

votes at general meetings & to rule on the validity of an amendment;

- Article 50 of Table A to the Act stipulates that the Chairman, if any,

of the Board shall preside as Chairman at every general meeting of

the company.

- Under Article 54 of Table A, the Chairman has a “ second or casting

vote’ in the case of equality of votes.

- Under Section 178, a declaration by the Chairman whether a

resolution has or has not been carried out or that it has been carried

either unanimously or by a particular majority shall be conclusive.

6. The Committee found that the Chairman of OSCSC actively participates

in the functioning of OSCSC in the administrative side. He also

extensively tours the State on regular basis and claims TA/DA.

7. The Committee found that the Chairman, OSCSC is a political person.

Earlier Secretary of the Department used to be the Chairman of the

OSCSC. It was only some time in 2002 / 2003 that a political person was

appointed as Chairman. There are no rules, regulations or instructions

for appointment of Chairman. The Committee learnt present incumbent

was appointed for first time simply on the basis of note received by the

Corporation from the Chief Minister. At the time of General Election he

had to leave the job like any other Chairman of other State

Corporations. Since 2006, he has again taken over as Chairman. In

between, the Secretary was the Chairman.

1.4 The Staffing Pattern at District Office of OSCSC was :-

Officer (Government Officer working as District Manager)

Assistant Manager (Accts)

Sr. Accts- Supervisor

Marketing Inspector

(On Deputation from Government)

Sr. Accountant

Jr. Accountant

Ministerial Staff

Senior Sales Manager-cum-Godown Supervisor

Sales Assistant cum Godown Assistant

Data Entry Operator

Jr. Steno

Driver

Class – IV

1.5 Current position of the Staff in OSCSC office was as followed :-

SI. No. Category of Post Sanction

Strength

Men in Position Vacancy

1 Officer ( 8 officers on

deputation from Govt.

18 13 5

Working at Head Office)

2 A.M. (Accts) 31 19 12

3 Sr. Accts-Supervisors 29 25 4

4 Ministrial Staff 66 53 13

5 Sr. Accountants 78 59 19

6 Senior Sales Manager-

cum-Godown Supervisor

2 2

7 Jr. Accountant 111 40 71

8 Auditors 8 8

9 S.A. cum G.A. 206 174 32

10 Jr. Stenos 8 7 1

11 Drivers 122 117 5

12 Staff Outsourced

Jr. Acct

Data Entry Operator

SA-cum-GA

Kantawalla

35

37

179

156

13 Class – IV 307 298 9

Total

986 1214 (Corporation

Staff 807 and

Outsourced 407)

179

1.6 Position of the Godowns under the control of Corporation :-

Different Godowns No. Of Godown Capacity (In

M.T.)

Corporation own godown 161 77450

Godown transferred from Govt.in FS&CW Deptt.

50 39878

Godown hired from otherGovernment Agencies like CWC,OSWC, RMC, MARKFED, G.P. etc.

95 65535

Godown hired from privatepersons

109 93548

Total Godowns 415 276411

1.7 Different activities performed by the OSCSC are :-

1. Lifting, Storage and distribution of food grains under PDS

2. Decentralized procurement operation

3. Mobile maitree shop(mobile van scheme)

4. Model fair price shops (maitree)

5. Gas agencies

6. Relief operation

7. Market intervention

8. Consumer awareness

II. STORAGE AGENT

Orissa Control Order, 2008 defines a Storage Agent in 2 (Q) in the following

manner:-

“Storage Agent means an agent appointed by the Orissa State Civil Supplies

Corporation for transportation and/or storage of PDS commodities for and on

behalf of the said corporation for their eventual distribution through the Public

Distribution System.”

Clause 11 of the Control Order provides for the responsibilities and duties of

such wholesale agents and Storage agents which are as follows:-

(1) The Wholesalers, including Sub-Wholesalers and Storage Agents Shall be

responsible to :-

(a) Keep the essential commodities meant for PDS after obtaining the same

from the authorized/nominated agency in the month preecing to the

month to which the allotment relates ;

(b) Supply the Public Distribution System commodities to the retailer or

Sub-Wholesaler as the case may be, immediately on demand and

subject to prepayment of cost of commodities and production of tally

register etc. as per prescribed procedures;

(c) Maintain register/records as prescribed by the Government/Licensing

Authority from time to time;

(d) Produce such records, and information as called for by the authorized

inspecting officers;

(e) Keep certified weights and measures as may be prescribed by

Government and/ or Licensing Authority;

(f) Display the following information on a notice board at a prominent place

outside the business premises near the entrance of the premises;

namely :

(i) Timing of the Shop;

(ii) Opening Stock, quantity received, sold, closing stock, on a daily

basis;

(iii) Issue price of each (commodity); and

(iv) License number/name of owner.

(g) Maintain books of accounts in the manner prescribed by State

Government/Licensing authority and provide these to authorized officers

for inspection and verification on demand;

(h) Provide correct cash memo in sequential order and, in case of

foodgrains, printed copy of weighments slip to the cutomer;

(i) Display samples of foodgrians in stock kept for sale;

(j) Provide relevant extracts of records to any person on payment of

prescribed fees;

(k) Arrange for scientific storage of Public Distribution System commodities;

and

(l) Ensure that the agents and employees comply with all terms and

conditions of the license and provisions of this order.

(2) The Wholesaler, including Sub-Wholesalers and Storage Agents shall not :

(a) Close the business premises during the business hours on working days

without obtaining prior written permission of the licensing authority or

an officer authorized by the licensing authority or by Government;

(b) Deliver Public Distribution System commodities to any person other than

that a licensee for whom the commodities are meant to be supplied;

(c) Stock/Store the Public Distribution System commodities at any place

other than the place allowed in the license;

(d) Retain the tally register of other licensees with him ; and

(e) Keep the records relating to the business at any place other than the

licensed business premises.

It is relevant to point out that the Orissa Control Order does not provide the

method for appointment of such Storage Agents. The Storage Agents are

appointed by the OSCSC. The Committee on visits to these godowns, which

fact will be elaborated little later in this report, found a total and blatant non

adherence by Storage Agents to the duties and responsibilities enumerated in

the Clause 11 of Orissa Control Order.

2.1 Appointment of Storage Agents

The OSCSC appoints various private individuals as Storage Agents for

intermediary storage of PDS grain. As explained to the Committee, the process

involved in the appointment of Storage Agents is as follows-

• Publication of advertisement in local dailies and selling of application

form at the office of District Manager, OSCSC.

• Applications are filed before the collector.

• Verification of application/antecedents of applicants and sending the list

of eligible candidates by the Collectors in prescribed proforma along with

recommendation.

• Recommendations made by a public representative.

• A Committee is constituted which examines the recommendations.

• Once examined the report is put in front of the Board of Directors of

the corporation.

• Food and Civil Supplies Department then examines the list of Storage

Agent to be appointed.

• The list must be examined by a cabinet minister or a concerned

minister of Food and Civil Supplies Department.

• Approval of selection list by the State Government.

• Then the Corporation issues the list to the concerned Collectors.

• Thereafter, the Collector makes the necessary enquiries if there are any

complaints against the applicant.

• Thereafter, the Collector executes the agreement with the storage

agent.

2.1(a) There Shall be one Storage Agent for a population of 50,000/- and fraction

thereof in a Block/Urban Local Body (ULB) as the case may be. Additional

storage agent shall be appointed for population exceeding 75,000. In case of

inaccessible area with geographical barriers, the population criteria should be

reduced to 35,000/-. Specific recommendation to that effect shall be made by

the concerned Collector. In DPAP/ITDP block, the population size would be

35,000/- or part thereof for an agency. Additional storage agent shall be

appointed for the population exceeding 52,500. In case of small ULBs with

less than 35,000 population, population of neighboring block should be

clubbed to form a unit of 50,000/35,000 as applicable for the block.

2.2 The Corporation appoints Storage Agents in each Block and Municipality of the

State for transportation, Storage and distribution of essential commodities for

about 30,000 retail fair price shops. They are paid remuneration for their

services as per the Government approved rates i.e. Storage Commission Rs.

3.20/- per qtl (BPL) & Rs. 1.60/- per qtl (AAY), incidental charges Rs. 2.50/-,

interest on investment, towards transport charges Rs. 10/- upto 10 Km & Rs.

0.35/- per Km/quintal beyond 10 Km. Prior to 1997-98 the Storage Agents

were allowed to lift the essential commodities, without pre-deposit of cost but

from 1997-98 the agents could lift the essential commodities only after

prepayment as per the policy of the Corporation.

2.3 The Committee during its visit found that the appointment of Storage Agent

was susceptible to high political influence. The Committee obtained the

particulars of the applicants who applied for storage agency for the year 2007-

2008 of the District Angul. The Committee while perusing the files observed a

case of a storage agent named Mr. Bijay Kumar Sahoo whose appointment was

approved despite a complaint having been lodged against him.

2.4 Particulars of the case are as followed:-

District - Angul

Block - Kishorenagar

Name of applicant - Mr Bijay Kumar Sahoo

Address of the applicant - Nunukapasi, Po, kishorenagar

Financial solvency of the applicant- 15,00,000

Recommendation by the collector - No

Recommendation by a minister - Mr. Sanjeev Kumar Sahoo

Complainant against the applicant - Mr. Santanu Pradhan

Nature of Complaint - Applicants wife was the Chairman of K.

Nagar block

Details of the case explained step by step-

1. An advertisement is given in the local newspapers.

2. Mr Bijay Kumar Sahoo (applicant) applies before the Collector. The

Collector does not find him to be a suitable candidate for the

appointment of storage agent since in a complaint filed against his name

stated that his wife was the Chairman of the Kishorenagar block at the

time of the filing of the application.

3. A Committee is constituted at the corporation level that scrutinizes the

recommendations of the Collector or the public representative as per the

guide lines and submits a report. The Committee also does not find him

to be a suitable candidate.

4. A report is further put in front of the Board of Directors who also do not

recommend his name to the government for the appointment of storage

agent.

5. The government however approves his name, presumably at the

intervention of the minister for the appointment as a storage agent and

sends the order back to the Board of Directors

6. The Corporation then sends the file back to the district collector to make

final enquiries and verification

7. The District Collector after making the necessary enquiries and

verification approves Mr Bijay Kr Sahoo’s name for the appointment as a

storage agent. The District Collector states that an enquiry had been

conducted by the sub collector. Vide letter dated 4/11/2008 to the

district collector it was informed that an affidavit had been submitted

by Mr Bijay Kr Sahoo in which he had sworn that he had been divorced

from his wife Mrs. Gauri Sahoo for the last five years and they had been

living separately since then .

8. The District Collector further sends a letter to the Managing Director of

the Corporation in which he asks the managing director to issue

clearance in the case of Mr Bijay Kr Sahoo at the earliest.

2.5 This case was the astonishing example showing the political influence on the

appointment of Storage Agents as just on the basis of an Affidavit submitted by

the Storage Agent, the Collector agrees that applicant is divorced from his wife

and does not think even for once that a court decree would be an essential

document in proving the genuineness of the divorce.

2.6 Visits to Godowns of the OSCSC and Storage Agents

The Committee visited some godowns of the OSCSC and godowns operated by

Storage Agents.

A. OSCSC Godowns

1. Visit to the OSCSC Godown. A-101 Mancheshwar, Bhubaneshwar:-

(i) On visiting the Godown owned by the Corporation, the following

observations were made by the Committee-

• Electronic weighing machine at the Godown had only a capacity of 3

quintals.

• Facilities of repacking were not there at the Godown.

• Over 4200 empty bags were lying in the godown. The godown in

charge said that these were the empty gunny bags which were in a bad

condition and could not have been used to store food grains. The

Commission then enquired from the godown Officials as to how did the

4200 empty gunny bags reach there. The Committee was then informed

that the godown had received 2 rakes of food grains out of which the

4200 empty bags were damaged and had to be replaced.

• There were two sheds to store food grains.

• The first shed contained only levy sugar and the second shed contained

PDS stock.

• Position of stock in the second shed was as followed :-

Under Decentralized procurement scheme (DPS)- 780.90 quintal

Annapurna Rice - 71.70 quintal (wholesaler)

APL Rice – 9.79 quintal (retailer)

• This godown is used for storing whole sale as well as retailer quota.

• Samples of food grains were stated to be issued by the miller to the

godown but not issued to the Storage agent by the godown incharge.

• No sampling of grains was kept by godown incharge of the food grains

received through millers. This happened because samples of food grains

received from millers are kept by the FCI officials.

• A computer was placed in the godowns managerial office but not used

by the godown employees for storing any data.

• Assessment of godown was done by FCI on the basis of infrastructure

and cleanliness.

• The godown in charge informed the Committee that he had never

received any bad quality food grains.

• Stock register was maintained at the godown.

• Moisture check and quality check of food grains received through

millers was done by a FCI official.

• No records maintained when food grains were rejected on the basis of

bad quality.

(ii) The Committee found that:-

• This Godown is handling very large quantities of grain but had no

weigh bridge. It only has a weighing machine which can weigh

only 3 quintals at a time. Apparently no weighments are done and

grain is received and distributed only by counting the bags

irrespective of the quantity in each bag.

• It will be relevant to point out that at this stage the Committee

found that bags of rice which were supplied to the storage agent

did not contain full quantity of 50 kgs. On an average a bag

contained 2-3kgs less rice. Storage agent receive food grains

after proper weighment. However they distribute the food grain

to the FPS Shops on the basis of number of bags presuming one

bag to be of 50 kg. Thus for every 100 quintals the storage agent

received 15 to 20 extra bags which ultimately remains with them.

Consumers were not being supplied rice by weighing. They were

told that less quantity are being received in every bag, therefore

either 2 consumers were given 1 bag or 1 consumer was given a

bag for two months quota. Since each consumer was suppose to

get 25 kgs every month, he was only getting proportionately less

quantities.

2. Visit to the OSCSC Godown at Salepur, License No. 26/2007-08,

District Cuttack.

(i) The Committee visited the OSCSC Godown at Salepur. The following

observations were made:-

• The Godown was divided into two parts by a thin wall of bricks. The first

part of the Godown was used by the OSCSC for storage of grains

procured either through DPS or from FCI and the Second part of the

Godown was leased out to the Storage Agent by the OSCSC for storing

his grains.

• There are 83 FPS shops attached to the first part of the Godown

belonging to OSCSC.

• Mr. Chakrodhar Barik was the Godown Superintendent and was an

employ of the Department and deputed to the Corporation.

• First part of the Godown had a capacity of 3000 M.T. and Second Part

had a capacity of 2000 M.T.

• No weighbridge was installed in the Godown to weigh the trucks

bringing the Grains from the millers. The nearest place to weigh the

grains was in Cuttack District at Jagatpur which was a Private

weighbridge. Trucks are weighed only at the millers and no cross check

done when grains reached the Godown. No samples were kept in the

godown. No samples were being given at the time of issue of the grains.

B. Storage Agent Godown

1. The other part of the Godown at Salepur which was leased by the OSCSC to

a Storage Agent on a monthly rent of Rs. 2000.

(i) Condition of the Godown was as follows:-

• Electronic weighing machine used for weighing bags was installed in the

Godown.

• This weighing machine at the Godown seemed to be a new one since

the plastic cover of the machine was not torn off. It appeared not to

have been used at all.

• But Storage Agent informed the Committee that this machine was

installed 4 months ago.

• The Weight memo issued at the time of delivery of grain from the

Millers Mill to the Storage Agent Godown was cross checked by the

Supply inspector and BDO.

• BDO informed the Committee that Civil Supply Officer (CSO) informs

him about the delivery of grains through a letter asking him to go for

inspection.

• Records of this inspection by the BDO of the Weight memo was

maintained in the Tally Register, which was kept by the Storage Agent

only. This Register was also very new and appeared to have been

prepared recently presumably for the visit of the Committee. But

Storage Agent said that this Register was being maintained for the last 3

months i.e. since he had taken the charge of this Godown.

• The newly prepared records of the Storage agent did not show that they

were verified by the Department Officials.

• No records are kept by the departmental officer in charge for ensuring

that the Food grains are reaching the Storage Agent Godown or not.

• Name of the Storage Agent was Mr. R.C. Prushti. But his son Mr. Ajay

Kumar Prushti managed the Godown as he has the power of attorney

from his father in his name.

• The Storage Agent has taken over charge of this Godown only 3 months

back on the death of the Storage Agent who was previously handling

this Godown.

• Prof. Kalindi Behra (MLA) had recommended the name of present

Storage Agent for the appointment as the Storage Agent for this

Godown.

• Renewal of License was done in every two years.

• This Storage Agent picked his quota from Orissa State Warehousing

Block Godown, Jagatpur.

• He informed the committee that he paid Rs 300 for Wheat and Rs 150-

180 for Rice to the OSCSC Labour at the time of loading and unloading

of Food grain from the OSCSC Godown.

• This Labour was under the employment of OSCSC and is paid labour.

• The Banner lying outside the Storage Agent Godown containing the

name of the Storage Agent is made on the same material of same colour

which was used for making banners mentioning about the arrival and

welcome of committee.

• Computerization is easily possible. Connectivity is not at all a problem.

• Samples are available in the Godown.

• FCI person comes for checking the level of moisture in the food grain on

the next day of arrival of food grain from the millers.

• The Storage Agent was issued gate passes at the Orissa State

Warehousing Corporation (OSWC) each time when he went for collecting

the food grains.

• The Storage Agent had ample notice of visit of the Committee to his

godown.

(ii) The Committee found:-

• The records were all presented in crisp new books and appeared to be

prepared keeping in mind the visit of the Committee.

• It was a stage managed event which confirmed our suspicions that the

storage agent is a device to ensure diversion.

• As to what was visible to the naked eye was that there was no

weighment and no method to properly verify the exact amount of stock

received and disbursed

• The electronic weighing machine looked so new and unused.

• The Corporation had no explanation in respect of the query of the

committee as to the need to have a storage agent in a state owned

godown. The Corporation also had no answer or justification as to why

this additional intermediary was required when the FPS dealer was in

fact directly lifting his goods from the said godown.

2. The Committee thereafter visited a private godown managed by a Storage

Agent in Talecher, Angul District

(i) The details of the Storage Agent are :-

Storage Agent Name - Kailash Chand Agarwala

Licence No. - 01/2005-06

Position of the Stock in the Godown was :

Commodity Rate/Quintal Stock

Sugar 1340 24.17q

Wheat 682 702.12q

BPL Rice 180 3 q

AAY Rice 180 Nil

Annapurna Rice Free Nil

APL Rice 930 Nil

Palmolive Oil 47.58 2200 ltrs

(ii) The Committee then probed the viability of the business of a storage

agent from PDS goods. The agent gave us the following calculation

Calculation for Gross Expense

Particulars (Quintal/Rs) Monthly Figures(Rs)

a. Rice from Angul ( 2000 X 11.50 ) - 23000

Labour 4/- - 8000

b. Wheat From JagatPur (1000 q X 42/- ) - 42000

Labour 4/- -4000 Staff Expense - 1000

c. Sugar from BBSR (90 q X 50/- ) - 4500

Labour -360 Staff - 200

d. Oil from Angul ( 1000 carton X 4/-) - 4000

______ Gross Expense 87060

Calculation for Gross Income

a. Rice Commission ( 2000 X 6.50 ) - 13000

b. Wheat Commission (1000 X 5.50 ) - 5500

c. Sugar Commission ( 90 X 2.50 ) - 225

d. Oil Commission ( 1000 Litre ) - 200

Frieght charges paid by Department

e. Rice (2000 X 8 ) - 16000

f. Wheat ( 1000 X 24 ) - 24000

g. Sugar ( 90 X 30 ) - 2700

h. Oil ( 1000 X 2 ) - 2000

______

Gross Income 63625

(iii) On the basis of these figures provided by the Agent – Mr. Kailash Chand

Aggarwala, it appears that he is incurring a monthly loss of Rs 23,435/-.

The question which Committee is faced with is as the how this agent is

in a position to sustain himself and keep the agency running despite

incurring such a substantial monthly loss.

(iv) An official of the department accompanying the team at this point

conversed with the storage agent in Oriya whereupon Mr. Kailash Chand

re worked the calculations showing a profit of Rs. 7545/- now.

Re-worked Calculation for Gross Expense

a. Rice from Angul (2000 X 8) - 16000

Labour 4/- - 4000

b. Wheat from JagatPur (1000 q X 27/-) - 27000

Labour 2/- - 2000 Staff Expense - 1500

c. Sugar from BBSR (90 q X 32/-) - 2880

Staff - 200

d. Oil from Angul (1000 carton X 2/-) - 2000

Labour - 500 ______

Gross Expense 56080

Re-worked Calculation for Gross Income

a. Rice Commission (2000 X 6.50) - 13000

b. Wheat Commission (1000 X 5.50) - 5500

c. Sugar Commission (90 X 2.50) - 225

d. Oil Commission (1000 Litre) - 200

Re-worked Freight charges paid by Department

e. Rice (2000 X 8) - 16000

f. Wheat (1000 X 24) - 24000

g. Sugar (90 X 30) - 2700

h. Oil (1000 X 2) - 2000

_______

Re-worked Gross Income 63625

(v) Certain other observations made at this Godown revealed the

following:-

a. That the Storage Agent received grain directly from Angul

Godown.

b. There was an occasional electricity problem.

c. That the Storage Agent apart from dealing in PDS Commodities,

sold Amul products and was also an Airtel Connection Dealer.

d. He stated that he did not only rely on income coming from

distribution of PDS commodities since he had other form of

businesses running on his name.

e. There were 41 shops in a municipal area and 120 at the Block

level connected to his storage agency.

f. The weighment of Food grain was done by a manual scale.

g. The Storage Agency had a computer and private Internet

connectivity which was his personal.

h. The Storage Agent did not have any sample in his Godown. He

informed the committee that when he receives grain from FCI or

Millers, the Departmental officials take Samples for checking them

in the laboratory; however no records in this regard were being

maintained. He further stated that he was taking samples on his

own for issuance to the retailers.

i. Operating a storage agency is really not a viable enterprise and

reinforces an inference that the additional intermediary viz. the

storage agent is probably meant only as an additional diversion

point.

J. Both storage agents interviewed by the Committee stated that

without political patronage they cannot continue in business as

they have to be recommended by the local MLA.

K. The two questions that are therefore posed for consideration are

as to whether a storage agent is required at all and secondly

even if assuming for the sake of argument that this intermediary

is required, whether the elected representatives should have a

role to play in the process of storage agents.

3. The Committee on its visit to another private godown managed by a

storage agent in Sainthala Village, Saintala Block, Bolangir District found

that the state of affairs was equally abysmal and to compound the problems

the quality of rice available in the godowns was bad and infested with

insects.

III. DIVERSION OF PDS STOCK

The issue of Diversion can be could be broadly categorized as:-

• Recycling

• Weighment of food grains

• Storage agents

3.1 Recycling -The Committee learnt about the system of recycling.

A) OSCSC is allowed to procure paddy on behalf of the FCI under the

Decentralized Procurement Scheme. The State Government through OSCSC

procures paddy and gives it to the millers who extract rice and give it back to

the OSCSC.

B) As per the rules the millers should not be related to the storage agents. In

practice it was found out that all the millers and storage agents worked in close

co-ordination with each other. It was also found that in fact the millers on

behalf of the OSCSC were doing the procurement.

C) The millers exaggerate the quantities which they would be supplying to the

OSCSC/FCI. They in fact procure lesser quantities. After extracting rice from

the procured quantities they supply same to the OSCSC/FCI as per agreement.

Then they slow down or stop further supplies till the rice already supplied has

been allocated to the storage agents. The storage agents transfer some part of

this rice back to the miller who again supplies the same to OSCSC/FCI.

To illustrate, a miller agrees to supply 1000 MT. He would initially supply only

700 MT and then wait till the allocation is made to the storage agent’s. 300MT

would be recycled and received back by the millers from the storage agents

and again supplied to the OSCSC/Government.

D) The people who attended a public hearing on the 22nd November also spoke

about the recycling system. As a matter of fact, the Committee was also

informed that Millers have to pay 3% of their revenue earned from OSCSC for

smooth functioning.

3.2 Weighment of food grains.

A. On Visiting Godowns of OSCSC and Storage Agents, the Committee

found that there are no proper weighment methods to weigh the food

grains. Most of the Godowns did not have adequate weighing machines.

Godowns store a large quantity food grains but machines of lower

capacity are installed at these Godowns. For instance Mancheshwar

Godown owned by the Corporation had a weighing machine with

capacity of 3 quintals only.

B. Lower capacity weighing machines was not the only problem regarding

the weighment of food grains. The local officials informed the

Committee that storage agents received food grains in shortage in

weight from the FCI/FSD and in turn they also deliver the same bags

with shortage in weight to the FPS after taking out their quota.

3.3 Storage Agents.

A. In the public meetings it was the general complaint made to the committee

that storage agents were the biggest problem and one of the major factors

responsible for the diversion of food grains.

B. The committee visited several Storage Agencies in the state of Orissa. On

enquiring from various storage agencies it was learned that the weight of

the empty gunny bags used for food grains by the millers and the FCI was

650 grams and was included in the weight of 50 kg bag.

C. It was also informed to the committee that the storage agents were not

issued any samples of food grains. It was also learned by the committee

that an initial sum of Rs. 4 lakhs had to be deposited with the OSCSC as a

down payment and security fees by all the storage agents.

D. It will be relevant to point out that at this stage the Committee found that

bags of rice which were supplied to the storage agent did not contain full

quantity of 50kgs. On an average a bag contained 2-3kgs less rice. Thus for

every 100 quintals the storage agent received 15 to 20 extra bags. It was

also learnt that fair price shops were not being supplied rice by weighing

but on the basis of no. of bags. They were told that fewer quantities are

being received in every bag, therefore either 2 consumers were given 1 bag

or 1 consumer was given a bag for two months quota and not by weight.

Since each consumer was supposed to get 25 kgs every month, he was only

getting proportionately less quantities.

E. The Storage agents thereby extract certain quantities from the bags

containing food grains and supply the extracted food grains either back to

the miller as stated above under the heading of “RECYCLING”. They also

divert this extracted grain to other resources.

F. Storage agents are not only a mechanism for diversion but also were the

main reasons for the lack of proper functioning of PDS in Orissa.

G. As stated in the introductory lines, the system of storage agents was

introduced in the initial period of OSCSC when it did not have any self

owned Godowns but now OSCSC has its own Godown everywhere in the

state and even leasing out Godowns to these storage agents for their use,

so the system of this Storage Agents (intermediaries) does not hold any

merit.

IV. OBSERVATIONS

4.1 There is unbridled political interference in the selection of the storage agents

and all procedures are given a go bye by the department if there is a “political”

recommendation.

4.2 The Committee found that the process of weighment followed in the godowns

was by and large manual and was therefore susceptible to pilferage and

diversions.

4.3 The Committee found that bags of rice which were supplied from the FCI/FSD

to the godowns did not contain full quantity of 50 kgs. On an average a bag

contained 2-3kgs less rice. Thus for every 100 quintals the storage agent

received 15 to 20 extra bags. It was also learnt that godowns were supplied

the food grain by counting the number of bags and taking the average weight

of each bag as 50 kg. Thus the remaining could be easily diverted.

4.4 Operating a storage agency is really not a viable enterprise. It reinforces an

obvious inference that the additional intermediary viz. the storage agent is

probably meant only as an additional diversion point.

4.5 The Panchayat Raj Department has 6000 godown of 50 MT capacity and 300

godown of 100 MT capacity but the OSCSC is not interested in hiring these

godowns. The Panchayat Raj Department and the Urban Development are also

prepared to construct more godowns if required by the OSCSC.

4.6 The position is that since the State has adequate storage facilities and

sufficient resources of the Corporation, the concept of a storage agent must be

done away with. It is the main source of diversion of PDS grain in Orissa.

4.7 The Chairman of the OSCSC should not be a political/private person. His

appointment should be transparent. Corporation should be run strictly on

professional basis.

CHAPTER 4

RETAIL OUTLETS (FAIR PRICE SHOPS)

In the State of Orissa, the fair price shops are run by the OSCSC (which are described

as Maitree shops), Women self help groups (WSHG), Gram Panchayats, and Private

individuals.

Apart from this, State has mobile vans owned by the OSCSC. Total number of Mobile

vans running presently in the State of Orissa is 94.

In this Chapter, the Committee deals with the method adopted for appointment of

retail outlets in Orissa, their viability and the different types of retail outlets currently

operating in the State.

I. MODE OF APPOINTMENT OF DEALERS.

1.1 STATUTORY FRAMEWORK

A. Clause 4 of the Orissa PDS Control Orders 2008 provides for the modes and

methods of appointments of Fair Price Dealers.

B. Clause 5 provides for the prohibition in respect of grant of licence which

includes that a licensee or his family member shall not have any commercial

interest in the business which pertains to PDS Commodities and also

provides that neither dealer nor members of his family shall be member of

any advisory committee.

C. The definition of family under the clause is interesting in as much as it

includes only “dependent parents” and unmarried sons and daughters. The

loopholes are apparent as a married son can under the PDS Control Order

do competing business.

D. Executive instructions No. 14200(13) dated 21-04-1992 containing

instructions on appointment and removal of retailers is still in vogue. The

said instruction envisages that the Block Level Advisory Committee (BLAC)

and Town Level Advisory Committee (TLAC) are to make recommendations

for appointment of Retailers. The nature and composition of such

Committees are elaborated in the chapter dealing with the vigilance

mechanism. The said instruction also provides that there should be one

retailer for a population of 2000 in the plains and one retailer for the

population of 1000 in the hilly areas. The maximum no. of retail outlets

should not exceed 3 in a Gram Panchayat area but may be increased up to

5 in an inaccessible/hilly area.

1.2 The Committee during the visit learned that the Sub Collector on the

recommendations of the Block Level Advisory Committees/ Taluk Level

Advisory Committees (BLAC / TLAC) appoints the dealers. It was further

learned that preference is given to gram panchayats, women self help groups

and cooperatives. The licensing provisions for retailers, their duties and

responsibility are laid down in the Orissa PDS (control) orders, 2008. It was

also observed by the Committee that the following entities operate FPS outlets

in the State,

a. Private individuals

b. Panchayats.

c. Women’s Self Help Groups.

d. Maitri Shops/Model Fair Price Shops. Both operated by the OSCSC

e. Mobile Vans

Note: - The Order of preference for the appointment of FPS dealer is stipulated in

Clause 4(3) of the Orissa Control Order, 2008 as follows:

The First preference for appointment and grant of licence as retailer shall be given to

Gram Panchayats, followed by women self help groups, Co-operative Societies and

other self help groups in that order of preference;

1.3 Files Regarding Appointment Of Retailers

A. Committee inspected the files pertaining to the appointment of dealers which

revealed that

• No public advertisement is issued regarding vacancies.

• Applications are made to the Sub-Collector/Additional District Magistrate

(ADM).

• Meetings of Taluk level Advisory Committes or Block Level Advisory

Committees takes place whenever there is a vacancy.

• Names are recommended by the BLAC / TLAC to the Sub-

Collector/ADM.

• Sub Collector or ADM does the necessary verifications if required.

• The Sub-Collector/ ADM executes the agreement with the dealer.

B. The Committee made the following observations –

• There is no transparent mode of appointment as admittedly no

advertisement is issued.

• The Taluk and Block Level Advisory Committee would meet only when a

“convenient” application is made and what is worse is that only the

“convenient” application is considered and the previous applications are

ignored.

• The system requiring the BLAC and TLAC to be a part of the

recommendatory process results in a direct conflict of interest as it is the

same entity which is entrusted with the task of vigilance as well as choosing

the fair price shop.

• The extent of political interference and arbitrariness in the process of

allotment of outlets came to light when the Committee visited retail outlets

in Rajabagicha lane, Cuttack. In one Shop the dealer was one Mr.

Aurobindo Mohanty and it is relevant to point out that the shop’s condition

was very bad, infact there was no board identifying the shop as a FPS. The

condition of another shop in the lane was equally bad and the dealer of this

shop was Smt. J.B. Mohanty who is the wife of Aurbindo Mohanty.

Therefore a husband and wife has 2 shops in the same lane and it came to

light on interviewing beneficiaries and officials that the said Aurobindo

Mohanty is a politically influential person and throws his weight in the

locality.

II. VIABILITY & CONDITION OF THE RETAIL OUTLETS

The Committee visited various retail outlets in the State and found that the

shops were either making only marginal profits or were incurring losses. On

the visit of the Committee to an outlet run by a private individual the following

observations were made,

2.1 Visit to the FPS Shop in The Salepur, District Cuttuck

A. Name of the FPS :- Mahima Enterprises

Name of the Retailer: - Mr. Birender Kumar Bhayan

Name of the Gram Panchayat:- Chandradepur

Name of the Block: - Salepur

No. Of Cards attached: - BPL APL AAY AY

212 300 154 11

B. It was observed by the committee that everything was in order as it was

obvious that it was stage managed by the State Government for the purpose of

the Committees visit. Therefore the Committee took the opportunity to access

the viability of the fair price shop and got a detailed costing which indicated

that the net profit earned was only Rs. 657 whereas his helper was getting a

salary of Rs 900 per month. The dealer informed the committee that he would

be happy with a net profit of Rs. 1000-1500 and wanted a marginal increase in

the commission. He also wanted permission to sell other household items. It

was observed that no samples were kept in the shop.

C. Details of the income of the FPS

Income Heads

1. Income earned from selling Rice [(107 X 200) – (107 X 1800)]= 2140

2. Income from Kerosene (@ 0.30 X 2500) = 750

3. Income from Sugar (@ 0.10 X 300) = 300

4. Income from Wheat (@ 0.25 X 600) = 150

5. Income by selling the Sacks = 1000

______

Gross Income Rs. 4340

Expenses Heads

1. Salary of the Employee = 900

2. Shop Rent = 1000

3. Transport and handling/loading Unloading Charges

i. For Rice ( Rs 14/quintal X 107 ) = 1498

ii. For Oil ( Rs 20/barrel X 12 ) = 240

( 1 Barrel = 200 Lits )

iii. For Sugar ( Rs 5/quintal X 3 ) = 15

iv. For Wheat ( Rs 5/quintal X 6 ) = 30

________

Total Expenditure Rs. 3683

Thus, Net Income of the FPS Owner was (4340 – 3683) = Rs 657

D. This would clearly indicate that the shop in its present form is unviable. It is

obvious that with such income, the shop keeper would be indulging in illegal

activities of diversion for the purpose of his very existence.

2.2 Visit to FPS Shop at Bada Danda Sahi, Talcher, Angul District

A. Name of the FPS Owner - Raj Kumar Mishra

Licence No. - 1/2002-03

B. The said dealer has being dealing in this business for last 18 years.

C. Position of the Cards attached to his shop are :-

APL BPL AAY

274 51 20

D. He stated that his average monthly income was Rs. 1100/- to 1500/-.

Calculations showing this profit are: -

Type ofCommodity

Quantity Allottedevery Month(quintals/litres)

Commission perQuintal (Rs)

Income (Rs)

Rice 13 20 260

Wheat 12 18 216

Sugar 1 12 12

Kerosene 1300 0.35 455

Empty Gunny

Bags

45 10 450

Total Income 1393

E. He said that only expense he has to bear is transportation as his shop is part of

his house and electricity charges are covered under house electricity bill.

Transportation cost for a month comes to Rs. 300/-.

Thus, his net monthly profit is Rs 1393 – 300 = Rs 1093/-

F. The Committee found that:-

1. List of Beneficiaries was found to be displayed outside the shop.

2. He had distributed the entire quota of this month.

3. He informed the committee that he wants to sell other commodities

also but the department does not permit this.

4. Three years ago, he was selling non PDS Commodities but was stopped

from doing so by the Departmental officers. However Government

Officials who are accompanying the Committee clarified that there was

no such prohibition for selling non PDS Commodities.

5. He also informed the Committee that the last time anyone from

vigilance committee visited his shop was three years ago and no one has

come since then.

6. License was renewed every year by the concerned authorities.

2.3 Visit to the FPS Shop run by Women self helf group (WSHG), Talechar

A. License No. of Shop was 14/2004-05.

B. Shop was run by a WSHG consisted of 10 members.

C. Name of the Group was Mahashivani.

D. Mrs. Ritala Maharanna, member of the WSHG present at the shop stated that

they had small savings (personal) every month, which help them running the

shop.

E. She said they are making a profit of Rs 400 – Rs 500/- every month from this

shop.

F. Position of the card attached to the shop are :

APL BPL AAY

30 72 15

G. She stated that personal rapport with beneficiaries was essential for running

the shop efficiently.

H. Out of the 10 members of the WSHG, 8 are cardholders which helps them in

understanding the position of the other cardholders.

I. They have been running this shop for last 4 years.

J. This group also imparts training to people for making toys for a living.

K. Since they belong to the same group, they ensure the proper delivery of the

food grain.

L. This Shop is operated from the house of one of the member present there

who rented out this portion of the house to SHG for running this shop for a

rent of Rs. 250 per month.

M. The Committee interviewed one member of the WSHG. During the interview

when her husband tried to intervene, she politely told him that it was her

enterprise and he should keep out of the interview.

N. On being asked whether the officials or others in the chain demanded bribe

they answered that they don’t pay bribes even if demanded.

O. The visit to this shop run by the Women SHG was certainly positive.

2.4 Visit to Model Fair Price Shop (Maitree Shop)

The Committee visited a Model Fair Price Shop (Maitre Shop)-cum-Government

Storage Agent Godown owned by the OSCSC at Sector 6, Cuttack Development

Authority, Cuttack.

A. The Corporation has 38 MFPS under its control to provide Rice, Wheat, Sugar

and Kerosene Oil to the PDS consumers covered under different schemes.

Besides the above, some other essential consumers goods are sold through the

MFPS.

B. Mr. Liyakat Ali (Storage Agent cum Godown Assistant) was in charge of the

shop.

C. Committee found the following during the Visit to the Shop:-

1. Details of the cards attached to the shop are :-

BPL AAY APL Annapurna

3476 1456 2890 203

2. Four Maitre shops were covering the all BPL, AAY and Annapurna Card

Holder requirement in Cuttack city (Other FPS in the city were only holding

APL cards). Total No. of BPL, AAY and Annapurna cards attached to these 4

shops are:-

BPL AAY Annapurna

17,443 5966 740

3. In the shop Committee visited, 3 persons are employed.

4. This Shop also sells many other Non PDS Commodities like Pulses, Salt,

other brand Palmoline Oil, etc.

5. Current Stock position of the Shop was:-

Category Wheat Rice

APL 102.52 qtls

BPL 264.76 qtls

AAY 325.90 qtls

Annapurna 16.50 qtls

6. No sealed samples are available in the shop.

7. Records are properly maintained in the shop. List of all beneficiaries are

displayed outside the shop.

8. The weekly holiday of the shop was on Thursday.

9. Empty gunny bags were sold for Rs. 7 or 8 per bag.

10. The shop was earning profits. (Both from sale of PDS Goods and other

activities).

11. The shop worked as a storage Godown as well as retailer shop.

12. Private Retailers also take their quota from this Maitre Shop.

D. The Visit to the Shop brought into the notice the following facts:-

1. The model fair price shop which works both as a wholesale and retail outlet

and which sells non PDS commodities as well, seem to work well and were

also making profits.

2. Keeping in mind the success of the maitree shops or the model fair price

shops, the question thus arises for consideration is whether in terms of the

obligations set out in the PDS Control Order, the Government itself must

undertake the task of door step distribution without franchising the same to

private persons.

2.5 Visit to FPS operated by Gram Panchayat Gursang Block Talechar, DistrictAngul.

A. The Gram panchayat had 8 villages attached to it.

B. Position of the cards attached to the gram Panchayat was -:

AAY BPL APL

70 NIL NIL

C. The Committee found that:-

The licence for the shop is in the name of Panchayat Secretary. The Shop is

run by the panchayat secretary who is a government servant and hence this

FPS in all respects is a government shop. Although the shop was operating at a

very small scale having only AAY cards, the shop was totally uninspiring and

showed that the shops run by the panchayats in contradistinction to the

Corporation run Maitree shops were not run in an efficient and orderly manner.

2.6 Visit to Fair Price Shop operated by Gram Panchyat in Chamunda Village,

District Sambhalpur.

A. Details of the Gram Panchayat:-

Name of Gram Panchayat secretary - Mr Gorang Sahu

Stock In Charge - Mr. Patoa

Sale Register - Maintained

No of cards:-

BPL- 449

APL- 131

AAY – 7

Villages attached to the Gram Panchayat - 6

B. The visit showed that in a village setting the PDS system had totally broken

down and the person who are most vulnerable are not protected by the PDS

owing to the tardy working of the shop. It was strange to find out that

exclusion errors were apparent as many families who are living in a very poor

state having nothing to eat were excluded from the system as a whole. Those

persons who are within the system also had little or no access to it owing to

the poor working of the PDS Shop.

C. It was found that most of the genuine persons do not possess any card. There

are many families in the village who are very poor and living in a very bad state

having nothing to eat. This again leads to the inevitable inference that

exclusion/inclusion errors are one of the major maladies afflicting the PDS. The

team also visited a FPS shop run by the gram Panchayat situated in the

Chamunda village.

D. The major maladies affecting the functioning of PDS in the district is the

presence of naxalites in that area. The presence of Maoists in these areas has

become a cause for considerable alarm. This is compounded by factors such as

inaccessible hilly terrain, dense forests and lack of development. The officials

also use this as an excuse for not performing their duties relating to PDS in

these areas.

E. The officials also used the presence of naxalites as an excuse for not

performing their duty. The situation in an interior and poverty striker part of

the State was grim and shocking and requires urgent redress to ensure

food security reaches the poorest of the poor.

F. Further Observations made by the committee are –

• Visit was made in order to study the working of fair price shop in an interior

and rural setting.

• Secretary of the Panchayat who was the incharge of the shop failed to

produce any records or registers about the working of FPS Shop.

• Secretary first stated that he does not have any records and later he said

that he can not show any records as they are in the possession of some

other person.

• Only 2 Litre of Keroseine Oil was distributed to every card holder but entry

was made for 4 Litre.

• There was no electricity in the village. It was stated by the Villager that two

years earlier the Village was electrified. However for the over one year, the

transformer was burnt. Villagers were told unless they contribute towards

the price of transformer, new transformer will not be put up. Considering

the poverty existing in the village, it would appear that new transformer will

never be put up.

2.7 MOBILE VANS

A. The Corporation has started operation of Mobile Vans in the State from the year

1985. As many as 145 Mobile Vans were purchased out of funds provided by

Government of India on 50 : 50 loan and subsidy basis for utilization in

inaccessible area by way of ‘Hat sale’, with an aim to ensure distribution of

essential commodities at the door steps of the poor and needy consumers. At

present 94 Mobile Vans are running in 15 districts. Out of that, there are 40

Mobile Vans operating in 6 KBK districts of the State. The Committee was told

that 51 Mobile have been condemned being beyond repair.

B. Visit To Mobile Van In Gikki Village, Bissora Gram Panchayat, Nuapada District

1. Villagers were very happy with the working of mobile van.

2. Distribution of food grain was done in more proper and better way than

the FPS Shop.

3. 3 persons are employed in the mobile van. They are sales man, Driver

and Helper.

4. The salary of these 3 persons for a month are :-

Driver – 8000

Helper – 80 Rs Daily

Sales Man - 5000

5. This mobile van was also used for transportation of food grain from

godowns to Gram Panchayat, FPS Shops, Maitree Shops, etc.

6. On the day of the visit Mobile van had received 70 quintal rice from

Storage Agent Godown for distribution.

7. Total grain distributed to the Card holders was 69.45 quintal.

8. The difference of 55 kg was Shortage in weight in the gunny bags

received from Storage Agent.

9. Total Cards attached to this Mobile Van are :-

APL - 97

BPL - 136

AAY - 32

10. Manual Weighing Scale was used.

11. The State Government has introduced a system of distributing the food

grains on fixed dates i.e. 5th, 6th, 7th, 20th, 21st and 22nd day of every

month. Special permission has to be taken from the collector for

distributing grain on non distribution day.

12. Since Mobile van is Corporation run, its viability as FPS does not arise.

2.8 Viability of Fair price shop is critical to sustenance of Public distribution system

and to minimize leakage of PDS grains. The number of ration cards attached to FPS,

their BPL-APL breakup, off take of grains, margin on commodities, cost incurred on

transport and handling, rents etc. are the determinant of viability of FPS’s. Programme

Evaluation Organization under Planning Commission in its evaluation Report of year

2005 on TPDS put that Viability of FPS means an annual return of 12% or more on

the working capital. This has been again mentioned in 11th Five Year Plan report of

Planning Commission.

III. FIXED DISTRIBUTION DAYS AND RELATED PROBLEMS

3.1 The State Government has introduced a system of distributing the food grains

on fixed dates i.e. 5th, 6th, 7th, 20th, 21st and 22nd day of every month. This

system may be convenient for the State Government officials but causes

many difficulties for the beneficiaries. It should not be forgotten that the

Public Distribution System is for the benefit of the public and not for the

convenience of the implementing authorities. There are long queues at every

FPS on the distribution days. If some beneficiary who is daily wage earner

comes to get his ration he has to forego his earning for that day. The

beneficiary is compelled to take his entire entitlement on one day. This system

is clearly violating of the directions of the Supreme Court contained in the

order dated May 2, 2003 in Writ Petition (Civil) No. 196 of 2001. The Supreme

Court has directed that Licensees who do not keep their shops open

throughout the month during the stipulated period shall make themselves

liable for cancellation of their license. This order also provides that in order to

facilitate the supply of grain the BPL house hold should be permitted to buy

the ration in installments. Both these directions are thus being flouted

because of the distribution of ration only on fixed dates.

IV. GENERAL OBSERVATIONS IN RESPECT RETAIL DISTRIBUTION IN

THE STATE OF ORISSA

4.1 The visit to the shop run by the Women SHG had many positives. However,

such shops face tremendous difficulties in terms of the low number of cards

being allotted to them and thus low commission and short delivery of stock.

The WSHG, however, have to be those which have an existing track record and

not one created only to run an FPS. That is to say those WSHG’s created under

the Integrated Child Development Scheme (ICDS) and allied schemes of

Government.

4.2 Maitre shops operated by the Corporation were found to be operated more

efficiently than privately managed shops.

4.3 The outlet operated by the Gram Panchayat is run by the panchayat secretary

who is a government servant and in all respects is a government shop.

Although the shop visited the Committee was operating at a very small scale

having only AAY cards, yet the visit to this shop was uninspiring and showed

that the shops run by the panchayats in contradistinction to the Corporation

run Maitree shops were not run in an efficient and orderly manner.

4.4 The general condition of the retail outlets was found to be poor and the

guidelines contained in the Control Orders are not being followed in letter and

spirit.

4.5 Political interference in the appointment of retail dealers is wide spread.

4.6 Weighing of stock is being done manually which facilitates diversion.

4.7 There is a shortage of 1 or 2 Kgs in every jute bag of 50 Kg received from the

godown of Storage Agents as mentioned in detail in paragraph 2.6 of the

Chapter dealing with Wholesale distribution.

4.8 The quality of rice distributed under the PDS System is found not to be good.

4.9 The State Government has introduced a system of distributing the food grain

on fixed dates i.e. 5th, 6th, 7th, 20th, 21st and 22nd of every month. This system

may be convenient for the State Government officials but causes many

difficulties for the beneficiaries. It should not be forgotten that the Public

Distribution System is for the benefit of the public and not for the convenience

of the implementing authorities. There are long queues at every FPS on the

distribution days. If some beneficiary who is daily wage earner comes to get his

ration he has to forego his earning for that day. The beneficiary is compelled to

take his entire entitlement on one day. This system is clearly violating of the

directions of the Supreme Court contained in the order dated May 2, 2003 in

Writ Petition (Civil) No. 196 of 2001. The Supreme Court has directed that

Licensees who do not keep their shops open throughout the month during the

stipulated period shall make themselves liable for cancellation of their license.

This order also provides that in order to facilitate the supply of grain the BPL

house hold should be permitted to buy the ration in installments. Both these

directions are thus being flouted because of the distribution of ration only on

fixed dates.

4.10 Mobile Vans are an important tool for improving the coverage of the PDS and

therefore the number of Mobile Vans must be increased to ensure that the

outreach of the PDS is increased.

4.11 FPS owners should be permitted to stock and sell non PDS Commodities also

like tea, oil, dals, etc. to make business profitable and cover their losses if any.

In fact the concept of a stand alone FPS outlet is an inherently unviable

proposition. From the present regime of stand alone shops to a regular

kirana/grocery shop which also sells FPS commodities, with the rider that the

shop will not sell PDS food grains.

4.12 In a village setting the PDS system had totally broken down and the persons

who are most vulnerable are not protected by the PDS owing to the tardy

working of the shop. It was strange to find out that exclusion errors were

apparent as many families who are living in a very poor state having nothing to

eat were excluded from the system as a whole. Those persons who are within

the system also had little or no access to it owing to the poor working of the

PDS Shop.

4.13 The officials also used the presence of naxalites as an excuse for not

performing their duty. The situation in an interior and poverty stricken part of

the State was grim and shocking and requires urgent redress to ensure food

security reaches the poorest of the poor.

CHAPTER 5

TRANSPORTATION

1.1 There are three main mode in the Public Distribution System in the State of

Orissa by which the food grains move ultimately reaching the consumers.

1.2 FCI Godowns to OSCSC Godowns or Storage Agent Godown: The

OSCSC/Storage Agent is responsible for the transportation of the food grains

from the FCI Godown to their own Godown. The cost of the transportation is

paid by the State Government through the OSCSC and that the transportation

is done by the transporters who are appointed by tender process.

1.3 OSCSC Godown to Storage Agent Godown : When the OSCSC procures food

grain under the Direct Procurement Scheme on the behalf of FCI, and store in

their own Godown, then the Storage Agent is responsible for transportation of

the food grain from OSCSC Godown to their own Godown. The cost of the

transportation is paid by the State Government through the OSCSC

1.4 OSCSC or Storage Agent Godown to Fair Price Shop: The fair price shop owner

arranges transport for transporting the food grains from the OSCSC or Storage

Agent Godown to the fair price shop. FPS owner has to bear the cost of

transportation is included in his margin.

1.5 As in the State, the responsibility to transport food grain has been entrusted to

the Storage Agent, the Agreement is made between the Storage Agent and the

OSCSC. The Agreement clearly puts the responsibility of Transportation of food

grain on the Storage Agent for which he gets the commission.

1.6 Clause 7 of the agreement between Storage Agent and OSCSC requires the

Storage Agent to make arrangements for transportation for which he is

reimnursed in accordance with approved rates revised from time to time. The

r

a

t

e

s

a

r

e as follows :-

Transportation

charges

BPL Rice AAY Rice APL Rice APL Wheat

Up to to 10

km

10 10 7.00 7.00

Beyond 10 Km 0.35/km 0.35/km 0.30/km 0.30/km

Observations

1. The role and responsibilities of Storage Agent are provided in Clause 11 of

Orissa PDS Order, 2008. Interestingly however, the said Clause does not

provide any specific responsibilities for safe transportation of food grain. No

such obligation is found in the agreement between the Storage Agent and

OSCSC. It is a well established fact that a lot of the diversion takes place during

transits of Goods. Yet in the State of Orissa there is absolutely no check at this

stage.

2. A proper vigil has to be kept on transportation of the foodgrain at all level i.e.

from FCI to Storage Agent and at the time of Storage Agent to Fair price

shop. GPS system can be used for tracking the movement of Trucks carrying

foodgrainn. For this, routes that have to be followed by Trucks carrying food

grains have to be prepared and specified. Devices required for GPS should be

installed on every such Truck and movement of the Truck should be

monitored. Attachment of device of GPS in the Trucks engaged in Public

Distribution System may be made part of the tender conditions.

3. There should be routine daily physical checking of the GPS Units to detect

any tampering etc. Any tampering with GPS system installed on the Trucks

carrying food grains or any deviation of the Truck from the route prescribed

would be considered as violation of the Public Distribution System (Control)

Order, 2001.

4. Though the task of monitoring the functioning of GPS should be with the

Department and in addition, the Ombudsman will also have access to the

system to ensure its proper implementation.

CHAPTER 6

VIGILANCE, ENFORCEMENT AND COMPPLAINT MECHANISM

Although the Statutory instruments namely the PDS Control Order, 2001 as well as

the Orissa Control Order 2008 provide for the monitoring and Vigilance of Fair price

shops, The Committee found the Vigilance mechanism is totally defunct and almost

non existent. The Committee in this Chapter details its observation in this regard.

I. COMPOSITION AND FUNCTIONING OF VIGILANCE COMMITTEES.

1.1 Instruction No. 15756 dated 31.07.2006 contains government instructions on

composition of Vigilance Committees. It contains two sets, one set contains

old instructions of 1991 and the second set contains reconstitution of

Committees and instructions thereof in 2006.

1.2 Three types of Vigilance Committees are constituted in the State of Orissa:-

A. DISTRICT LEVEL ADVISORY COMMITTEE

B. TOWN /BLOCK ADVISORY COMMITTEE

C. RETAILER LEVEL ADVISORY COMMITTEE

1.3 DISTRICT LEVEL ADVISORY COMMITTEE (DLAC)

A. Composition: The composition of DLAC is as under:-

1. Collector Chairperson

2. Hon’ble MP’s or their representatives.

3. Hon’ble MLA’s or their representatives.

4. Two members of Zilla Parisad of whom

Atleast one shall be a woman to be nominated

by the Zilla Parisad.

5. Two Chairpersons of Panchayat Samities of

whom at lease one shall be a woman nominated

Collector.

6. Two representatives of Voluntary Consumer

Consumer Organizations or NGO’s active in the field of

Consumer Protection of whom at lease one shall be

a woman to be nominated by Collector.

7. Additional District Magistrate (1/c of PDS)

8. Project Director, District Rural Development Agency

9. District Social Welfare Officer

10. District Manager, Food Corporation of India

11. District level Coordinator of Oil Companies

12. Civil Supplies Officer Member-Convener

B. FUNCTIONS: The functions of the District Level Advisory Committee are

specified to be:-

1. To monitor the over-all functioning of Public Distribution System in the

district.

2. To monitor progress in implementation of Antyodaya Anna Yojana and

Annapurna Yojana and to approve beneficiary list thereof.

3. To monitor the functioning of Block / Town level Advisory Committees

in the district.

4. To look into the complaints of irregularities in the Public Distribution

System and to make appropriate recommendations to the Licensing

Authorities concerned.

5. To ensure supply of adequate quantity and prescribed quality of PDS

commodities through the Public Distribution System.

6. Such other functioning as may be entrusted to the Committee by the

State Government.

7. The Committee is required to meet atleast once in a quarter or more

frequently as required.

1.4 TOWN /BLOCK ADVISORY COMMITTEE (TLAC/BLAC)

A. COMPOSITION

Instruction No. 16958(30)/SFS&CW dated 16-08-2006 on constitution of Town

/ Block Level Advisory Committee is as follows:-

1. Hon’ble MLA of the local constituency Chairperson

2. Chairperson of the Urban Local Body Member

3. Hon’ble MP or his representatives Member

4. 2/4/5 Ward Councilors to be nominated by the

Urban Local Body concerned as follows: Member

(a) for ULBs with upto 16 wards 2

(b) for ULBs with more than 16 and upto 20 Wards 4

(c) for ULBs with more than 20 Wards 5

5. One representative of a Voluntary Consumer

Organization to be nominated by the Collector Member

6. One representative of women Self Help Group

(other than PDS licensee to be nominated by Member

the Collector)

7. Three consumers of which at lease one shall be a

Woman and one from ST/SC community Member

8. ASCO concerned Member

9. Inspector of Supplies Member

10. ARCs Member

11. Executive Officer of Urban Local Body

Concerned Member Convenor

B. Additionally the following representatives from the following categories shall be

inducted as members:-

(1) Two Sarapanches to be nominated by the Collectors (in place of one

Sarapanch at present)

(2) Four Consumers to be nominated by the Collector (in place of three at present)

out of whom at least one shall be a woman and one from SC/ST community.

(3) One representative of Voluntary Consumer Organisation to be nominated by

the Collector.

(4) Two representatives of WSHGs (other than PDS licensee to be nominated by

the Collector.

C. FUNCTIONS OF THE BLAC:- The functions allocated to be Block Level Advisory

Committee are :-

1. To monitor receipt of stocks of essential commodities;

2. Ensure their proper distribution;

3. To make recommendations for appointment of retailers;

4. Suggest measures for ensuring availability of Essential Commodities, for

holding the price line, for ensuring equitable distribution of the allotted stocks

to the consumers with the area;

5. To detect and prevent malpractices.

D. Instruction No. 6540(13)/F&CS-PL.IP-59/90 dated 20.2.1991 provides that the

meetings of Block Level Advisory Committee shall ordinarily be held once every

month and at intervals not exceeding one month.

E. Block Development Officer (BDO) is required to convene the meeting and also

keep record of the proceedings of the meeting duly authenticated by the

members present.

1.5 RETAIL LEVEL ADVISORY COMMITTEE (RLAC)

A. COMPOSITION

Instruction No. 15758 dated 31.07.2006 lays down the composition of the Retail

Level Advisory Committee:-

1. Rural Areas:-

(i) Sarapanch of the Gram Panchayat concerned Chairperson

(ii) All Ward Member(s) in whose ward area

The FPS’s are situated.

(iii) Four literate consumers from the area of operation

of each of the FPS’s in the GP of which at lease

one shall be woman and one from SC/ST community

(to be nominated by the G.P.)

(iv) One representative of a WSHG (other than

a PDS licensee (WSHG) from the GP area

to be nominated by the BDO.

(v) One voluntary Consumer Organization / NGO

active in the field of consumer protection

from the GP area to be nominated by the BDO.

(vi) One consumer from each of the Fair Price Shop

area to be nominated by Hon’ble MLA.

(vii) Executive Officer of the GP - Member Convener.

2. Urban Areas:- The composition of RLACs in the Urban Areas is to be as

follows:-

(i) Councilor of the Ward within which Chairperson &

FPS is situated. Convener

(ii) Councilors of other Wards if any,

Whose areas are serviced by the FPS.

(iii) Four literate consumers from the area

of operation of the FPS of whom at lease

one from SC/ST community (to be nominated

by the Urban Local Body).

(iv) One representative of a WSHG to be

nominated by the E.O.

(v) One Voluntary Consumer Organisation / NGO

active in the field of Consumer Protection to

be nominated by the E.O.

(vi) One consumer from the FPS area to be nominated

by Hon’ble MLA

4. In the Gram Panchayat areas as well as licenses for the “haat” sale, one

RLAC is to supervise all the FPS located with the FP areas. But in urban

areas there has to be separate RLAC for each FPS.

5. The BDO & E.O. of the ULB (Urban Local Body) have to issue orders for

constituting RLAC for urban and rural area respectively.

B. FUNCTIONS OF THE RLAC:- The functions of the RLAC are:-

1. The Retailer Level Advisory Committee shall primarily be responsible for

ensuring that the retailer lifts the essential commodities allotted for the

retail centre that the stocks allotted are actually brought to the retail

centre and no part of the stocks allotted lapses or gets diverted for

unauthorized purpose.

2. It shall verify the ration card register of the FPS regularly and report to

the BDI/EO of ULB in the event of detection of fake/ghost /counterfeited

cards.

1. At least two non-official members of the Committee, to be decided by

the RLAC shall sign the Tally Register maintained by the retailer and

certify the receipt of essential commodities allotted to the retail centre

and their proper distribution. Allotment of subsequent months shall not

be released until such a certificate has been recorded in the Tally

Register of the Retailer.

2. The RLAC will also monitor the quality and correct quantity of FPDS

commodities sold to the consumers.

3. The RLAC members will verify the use of certified weight and measures

by the retailers.

4. Arrival of PDS commodities will be certified by at least two members of

the RLAC (to be decided by the Committee) and the distribution of the

stock will commence only after verification of arrival by these members

who will then put their initials in the stock register of the retailer.

5. The RLAC will have the power to call for records of the retailer as and

when decided.

6. Tally / stocks / Sale Register and complaint book of Fair price Shop will

be place din every meeting of the RLAC

7. RLAC is required to meet at least once a month. The Convener i.e.

Councilor is required to convene the meetings, record proceedings and

to take follow-up action. Earlier to 31st July, 2006, Village Level

Committees and Ward Committees were constituted for the rural and

urban areas.

II. OBSERVATIONS

2.1 It was revealed that the retailers were appointed on the recommendations of

the Block Level Advisory Committees (BLAC) or Taluk Level Advisory

Committees (TLAC) which were also supposed to act as the Vigilance

Committees under the Orissa PDS Control Order.

2.2 It is relevant to point out that the fact that the Vigilance Committee are almost

defunct. This was admitted by the Government. Reference may be made to

circular No. 5022 dated 28/2/2008, the Commissioner- cum-Secretary, Food, of

the State which clearly stated that no meeting of the Vigilance Committee have

been convened even once in several districts which include the districts visited

by the Committee namely Cuttack, Angul, Sambhalpur, Bolangir and Kalahandi.

2.3 It was further discovered that these Committees do not perform any Vigilance

work and were only meeting when an appointment of the dealer was to be

made.

2.4 Giving a role to the vigilance Committees i.e. the BLAC and the TLAC in the

appointment of retailer’s results in a direct conflict of interest and such a

system must be abolished immediately. The very nature and composition of the

committees would show that it is based on an unworkable model and the best

vigilance would be if an end to end automated model is in place with real time

public access to the data.

2.5 The Committee found that there is a complete overlapping of functions in as

much as the same set of people (BLAC/TLAC) recommends persons for

appointment as dealers/retailers and also are entrusted with the task of

scrutinizing the performance of the said retail outlets. This completely erodes

the independence and impartiality of the vigilance committees.

2.6 The Committee’s in their present form are unwieldy and there is no system in

place in respect of how and when these Committee’s will meet. The Order

should provide that the Convener should fix a day, time and place for the

meetings every month or two months, as the case may be, so that there is no

requirement for sending intimations in respect of the same to the members. A

Secretary of the Department of Food and Supply, Concerned District Magistrate

and concerned Block Development officer should respectively be responsible for

convening the meetings of the Vigilance Committees.

III. COMPLAINT MECHANISM

3.1 The grievance redressal mechanism is also virtually non-existent and even the

‘call centre’ was found to be inadequate in its operation and effectiveness. The

Committee found that the call center functioned from 8 am to 8pm on working

days. The call center had a toll free no-1800 3456760. Only way of redressal

was by informing the Civil Supply Officer of that particular District of which the

complaint had been made. The Committee was also informed that people who

filed complaints were not given a complaint number due to which following up

on a complaint was not possible at all. A proper and functional helpline is

suggested.

3.2 In order to ensure efficiency and optimise effectiveness of the Helpline

services, the following recommendations are made:

(a) The toll free telephone Helpline facility should preferably be operative twenty-

four hours a day and seven days a week.

(b). It shall be the responsibility of Ombudsman/ Regulator(whose role is being

discussed a little later in this report) to catalogue the complaints/grievances

received on the Helpline and to continuously monitor these

grievances/complaints to ensure their ultimate resolution.

(c) The consumer/user interface aspect of the Helpline should broadly have the

following basic features viz.:

(i) Providing information related services.

(ii) Registration of complaints.

(iii) Issuance of a unique identification/token number to the caller upon

registration of complaints.

(iv) Mechanism to ascertain status of action taken on such registered

complaints.

(d) The Department, the FCI and the OSCSC will be obliged to inform the Helpline

as to when the particular FPS will get its stock. The OSCSC will also inform the

Helpline about the movement of trucks to the particular shop so that any caller

will be able to ascertain from the Helpline as to when stock would be available

at the shop.

3.3 In order to make the Helpline effective, it is necessary:

(a). To give adequate publicity of Public Distribution System service benchmarks.

(b). Adequate publicity should be given to this toll free Helpline and the category of

services that would be available to the consumers on this Helpline.

(c). Complaints received through the Helpline should be forwarded to the

concerned officer in the Department not later than 24 hours from the time of

receipt of the complaint.

(d). For the purposes of ensuring accountability of the official(s) who has/have been

entrusted with a given complaint, it is necessary that a time bound complaint

redressal mechanism is created and there should be an independent agency to

periodically monitor the working of the system. This aspect has been dealt with

in greater detail under a separate heading “Ombudsman/ Regulator”.

(e). In case of delay in redressal of complaints, the concerned official shall be

liable for action in case of dereliction of duty, including penalty, for each day of

such delay. This penalty would be paid by the State Government to the

complainant at the first instance and thereafter, recovered from the concerned

official.

IV. OMBUDSMAN/ REGULATOR

4.1. The Ration Card holders have been given certain entitlements under Public

Distribution System. It is the responsibility of the state apparatus to ensure

that these beneficiaries enjoy access to these entitlements smoothly, without

let or hindrance. Public satisfaction in this field would strengthen the

democratic system and reinforce public confidence. Widespread discontent will

naturally provoke disruption and affect social stability adversely. Hence, it is

imperative to take urgent action for suitably strengthening the vigilance and

monitoring system in the existing Public Distribution System framework. This

can be done by the appointment of an independent Ombudsman/Regulator.

4.2 While the Central Vigilance Committee is of the considered view that an

independent monitoring mechanism for addressing consumer complaints along

with a host of other related issues needs to be set up on priority. Such

grievance redressal machinery would be in addition to the already existing legal

remedies that may be available to an aggrieved person under Clause 11 of the

Public Distribution System (Control) Order, 2001. This alternative mechanism

may be in the form of “Ombudsman/ Regulator” that may be created under

Para 6(1) of the Annexe to Clause 8 of the Public Distribution System (Control)

Order, 2001. Para 6(1) of the Annexe to Clause 8 of the Public Distribution

System (Control) Order, 2001 casts an obligation upon the State Government

to provide a proper system of monitoring FPS. This clause provides the

statutory basis for setting up an independent monitoring mechanism such as an

“Ombudsman/ Regulator”.

4.3 The objective of Ombudsman/ Regulator would be that he/she would act as

‘Watch Dog’ to ensure effective compliance of the PDS Control Order, 2001,

The Orissa PDS control order and applicable instructions. The Ombudsman/

Regulator will also provide free, fair, independent mechanism for speedy

resolution of complaints with reference to the benchmark set out in the

governing statute, order and circulars by the authorities. Ombudsman/

Regulator should focus on investigating and resolving individual complaints and

also address systemic issues. The Ombudsman/ Regulator provides consumers

an easily accessible system, which would be just and speedy in redressal of

their complaints and grievances. This should not become a procedure bound

system or be driven by dilatory reports. Investigation will be resorted to

wherever considered necessary by the Ombudsman/ Regulator. The

Ombudsman/Regulator shall oversee the functioning of the Enforcement

Branch including the Anti Hoarding Cell.

4.4 Ombudsman/ Regulator should be appointed by the Governor of Orissai in

concurrence with the Chief Justice of The High Court. He or she will not be

eligible for re-appointment.

4.5 Eligibility conditions

A. The Ombudsman/Regulator should be a sitting/retired member of the Orissa

Higher Judicial Services who is or has been in the super time scale .

B. If the Ombudsman/Regulator is a retired member of the orissai Higher Judicial

Services, he/she will remain in office for a term of three years or upon reaching

the age of Sixty five, whichever is earlier.

4.6. Terms and conditions of service

The salary and allowances payable to the Ombudsman/ Regulator shall be the

same as payable to a member of the Orissa Higher Judicial Service in the super

time scale.

4.7 Removal and Resignation from office

Whereas a sitting member of the Orissa Higher Judicial Services will be

governed by the service rules applicable to him. In the case of a retired

member of the Orissa Higher Judicial Services being appointed, the following

will apply: -

A. The Ombudsman/ Regulator may be removed from office by the Government

any time after appointment if Ombudsman/ Regulator has:

(i). Been adjudged an insolvent; or

(ii). Been convicted of an offence involving moral turpitude; or

(iii). Become physically or mentally incapable of acting as Ombudsman/

Regulator; or

(iv). Acquired such interest as is likely to prejudicially affect his functions as

Ombudsman/ Regulator; or

(v). So abused his position as to render his or her continuance in office

prejudicial to the public interest.

B. However, the removal on the grounds specified in clauses (iv) and (v) can be

done only in concurrence with the Chief Justice of the High Court, after

following the principles of natural justice.

4.8 Functions and Responsibilities of Ombudsman/ Regulator

A. Ombudsman/ Regulator would be that he/she would act as ‘Watch Dog’ to

ensure effective compliance of the PDS Control Order, 2001, The Orissa PDS

control order 2008 and applicable instructions. The Ombudsman/Regulator will

constantly monitor each facet of the distribution process detailed in the

governing control orders and circulars to ensure inter alia that the correct

quantities of SFAs reach the intented beneficiaries.

B. In addition the Ombusman/ Regulator will deal with Consumers’ complaints

and grievances which may broadly be classified into two groups:

Basic

Complex.

C. Basic complaints would mainly relate to non-provision of Public Distribution

System items benchmarked to quality/quantity, delays, harassment etc.

Complex complaints would relate to matters involving laws, enforcement

deficiencies and widespread discontent. Basic complaints may require summary

disposal without undertaking any detailed investigation. Complex complaints

may involve proper investigation.

Having regard to the class of complaints, whether basic or complex, the

functions and responsibilities of the Ombudsman/ Regulator will be as follows:

(i). To act as the repository of complaints/grievances received upon the

Helpline. Ombudsman/ Regulator shall also monitor the functioning of GPS

technology that may be used in the Transportation of Food grains and deal

with all matters relating to consumer complaints arising from deficiencies in

various stages of Public Distribution System operation;

(ii). To act as the monitoring authority in respect of functioning of the

Vigilance Committees and follow up action taken by the Department on the

reports/recommendations of the Vigilance Committees.

(ii). To investigate, where necessary in the judgment of the Ombudsman/

Regulator, complaints on case-by-case basis after seeking the perspectives of

parties involved and making an independent assessment of complaints;

(iii). To seek resolution of complaints through application of extant law, rules

and orders in complex cases based on his or her personal assessment of what

is reasonable and fair;

(iv). The Ombudsman/ Regulator will have jurisdiction to address and

investigate, where necessary, complaints about, inter-alia, the following

matters:

• non-observance of the PDS Control Order by FPS owner.

• short supply of Food grains/sugar/kerosene oil below entitlement;

• supply of poor quality Food grains not matching the sample on

display; and

• diversion of Food grains to shops other than FPS.

• the manner in which complaints received from the

consumers/complainants including those on the toll free Helpline,

have been dealt with by the concerned officials of the

Department.

• Action taken by officials of the Department on reports of

Vigilance Committees.

(v) It will be the responsibility of Ombudsman/ Regulator to devise and

implement communication strategy to educate consumers as well as FPS

owners about their rights and entitlements as well as various dos and don’ts of

Public Distribution System.

(vi) It is made clear that the remedy to approach the Ombudsman/ Regulator

would be in addition to and not in derogation of other remedies available in

law.

4.9 Powers of Ombudsman/ Regulator

The powers of the Ombudsman/ Regulator, inter-alia, would include:

A. Public functionaries in the Department/Orissa State Civil Supplies Corporation

Limited/Food Corporation of India, in charge of, or dealing with Public

Distribution System, must function with “due diligence”; that is, they must

ensure that within the framework of the system, the consumers’ entitlements

of Food grains etc., are made available to them on time through the

distribution network. Any deficiency or shortcoming on their part, with

reference to the benchmarks, will render the functionary personally liable to

action. The Ombudsman/Regulator will have the power to recommend and

monitor departmental action in respect of errant officers keeping in mind the

governing disciplinary rules. In cases of violation of any laws in the matter of

Public Distribution System, the Ombudsman/ Regulator can direct the

concerned authorities to take action against the person/party. There cannot be

any corruption in Public Distribution System unless there is complicity between

FPSs, Department Officials and the Transporter. While the FPS owner and the

Transporter can be prosecuted under Section 7 of the Essential Commodities

Act, 1955 for violation of the provisions of law including the Public Distribution

System (Control) Order, 2001, it is incongruous that the Department officials

who are fully involved in the crime should be proceeded against only

departmentally in the absence of sanction under Section 15A of the Essential

Commodities Act, 1955. The Committee therefore recommends that Section

15A be suitably amended by deleting clause (b), which deals with public

servants belonging to the State Governments. The Committee also

recommends that till the legislature makes such an amendment as proposed,

the State Government shall delegate the power of sanction for prosecution to

the Ombudsman/Regulator.

B. The Ombudsman/ Regulator can recommend payment of compensation to a

complainant upto a maximum amount of Rs. 5,000/-, and/or supply of goods

and services as required for resolving the complaint or/and issue cease and

desist order. In case of complaints of a frivolous nature, the complainant will

also be liable for similar action. The amount mentioned above would be paid

by the Department to the beneficiary at the first instance and would be

recovered from the concerned officer.

C. The complaints received by the Ombudsman/ Regulator may be referred by

him for a report from the District Vigilance Committee or FPS Vigilance

Committee, as the case may be. It is clarified that this power of the

Ombudsman/ Regulator to make a reference shall be in addition to and not in

derogation of the powers of the Ombudsman/ Regulator to conduct an

independent enquiry into complaints. While, the reports so received, will assist

the Ombudsman/ Regulator in providing solution, these reports will not be

binding upon the Ombudsman/ Regulator.

D. The Ombudsman/ Regulator also may not entertain a complaint if the

complaint is more than 90 days old which can, however, be relaxed by

Ombudsman/ Regulator in his discretion in deserving cases and final resolution

of complaints will need to be prescribed for ensuring speedy and efficacious

handling of complaints.

E. Time limits for addressing complaints, various stages involved in completion of

investigation and final resolution of complaints will need to be prescribed by

the Ombudsman/ Regulator for ensuring speedy and efficacious handling of

complaints.

F. The Ombudsman/ Regulator will ensure that all codes/orders/regulations etc.,

are put on the website for the convenience of the consumers.

G. The Ombudsman/ Regulator will have authority to suggest/recommend

changes in operational matters to smoothen and simplify the operation of the

system.

4.10 Structure

The Ombudsman/ Regulator would need to be given a nucleus of staff to

examine issues from both reactive and pro-active approaches.

4.11 Funding

It will be the responsibility of the Government to provide funds for

implementation of the aforegoing recommendations including meeting

administrative and operational expenses of the office of Ombudsman/

Regulator including the staff thereof. In this context it is relevant to point out

that the Planning Commission provides funds under its plan programmes for

monitoring and improvement in the management of supplies.

V. OBSERVATIONS

5.1 The duty to convene Vigilance Committees in terms of the Order of Supreme

Court dated 8th May, 2002 is on the District Collector. However it was found

that there is uniform non adherence to the directions of the Hon’ble Supreme

Court. Responsibility has to be fix on District Collector that not only directions

given by Hon’ble Supreme Court are followed, various advisory Committee’s

formed under the Government Order constituting the Committee’s function

strictly in accordance with there it.

5.2 Various Committees constituted under the Consumer Proctection Act, 1986

could also be entrusted with the job of Vigilance in respect of PDS.

VI. ENFORCEMENT

6.1 Enforcement is in dismal state. Enforcement is virtually non-existent. In

spite of their being vast complaints against the FPS owners, not much action seems to

have been taken against the shopkeepers. It is stated by the State Government that

periodical checks are being made by the field functionaries of Civil Supplies

Department regarding regulating the sales and distribution of Essential Commodities

to the ration card holders as per their entitlement. It appears enforcement is

activated only in the year 2008 when it is stated that upto July 2008 1134 number of

cases detected and action suggested against the dealers for contravention of the

terms and condition of licences or of the Control Order issued under the Essential

Commodities Act 1955. It was stated that action had also been taken against the

officials for negligence of their duties. Apart from these statements no particulars

have been given by the State Government. No particulars of the action taken and

result thereof have been indicated by the State Government.

6.2 From the statement of pending cases under the Essential Commodities Act

1955 as furnished by the Hon’ble Orissa High Court we find the break-up of

the pending cases as on 31.10.2008 is as under:

Year No. of cases pending

1999 11

2000 16

2001 30

2002 58

2003 25

2004 48

2005 179

2006 187

2007 157

2008 45

6.3 The number of cases decided during the last 3 years is given as under:

Year No. of cases decided

2005 21

2006 19

2007 12

From the statement given by the High Court it would appear that the

Department is not taking much interest in the follow up action of the cases.

6.3 The Committee has been suggesting that as far as infraction of any provision

of law under the Essential Commodities Act 1955 is concerned, it should be a case of

zero tolerance. After examining the whole lot of cases those pending in the Court

and the action taken by the Department, the Committee is of the view that punitive

action taken by the State Government is ineffective and inadequate. Malpractices in

the PDS continue because of lack of effective enforcement system. The Supreme

Court issued direction by its Order dated 2.5.2003 to facilitate the supply of

foodgrains. But the Committee found during its visit that the directions were not

being followed. The directions given are as under:

A. Licensees who

• Do not keep their shops open through out the month during the

stipulated time.

• Fail to provide grain to BPL families strictly at BPL rates and no higher

• To keep the cards of BPL house holds with them

• Make false entries in the BPL cards,

• Engage in black marketing or siphoning away of grains to the open

market and hand over such ration shops to such other

person/organizations

• Shall make themselves liable for cancellation of their licenses. The

concerned authorities/functionaries would not show any laxity on the

subject.

B. Permit the BPL household to buy the ration in instalments.

C. Wide publicity shall be given so as to make BPL families aware of their

entitlement of foodgrains.

Need of the hour is immediate setting up of enforcement mechanism.

A vigilant consumer or any vigilance set up can not succeed without a proper

enforcement mechanism. Section 7 of the Essential Commodities Act, 1955 provides

punishment for violations of the Control Orders issued under Section 3 of the Act.

These provisions are technical in nature and require specially trained personnel to

enforce them. The normal police have proved ineffective in enforcing these provisions.

It has also been observed that the cases filed under the Essential Commodities Act,

1955 keep on pending in courts indefinitely and a large majority of cases end up in

acquittal of the accused persons. It is necessary that special courts and specially

trained prosecutors are appointed for the trial of these cases.

The license granted to the dealers lay down certain conditions. The violation of these

conditions makes the license liable for cancellation of his license. The Supreme Court

has also ordered that a license would make himself liable for cancellation of his license

in the following cases.

That the licenses of those fair price shop owners

• who do not keep their shops open throughout the month during the stipulated

period,

• fail to provide grain to BPL families strictly at BPL rates,

• keep the cards of BPL households with them,

• make false entries in the BPL cards,

• engage in black-marketing or siphoning away of grains to the open market,

and

• hand over such ration shops to such other person/organizations, will be liable

to be cancelled.

This order was passed on 2.5.2003 but no action has been taken by the states to

enforce this order. It is therefore necessary that the special squads consist of persons

drawn from the administration and the police and should be placed directly under the

District Magistrate. These squads should be responsible for launching criminal

prosecutions and also for recommending departmental action for suspension or

cancellation of license, or imposing penalties No action has been taken against any

official though it is admitted that no diversion of food grain is possible without the

connivance of the officials of the department. . It is also important that these squads

also have the powers to recommend action against officials in whose jurisdiction

violations are detected or who is found to be involved in diversion of food grain. The

Committee feels that there should be dedicated Special squads in every District for

enforcement of the penal provisions of the Essential Commodities Act, 1955. The

Committee has suggested Zero Tolerance in the matter of enforcement in the Public

Distribution System. Similarly a special squad should also be created at the State level

for surprise checks whenever there is complaint requiring such action. Prosecutors

should be specially trained for conducting cases under the Essential Commodities Act.

Special attention is also required to ensure speedy disposal of cases filed in courts.

Special Courts may have to be set up in consultation with the High Court to ensure

speedy disposal.

CHAPTER 7

IDENTIFICATION OF BENEFICIARIES

1.1 A critical issue which has arisen in the course of the various visits by the

Committee to different States pertains to proper identification of BPL

beneficiaries. One of the critical factors which has resulted in the PDS not

functioning properly is what can be termed as ‘exclusion and inclusion errors’.

This issue is extremely pivotal in as much as till a rational criteria for the

identification is put in place for the identification of true beneficiaries and an

independent survey is conducted to ensure that the poorest of the poor are

infact covered under the BPL/AAY categories as the case may be, all other

measures being suggested by this Committee may be defeated as a faulty

beneficiary list would continue to erode the effectiveness of the system.

1.2 The subject of identification is being discussed in the State report on Orissa

although its relevance would be felt in every State report being submitted by

the Committee.

1.3 In Orissa the identification of BPL families is yet not completed and it was

observed that many people who are below poverty line have been excluded

from TPDS benefits.

1.4 The State of Orissa enacted Orissa PDS (Control) Order 2008 which provides

for the identification and review of beneficiaries. (Clause 21)

1.5 Clause 21 Orissa PDS ( Control) Order, 2008

A. Sub-Clause 1 provides that Identification of Beneficiaries under BPL, AAY and

Annapurna Scheme shall be made in accordance with the guidelines issued by

the Government.

B. Sub-Clause 2 requires a periodic review of Beneficiary List. The Gram Sabha in

Rural areas and Urban Local Bodies in Urban areas are required to review the

lists of Below Poverty Line, Antodaya Anna Yojana and Annapurna beneficiaries

every year for the purpose of deletion of ineligible families, addition of eligible

but left out families and elimination of bogus cards.

C. When the Committee held deliberations with the officers of the State of Orissa,

its Principal Secretary was specifically asked if the State Government had

formulated any guidelines for the purposes of identification of families living

below the Poverty Line (BPL), including the ANTODYA families as envisaged in

Para 1 of the Annexure to the PDS Control Order, 2001. He replied that no

such criteria had been formulated. He further stated on being asked if the State

Government had been getting the list of BPL and Antodaya families reviewed

every year for the purposes of deletion of ineligible families and inclusion of

eligible families as required in Para 2 of the Annexure to the PDS Control Order,

it was stated that no such review was done.

D. It was also revealed that the State Government had not prescribed any

Proforma to be filled on behalf of the head of the family while under taking the

exercise of identification of BPL families as required in Para 3 of the Annexure

to the PDS Control Order, 2001.

1.6 The Adverse aspects of the identification and how it drastically

impacts food Security

A. The surprise visit to a remote village Chamunda in the District Sambhalpur

revealed several lacunae. The inaccessible hilly terrain and dense forests has

lead to lack of development. There were several grievances amongst tribal and

poor population in the area. The Committee observed that most of the genuine

persons do not possess any card. There are many families in the village who

are very poor and living in very bad state having nothing to eat. This again

leads to the inevitable inference that exclusion/inclusion errors are one of the

major maladies afflicting the PDS.

B. Further in Kalahandi District, several lacunae on account of identification were

apparent. The real problem in this area was in respect of identification. The last

survey for the identification of BPL which has been accepted by the

Government was done in the year 1997.

C. The Committee was informed that because no survey had been conducted in

the area for many years, districts like Bolangir which are backward show 60 %

population as BPL where as other districts which are more advanced and

developed show 80% of their population as BPL. This itself shows that issue of

wrong identification is a serious problem in the context of food security.

D. It was therefore noticed that the process of identification in the State which is a

critical element for the success of the PDS was in total disarray. This led the

Committee to delve in some depth into the issues concerning identification of

beneficiaries which are detailed herein below.

II. IDENTIFICATION OF BPL FAMILIES

2.1 Background

A. In June 1997, The Government of India launched the Targeted Public

Distribution System (TPDS) with focus on the poor. Under the TPDS, States are

required to formulate and implement foolproof arrangements for identification

of the poor for delivery of foodgrains and for its distribution in a transparent

and accountable manner at the FPS level.

B. The Scheme, when introduced was intended to benefit about 6 crore poor

families for whom a quantity of about 72 lakh tones of foodgrains was

earmarked annually.

C. To work out the population below the poverty line under the TPDS, there was

a general consensus at the Food Ministers’ conference held in August 1996, for

adopting the methodology used by the Expert Group set up by the Planning

commission under the Chairman Ship of Late Prof. Lakadawala. Thus, the

identification of the poor under the scheme is done by the States as per State-

wise poverty estimates of the Planning Commission for 1993-94 based on the

methodology of the Expert Group on estimation of proportion and number of

poor chaired by Late Prof Lakadawala.

D. The number of BPL families has been increased w.e.f 1.12.2000 by shifting the

base to the population projections of the Registrar General as on 1.3.2000

instead of the earlier population projections of 1995. With this increase the

total number of BPL families is 652.03 lakhs as against 596.23 lakhs families

originally estimated when TPDS was introduced in June 1997.

E. The Antyodaya Anna yojna (AAY) was launched in December 2000 for the

estimated one crore poorest of the poor families among the BPL households.

Later it has been expanded thrice to cover additional fifty lakh families every

time. By December 2007, 2.43 lakh AAY families have been identified and

ration cards issued to them. The Present monthly allocation of foodgrains

under AAY is around 8.49 lakh tones per month as on December, 2007.

F. The scale of issue under APL, BPL and AAY has been revised to 35 kg.per

family per month with effect from 1.4.2002 with a view to enhancing the food

security at household level and liquidating surplus stocks of foodgrains in the

Central Pool.

2.2 Annexe to the Public Distribution System Control Order, 2001

A. Identification of families living below the poverty line:

(1) State Governments shall formulate suitable guidelines for the purpose of

identification of families living Below the Poverty Line (BPL), including

the Antyodaya families, as per the estimates adopted by the Central

Government. Care will be taken to ensure that the families so identified

are really the poorest. The exercise of identification of BPL and

Antyodaya families, wherever it has not been done already, shall be

completed within three months of the issue of this Order.

(2) State Governments shall get the lists of BPL and Antyodaya families

reviewed every year for the purpose of deletion of ineligible families and

inclusion of eligible families.

(3) While undertaking the exercise of identification or review of BPL and

Antyodaya families, each State Government shall prescribe a suitable

proforma to be filled up by or on behalf of the head of a family.

(4) The data provided in the prescribed proforma shall be verified by the

authority designated by the State Government for the purpose. The said

authority shall also certify the correctness of the information contained

in the proforma.

(5) Gram Sabhas shall finalise the list of beneficiaries belonging to BPL and

Antyodaya categories drawn up by the designated authority in respect of

the area under their respective jurisdictions.

(6) Where there are no Gram Sabhas, the local representative bodies shall

finalise the list of beneficiaries belonging to BPL and Antyodaya

categories within their respective jurisdictions.

(7) The designated authority of the State Government or the local

representative bodies including Gram Sabhas and Gram Panchayats

which have been entrusted with the task of identification of

beneficiaries, shall verify and certify the information in the prescribed

proforma for BPL and Antyodaya families.

2.3 Guidelines from Ministry of Civil Supplies and Consumer Affairs (Government

of India)

A. The Ministry of Civil Supplies, Consumer Affairs and Public Distribution issued

guidelines for the implementation of the TPDS to all states and Union

Territories . The said guidelines also provides for identification of Population

Below Poverty Line.

B. Guidelines in the year 1997

1. To work out the Population Below Poverty line BPL it is proposed to

adopt the provisional estimates arrived at by the Planning Commission

for the year 1993-94 adopting the methodology of “ Expert Group on

estimation of proportion and number of poor Constituted by the

Planning Commission under the Chairman ship of Late Prof. Lakadawala

(Expert Group). According to the official methodology so far adopted,

the number and percentage of Below Poverty Line population for 1993-

94 works out to 14.98crores persons and 16.82% respectively. As per

the Expert group methodology this worked out to 32.03 crores and

35.97%. The Expert Group methodology according to the Deputy

Chairman, Planning Commission gives “ poverty estimates closest to the

ground reality” and as such it is proposed to adopt them for the

Targeted PDS.

2. While these estimates give the number of persons and percentage of

BPL population at State Level, identification at the micro level of the

population Below Poverty Line can be done as indicated below:

i. The quinquennial surveys made by the Ministry of Rural Areas and

Employment for implementation of IRDP etc on household living Below

Poverty Line can be a basis. However, the overall number identified

should be limited within the population Below Poverty Line as fixed by

the Union Planning Commission adopting the methodology of Prof.

Lakdawala’s Expert group.

ii. Gram Panchayats and Gram Sabhas should be involved in the initial

identification of eligible families.

iii. Final identification should be made after verification of Doubtful cases.

iv. As regards urban population, slum dwellers will generally qualify for

the BPL. Applications, if any, received from non-slum areas should be

verified to identify eligible beneficiaries.

v. The thrust will be to include only the really poor and vulnerable

sections of the society such as landless agricultural labours, marginal

farmers, rural artisans/craftsmen such as potters, tappers, weavers,

blacksmiths, carpenters, etc. in rural areas and slum dwellers and

persons earning their livelihood on a daily basis in the informal sector

like porters, coolies, rickshaw pullers and hand-cart pullers, fruit and

flower sellers on the payment etc.., in urban areas. The above criteria is

indicated only by way of illustration and is in no way an exhaustive list

of those who could be brought within the ambit of the Below Poverty

Line. The total number identified, however, should be within the limits of

BPL population indicated by the Planning Commission.

2.4 BPL census in India by MoRD

A. Ministry of Rural Development, GOI (MoRD) conducts BPL census in all the

rural areas of the country in the beginning of each Five Year Plan, through the

State Governments/ UT administrations fro identification of persons living

below the poverty line for targeting them under the Programmes of the

Ministry.

B. BPL census 1992 (8th Plan 1992-97):. In the BPL Census conducted by

MoRD during 1992, income was used for defining BPL households in contrast to

the expenditure route adopted by the Planning Commission for estimation of

Poverty. The census used self-reported household incomes to identify BPL

households. However, given the difficulties of measuring income, particularly

when incomes come largely from self-employment in agriculture, the self-

reported income approach was abandoned in the 1997 BPL census.

C. BPL census 1997 (9th Plan 1997-2000): MoRD conducted 1997 Census

taking the view that poverty line should be estimated in terms of the

Expenditure of the households. The basic criteria defining a BPL household was

the monthly per capita expenditure of the household. If the per capita

household expenditure was less than the poverty line (the cut off limit of

income adopted by the Planning Commission), the household was defined as

poor. The reference period or recall adopted was the last 30 day’s. Such

households were considered to be poor and eligible for assistance during the

Ninth plan provided that the other basic conditions laid down n the guidelines

were met.

D. The BPL census schedule has two parts. Part A and Part B. In Part A a set of

five questions were asked of each and every household in the village for quick

assessment of the status of household .

(i) whether operated size of land was more than two hectares;

(ii) whether owned a ‘pucca house’ as defined in the Population Census;

(iii) whether annual income was more than Rs. 20,000;

(iv) whether owned any of the following consumer durables: television,

refrigerator, ceiling fan, motor cycle/scooter and three wheelers; and,

(v) whether owned farm equipment such as tractor, power-tiller, or

combined thresher/harvesters

E. If households answered in the affirmative to any one of the five questions,

they were declared to be visibly non-poor. This was done to differentiate the

“visibly poor” from the “visibly non-poor” households in the village relatively

quickly and in an inexpensive manner.

F. In the case of those households that do not fulfill even one of the five criteria

laid down in Part A, would the surveyor proceed to gather information in Part B

of the Schedule covering sex , age, physical disability, educational status,

social Group, religion, occupation type of housing ( ownership) , etc.

2.5 The methodology of 1997 Census faced following Criticism:-

1. The exclusion criteria adopted for excluding visibly non-poor was not

appropriate, as possession of even a ceiling fan would categorize a

family as non-poor.

2. Non-availability of official poverty lines for all states/UTs; Estimates of

poverty lines were available only for 17 States and the estimate of

poverty line for the nearest State was applied for the remaining

States/UTs. This has reportedly been unfavourable to the States for

which poverty lines were not estimated separately.

3. Uniform criteria were adopted for all the rural areas throughout the

country, without allowing for inter-State variations particularly in respect

of hilly and remote areas.

4. Not allowing new households to be declared poor in the interim period

before the next survey is instituted. There was no provision for adding

to the BPL list, after finalization , by way of inclusion of persons who

have subsequently become poor.

2.6 BPL Census 2002 (10th Plan 2002-2007):-

A. The BPL Census 2002 was based on methodology of score based ranking or

rural households, for which 13 socio-economic parameters were used. The

state governments were directed to finalize survey by 31/3/2003.

B. As per the guidelines for the BPL Census 2002, whereas estimation of poverty

helped to assess the magnitude of poverty, identification of households below

BPL was necessary for targeting them under various poverty alleviation

programs. The improved design for the BPL census 2002 adopted a normative

approach for identification of the rural poor with score-based ranking of each

household based on quality of life, (not income or expenditure approach) which

included both economic and social indicators. The schedule for canvassing

information had 13 cardinal indicators for which scores had to be assigned on a

relative scale together with some non-scorable variables used for categorizing

households into very poor, poor, not so poor and non poor. For the BPL census

2002, the NSSO survey mentioned categorically that the total number of BPL

persons identified were not to exceed by more than 10% of the number of BPL

persons estimated by the Planning Commission for India’s rural sector in the

year 1999-2000.

C. The following States and UTs have finalized the BPL list based on the BPL

Census 2002

S. No. Name of the State S. No. Name of theState

1 Andhra Pradesh 12 Mizoram2 Arunachal Pradesh 13 Nagaland3 Assam 14 Punjab4 Chhattisgarh 15 Rajasthan5 Goa 16 Tamil Nadu

6 Gujarat 17 Uttar Pradesh7 Himachal Pradesh 18 Uttarakhand8 Jharkhand 19 West Bengal9 Karnataka 20 A & N Island

10 Madhya Pradesh

D. Commissioners of the Supreme Court [W P (Civil) No. 196 of 2001] critically

analyzed the 13 socio-economic indicators used for 2002 BPL Census

conducted by Ministry of Rural Development for identification of BPL (

beneficiaries) of its own schemes. The criteria for identifying BPL the house

hold should be of a directly verifiable and observable nature. Most of the 13

criteria, on the other hand, are not easily or clearly verifiable.

1. Land Holdings: If a land holdings-related question is to be used as a

question in BPL Census 2009 it should perhaps simply ask whether

the person has any land at all or not, i.e. whether the person is

landless or not. Such a question would obviate the difficulty of

investgating the issues of land quality and that of sources of

irrigation. The question of irrigation, non-irrigation or irrigation by

Private/ Public entity seems vague and unreasonable.

2. Type of House: Census criteria used by the Registrar General of

India enable us to clearly distinguish between a kutcha, semi-pucca

and pucca house. This question is reasonably clear cut.

3. Availability of Clothing: This question investigates whether a person

owns less than two pair of closing at a minimum, increasing up to

“more than 10 pair”. This question is flawed for several reasons.

First, in colder climates more clothing is required than in warmer

climates. Second, it is unclear from the question whether under

garments are counted among clothing or not. Answers to such

question are bound to lead to very unclear outcomes.

4. Food Security: This question is comparable to the NSS question on

“whether a family gets two square meals a day”. Even if all the

members of a household eat two meals per day there may be

serious problems with the quality of the meal, as reflected in the

calorie intake and protein intake per meal. Moreover, there is no way

the answer to the question will reveal how the food is being shared

between the man in the household on the one hand, and the women

& girls on the other.

5. Sanitation : This is a perverse question and encourages totally

perverse behavior. This kind of question would discourage families

from actually investing in a private latrine.

6. Ownership of Consumer Durables: possession of a TV requires a

much higher purchasing power than possession of an electric fan or

radio. Therefore simply counting, as the BPL Census questionnaire

does, whether the household has any such item or “all items” is not a

meaningful exercise. However, the expert group can consider using

possession of consumer durables (for example, a motorcycle, colour

TV, Fridge) as exclusion criterion, as a criterion for excluding a house

hold from the BPL category.

7. Literacy status of highest literate: The lowest scoring category under

this criterion is “Illiterate” while the highest scoring category “Post

Graduate”. There is slight risk that this question will not yield very

meaningful answers for many reasons. First, even with a post

graduate degree the holder of the degree may still be unemployed.

An unemployed person may still be thus a head of poor house hold.

Second, what means will the investigator use to interrogate and then

confirm the educational status of the highest literate is also not clear.

8. Status of House hold labour: as formulated in the questionnaire, this

question does not address the problems that in most rural house

hold women and children work along side the adult male on the

family farm. In any case, it is unclear how the investigator will

ascertain that only the adult male in the house hold is working, while

the woman and children are not.

9. Means of livelihood: This question asks whether means of livelihood

is casual labour (zero points), or subsistence cultivation (1) or artisan

(2), or salary (3), or others (4). This question simply fails to

understand that the poor always have multiple sources of livelihood,

and members of a household are likely to be engaged in different

kinds of work, and even the same individual may engage in different

kinds of work and derive income from those sources at different

times of the year. In other word it is impossible for house hold,

while answering the question, to merely tick one of the five listed

answers to the question.

10. Status of Children: This question investigates whether the children

are “not going to school and working”, or “going to school and

working”, or “going to school and not working”. The answer to this

question would be either perverse or not meaningful if it encourages

parents to force the child to not go to school and only work, simply

because it would entitle them to zero points and hence increase the

chances of the household being counted as BPL.

11. Type of Indebtedness: This question, of all questions among the 13

criteria, shows the least understanding of ground realities of the rural

indebtedness. The poorest people lack assets, which can be used as

collateral, and hence are unable to borrow. But this question gives

the highest score “4” to the household that is not indebted. In

another words, the poorest house hold might end up getting four

points and thus rule itself out of the BPL category.

12. Reason for Migration: This question gives the lowest score to the

house hold which has a member migrating for casual work, and gives

the score of 3 to non-migrants, and score of 4 to those migrating for

reasons other than casual work. Quite of apart from the fact that

this question does not distinguish households from which only one

member has migrated from those from which more than one

member might have migrated, it is entirely unclear why the reason

for migration should merit different scores for the purposes of

determining whether a family is BPL or not. Not surprisingly, the

West Bengal Govt. excluded the criteria in its rural survey.

13. Preference of Assistance: This question is also among the most

meaningless among the all criteria. It does not attempt to establish

the current status of a household in respect of a particular tangible

attribute of well-being, but rather interrogates whether the

household would like to receive assistance in the form of wage

employment (zero) or self-employment (1) or training (2) or

housing (3), or loan more than rupees one lakh (4). Given that such

a question would yield answers that are less than meaningful when

comparing across categories of answers, the West Bengal

Government eliminated this criterion from its rural survey.

2.7 Comments, Suggestions and Criticism of the 2002 criteria by the Programme

Evaluation Organisation (PEO) of the Planning Commission:-

A. The report of the (PEO) dated March 2005 suggested following things:-

1. It would be appropriate to do away with the methodology of identifying poor

families on the basis of Income/expenditure criterion, as identifying sources of

income at the household level and measuring them with precision on such a

large scare are fraught with many problems.

2. The report further suggested that criteria for BPL identification should include

only easily observable qualitative criteria relating to occupations, assets or any

other qualitative criteria relating to occupations, assets or any other qualitative

indicators of economic insecurity.

3. The proportion of population with food insecurity need not necessarily be

identified with Planning Commission’s poverty ratio. Analysing the survey data

of NSSO and Planning commission’s poverty estimate tends to suggest that the

size of the population with food insecurity will be larger than the size indicated

by Planning Commission for many States. In some states like Haryana,

Himachal Pradesh and Punjab, it would be lower, though.

4. Those families who do not have a secure source of regular income, should be

netted into BPL category irrespective of their current income levels (i.e. those

with economic insecurity). As many daily wage earning families have been left

out of BPL category because their current income levels are above the Planning

commission’s Poverty Line.

5. The set of assets and their relative weights need to be specified with utmost

care and region-wise. The criterion should be widely pre-tested too.

6. Active and effective involvement of the PRIs should be built into the process of

identification of the poor.

7. Since the BPL identification survey is so critical to the success of TPDS, it is

appropriate that this be carried out in all the States, through a collaborative

endeavour with reputed agencies such as the NSSO, NCAER and State level

research / survey institutions. The database so created may be computerized

for effective monitoring and regular updating.

B. Kinds of Identification Errors and their Implications as identified by the PEO

PEO report identified 5 types of errors of identification

1. Exclusion Errors ( EE)

2. Inclusion Errors (IE)

3. Double Counting errors (DE) i.e. the proportion excess

of ration cards over the number of households.

4. Missing Households Error (ME) i.e the proportion of

households who have been left out of the TPDS;

5. Shadow ownership Error (SE) i.e the proportion of BPL cards

being held by person other than the original owners.

C. It is observed in the Report citing Cornia and Stewart (1993), the exclusion

errors (EE) are indeed very high for most states in the TPDS regime. However,

in the States of Andhra Pradesh and Tamil Nadu, the EE is low and IE is high.

The EE in Karnataka could also have been low, had there not been a large

scale shadow ownership of BPL cards. The three Southern States exhibit a

different pattern from the rest because they have historically followed a policy

of extending the benefit of subsidized food grain to a larger section of the

population. In fact, in Karnataka too, the exclusion errors arising out of APL-

BPL identification errors is as low as in Andra Pradesh. However, when the

exclusion of BPL households due to shadow ownership errors is included, the

EE for Karnataka assumes a very high value implying a major weakness in the

implementation of TPDS in the State.

2.8 Inclusion Errors - Three States viz, Andra Pradesh, Karnataka and Tamil Nadu

have exhibited very high inclusion errors. High inclusion error implies diversion

of PDS benefits to unintended beneficiaries and hence, raises cost of delivery

and burden of budgetary food subsidies.

2.9 Double Counting Errors - Gujarat Haryana, Karnataka, Kerala, Madhya Pradesh,

Rajasthan, Tamil Nadu and U.P have issued a large number of excess ration

cards over the number of households.

2.10 Missing Households Error- Assam, Bihar, Himachal Pradesh, Punjab and west

Bengal have exhibited high ME. Since no cards have been issued to these

households. M.E implies welfare loss to the extent the BPL households have

been left out of purview of TPDS.

2.11 Kerala

A. Kerala experimented with nine non-monetary indicators of poverty under Urban

Basic Services for the Poor (UBSP) in Alleppey Municipality in early 90’s and

extended the same to Rural areas of Malappuram in 1995. These nine

indicators also known as risk indicators included kutcha house, no access to

safe drinking water, no sanitary latrines, illiterate adults in the family, not

having more than one earning member, not getting two square meals a day,

children below 5 years in the family, alcoholic or drug addict in the family and

family belonging to Scheduled Caste or Scheduled Tribe. Any family which

attracted 4 or more indicators was deemed to be at risk and included in the

BPL category.

B. Keeping in view the simplicity and community acceptance of the above

methodology, it was applied to Kudumbashree programme of Kerala.

Advantages of this methodology included – easy to understand, accepted by

the community itself, reduced patronage and arbitrariness, facilitated ranking

based on severity of poverty, enabled monitoring of progress, ensured

ownership of data, facilitated micro-level planning.

III. MoRD Expert Group for 2008 BPL Census

On 12th August 2008 Ministry of Rural Development constituted an Expert

Group under the Chairman ship of M.Shankar to advise the Ministry of Rural

Development on the methodology for conducting the Below Poverty Line

Census for 11th Five Year Plan. The expert group consists of 16 other members

including non official members.

For the purposes of completeness the creation and expansion of the AAY

category is briefly described below,

IV. ANTODAYA

4.1 AAY is a step in the direction of making TPDS aim at reducing hunger among

the poorest segments of the BPL population. A NSS Exercise points towards the

fact that about 5% of the total population in the country sleeps without two

square meals a day. In order to make TPDS more focused and targeted

towards this category of population, the “Antodaya Anna Yojana”(AAY).

4.2 Identification of the Antodaya Families and issuing of distinctive ration cards to

these families is the responsibility of the Concerned State governments.

Detailed guidelines were issued to the States/UTs for identification of the

Antyodaya families under the AAY and additional Antyodaya families under the

expanded AAY. Allocation of foodgrains under the scheme is being released to

the States/ UTs on the basis of issue of distinctive AAY Ration Cards to the

identified Antyodaya families. The present monthly allocation of foodgrains

under AAY is around 8.49 lakh tones per month as on December, 2007.

4.3 Presently, foodgrains are supplied at a rate Rs 2/- per kg for wheat and Rs. 3/-

per kg. for rice. The scale of issue that was initially 25kg. per family per month

has been increased to 35kg. per family per month with effect from 1st April

2002.

4.4 First Expansion of AAY

The AAY scheme has been expanded in 2003-2004 by adding another 50 lakh

BPL households headed by widows or terminally ill persons or disabled persons

or persons aged 60 years or more with no assured means of subsistence or

societal support. With that increase 1.5crores(i.e. 23% of BPL ) families have

been covered under the AAY.

4.5 Second Expansion of AAY

From 3rd August 2004 AAY has been further expanded by another 50 lakh

BPL families. The guidelines stipulated the following criteria:-

A. Landless agriculture labourers, marginal farmers, rural artisans/craftsmen such

as potters, tanners, weavers, blacksmiths, carpenters, slum dwellers and

persons earning their livelihood on daily basis in the informal sector like

porters, collies, rickshaw

B. pullers, handcart pullers, fruit and flower sellers, handcart pullers, fruit and

flower sellers, snake charmers, rag pickers, cobblers, destitutes and other

similar categories irrespective of rural or urban areas.

C. Households headed by widows or terminally ill persons or disabled persons or

persons aged 60 years or more with now assured means of subsistence or

societal support.

D. Widows or terminally ill persons or disabled persons or persons aged 60 years

or more or single women or single men with no family or societal support or

assured means of subsistence.

E. All primitive tribal households

With this increase, the number of AAY families has been increased to 2 crores

(i.e. 30.66% of BPL families)

4.6 Third Expansion of AAY

It was again announced in the Union Budget 2005-2006 , that AAY is to be

further expanded to Cover another 50 lakh BPL households thus increasing its

overage to 2.5 crore households. (i.e. 38% of BPL).

V. OBSERVATION

5.1 The Committee recognizes the fact that it is not an expert body to prescribe

identification guidelines and is therefore not venturing into any such task.

However, the Committee recognizing the critical nature and importance of

identification and the fact that exclusion and inclusion error are a very serious

malady afflicting the PDS, recommends that the expert body constituted by the

MORD in terms of the order of the Supreme Court dated 14 February 2006,

give its recommendations in a time bound manner and each State within a time

frame fixed by the Hon’ble Court prescribe transparent criteria of its own for

identification keeping in mind local conditions.

5.2 Once such guidelines are in place, as suggested in the Delhi report, a time-

bound door-to-door drive to identify genuine beneficiaries and eliminate

wrongful exclusions and bogus cards which is to be conducted by a reputed

independent agency. The agency will also simultaneously conduct a consumer

satisfaction survey, which will enable the department to bring in necessary

improvements to the system.

5.3 There would be an amnesty period of four weeks where persons holding bogus

cards could surrender them without liability. However on the expiry of this

period the above mentioned intensive door to door verification would be

conducted and during that verification if any bogus card is detected both the

holder as well as the officers who had recommended the bogus card would be

prosecuted under Section 7 and other Sections of the Essential Commodities

Act, 1955 without exception. The Officers can be proceeded against

departmentally and severely punished. Widest possible publicity must be given

to the amnesty scheme.

5.4 There is a need to revisit income criterion prescribed for the BPL category. The

government/MORD committee may also consider using consumption criteria

that is to say calorie intake per person per day as an indicator of poverty as the

minimal objective to be achieved by TPDS is to ensure that every poor person

gets two square meals a day. This is recommended in as much as a purely

income based criteria may in certain circumstances be misleading in terms of

actual determination of persons below the poverty line. However the estimation

of poverty should not be made on a criteria which is less than the minimum

wage fixed by the state for agricultural labourers or the wage fixed by the

Central Government under Section 6 of the NREG Act 2005. It may not be out

of place to point out that several states the minimum wage for agricultural

labour is in the range of Rs 100 and even the NSSO in its estimate fixes the

estimate of expenditure at Rs 20 per capita per day which works out to Rs 100

per day per family (a family is taken as 5 members).

5.5 The above mentioned recommendations are required to be put in place on an

urgent basis in the State of Orissa in as much as no BPL survey has been

conducted since 1997. In the absence of a survey in spite of a specific mandate

under the PDS Control Order, has resulted in large exclusion errors leaving

several people who are in the need for food security out of the PDS. This is

especially seen in the poorest districts of Orissa called the KBK district.

5.6 The abovementioned Committee set up by the MORD is essentially to devise a

criteria for identifying the correct beneficiary in a rural setting. For the urban

scenario however a different criteria will have to be devised. The committee in

its report on Delhi had suggested that the basis for determination as to

whether a person is BPL or not should be based on the minimum wage payable

to an unskilled workman in the area i.e. to say if the person is earning below

this amount he would be deemed to be below the poverty Line.

5.7 The Committee is also reiterating its suggestion/recommendation made in the

Delhi report that the concept of APL be abolished. Reference may be made to

the said report for a detailed analysis of the said recommendation and it may

be added that the committee in its visit state after state has found that the

Concept of APL is serving no useful purpose for food security but is instead

only a diversion tool. It may be added here that certain states for e.g.

Karnataka which is infact recognizing the same by giving the food grain under

this category to persons who are BPL but cannot get BPL cards owing to the

cap fixed by the planning commission under a category called EBPL (this aspect

is elaborated in the Karnataka state report).

5.8 It is however relevant to point out that State like Karnataka which have

adopted a system like EBPL must ensure that the BPL Quota is not expanded to

unrealistic levels for political considerations. In this context, it may be noticed

that the Central Government has warned State that it would cut Rice supply

under APL if the no. of BPL beneficiaries is not brought down.

CHAPTER 8

COMPUTERISATION

1.1 In the State of Orissa, the computerization of PDS activities is almost non-

existent. As a sample, the District of Angul was studied in order to understand

the possibilities of introducing a automated end to end PDS system in the

State. The District of Angul is divided into 8 blocks, namely,

i. Angul block

ii. Athamallik block

iii. Banarpal block

iv. Chhendipada block

v. Kaniha block

vi. Kishorenagar block

vii. Pallhara block

viii. Talcher block

1.2 Angul block comprises of 32 gram panchahyat’s (GP’s) which in turn cover 219

villages. The District NIC centre is situated at Angul block and is equipped with

VSAT facility. It was further revealed that all Districts in Orissa are equipped

with VSAT facility and broad band connectivity has also been provided up to

the block level, provided by BSNL. For eg, in Angul District the farthest village

from the block head quarters at Angul is Tikarpada which is at a distance of 70

kms from Angul and is well connected by road. VSAT connectivity at the block

level was not satisfactory as the speed is slow. Broadband was however

working well.

1.3 The Committee was informed that in order to provide connectivity through

optical fiber up to the panchayat level a project called the OSWAN (Orissa State

Wide Area Network) is being implemented and the tender has been awarded to

SPANCO Delhi.

1.4 Efforts at automation have however been taken by the State in respect of

Land records and public access to such records have also been provided on the

internet at www.bhulekh.ori.nic.in. The system seems to be working well at the

Block Level and therefore a similar attempt at automating the PDS is not

difficult.

1.5 A detailed discussion on Compterizartion is being provided in a separate report

being submitted to the Hon’ble Supreme Court and the inferences there in may

be read as part and parcel of this report.

II. OBSERVATIONS:-

A. That broad band connectivity is available till the block level at present coupled

with the fact that connectivity through optic fiber is likely to link the panchayats

in the not too distant future is extremely encouraging as connectivity is one of

the major areas of concern when one is considering the implementation of the

smart card system coupled with the PoS device.

B. As has been highlighted earlier in this report, the primary and the most

essential step in the attempt to cure the ills of exclusion and inclusion errors

which plague the prevailing system is the carrying out of an independent and

comprehensive survey of the BPL population. The fact that land records have

been completely digitized and posted on the internet in Orissa, will make it

possible to cross-verify the possible land holdings in the name of each existing

BPL card holder and thereby eliminate people with substantial holdings who

although not falling within the BPL category, might still be holding BPL cards

and drawing ration using the same. This will cure the problem of inclusion

errors thereby plugging leakages.

C. The highlight of the study was that the possibilities of computerization exist at

the block level with broad band connectivity thereby making the online system

with or without smart cards a possibility. Further as indicated above the

existing land records computerization will also help in eliminating bogus

/ineligible card holders in the eventual survey that the committee would

recommend. Schemes like the NREG are already being implemented through a

web based system of uploading information were reviewed both in the Angul

Block as well as in the Talcher block offices. It would therefore not be difficult

to implement a dedicated PDS online-fully automated system in these areas.

CHAPTER 9

RECOMMENDATIONS

1. There is unholy nexus between the transporters, Storage agents, Fair Price

Shop owners, Officials of OSCSC and the Department of Food and Civil

Supply in large scale diversion of PDS food grains meant for the poor. PDS

is inefficient and corrupt. To stem the rot, the use of Information

Communication Technology (ICT) appears to be the only solution. By use

of modern technology, there would be less human intervention and

transparency will be brought in the system and in allotment of food stocks

to be sold at the shops.

2. For a FPS to earn a marginal profit there has to be minimum 500 cards.

Where the cards are less than that, FPS runs on loss. Study of the

Committee shows that merely increasing the commission will not result in

making the FPS a profitable proposition. It is a well documented fact that

the FPS owner is in business for the purpose of diversion or for political

influence or other influence that he can wield by being a FPS retailer. The

FPS dealer also gets a statuts of sorts in the locality. Any amount of

increase in commission will not stem the rot. FPS owners are deliberately

not ready to sell groceries other than PDS food grains. The reason is not far

to seek. By opening shops for two or three days and selling PDS food grain

in connivance with Government/Corporation officials is in itself a lucrative

and effortless proposition for him. When there is no profit or there is loss as

complained by FPS owner, the question that arises is then why is he

sticking to the shop. The concept of a stand alone FPS should be changed.

This way he can earn profit and shop will remain open throughout the

month. Moreover attached numbers of cards mean a set number of

customers in any case who may buy other grocery items from that shop.

3. Retail Licenses should be given to Kirana/Grocery shop owners, Women

Self-help groups having a proven track record and Panchayats. Since

running an FPS is not a profitable proposition, any scheme of allotting the

shop to unemployed graduates or the like has no meaning. It must be

understood that these shops have not to be licensed for the benefit of the

shopkeepers but for the benefit of the consumers.

4. There must be a clear demarcation of responsibilities amongst the different

entities involved in the PDS. No entity must have an overlapping function.

The prevailing system whereby all the entities involved in the PDS have

interwoven responsibilities must be immediately done away with. The

responsibility of identification of beneficiaries, issue of ration cards and the

appointment of FPS has to be with the Food and Civil supply Department.

Role of distribution would be the responsibility of the Corporation. Various

committees namely the Retail Level Advisory Committee, Taluk/Block Level

Advisory Committee, District level Advisory Committee and State Level

Advisory Committee should only deal with vigilance aspect.

5. The existing system of giving the abovementioned committees a role in

appointments of dealers which has resulted in a direct conflict of interest

must be done away with immediately. The Government should frame/

amend rules regarding allotment of license in a transparent manner. Any

vacancy for the FPS should be properly advertised. The applications

received can be scrutinized by the officials to ensure that they comply with

the eligibility conditions. Names of the applicants can be made public and

objections invited from the public bodies responsible for vigilance. Spot

verification can be done by the officials of the department. There can be a

committee to take final decisions.

6. PDS operation should be based on the principle of zero tolerance. Any

infraction of the rules and regulations or instructions should invite strict

action not only against the FPS owner but also the concerned official. It is

the Inspector or his higher officers who should be held accountable.

Unfortunately, there is no accountability and there is no monitoring. If a

bogus card is found not only the FPS owner but the Inspector and other

concerned officials as well should be prosecuted for offences under the

Essential Commodities Act, 1955, Prevention of Corruption Act, 1988 and

also Indian Penal Code. It is a known fact that bogus cards are in

abundance and it is another source of diversion of PDS food-grains. The

State Government must devise a scheme to eliminate bogus cards.

7. The system of storage agents (storage agency) is one of the main sources

of diversion of PDS food-grains. This system should end forthwith.

State/Corporation has adequate storage facilities and sufficient resources to

man the same. Some of the godowns which are owned by the Corporation

have been let out to storage agents. Panchayat Raj Department has 6000

godowns of 50 MT capacity and 300 godowns of 1000 MT capacity.

Panchayat Raj Department and also the Urban Development Department

have offered to construct more godowns, if so required by the Corporation.

8. Chairman of the Corporation should not be a political/private person. His

appointment should be transparent. Corporation should be run strictly on a

professional basis. The earlier practice of appointing the Secretary of the

Food and Supplies Department was better and should be restored.

9. A Complaint Redressal mechanism should be set up, with a twenty four

hour Help line as suggested in report on Delhi. A post of

Ombudsman/Regulator should also be created for the purpose of ensuring

the transparent functioning of the system.

10. PDS food-grains should be transported only in tamper-proof bags like HDPE

bags instead of jute bags and PDS commodities should be supplied to the

beneficiary in small packages of 5 & 10 kgs.

11. Mobile vans for distribution of PDS food grain have proved their utility.

Number of mobile vans be increased.

12. As of today, there is no enforcement worth the name and no vigilance.

Vigilance Committees are non functional. Vigilance Committees must meet

on a fixed venue on a particular date and time, e.g. the District level

Vigilance Committee should meet in the Office of the District Collector every

second month on the second Friday at 4.00 P.M.

13. The State Government should fix the responsibly of the officials of the

administrative machinery to convene the meetings and ensure the presence

of the members. Rules can provide that any member who does not attend

two consecutive meetings would be replaced. The Secretary of the

Department of Food and Supply should be responsible for convening the

meetings at the State level, the District Magistrate should be responsible for

the District level Committee, Block Development Officer should be

responsible for the block and FPS level committees.

14. Since one of the reasons for the failure of the system has been wrong

identification of beneficiaries, urgent steps need to be taken for proper

identification so as to ensure there are no inclusion or exclusion errors. It

may not be out of place to mention that the State Government has not

furnished a BPL list based on the 2002 criteria.

15. There is a need to revisit income criterion prescribed for the BPL category.

The government/MORD committee may also consider using consumption

criteria that is to say calorie intake per person per day as an indicator of

poverty as the minimal objective to be achieved by TPDS is to ensure that

every poor person gets two square meals a day. This is recommended in as

much as a purely income based criteria may in certain circumstances be

misleading in terms of actual determination of persons below the poverty

line. However the estimation of poverty should not be made on criteria

which are less than the minimum wage fixed by the state for agricultural

labourers or the wage fixed by the Central Government under Section 6 of

the NREG Act 2005. It may not be out of place to point out that several

states the minimum wage for agricultural labour is in the range of Rs 100

and even the NSSO in its estimate fixes the estimate of expenditure at Rs

20 per capita per day which works out to Rs 100 per day per family (a

family is taken as 5 members).

16. The abovementioned Committee set up by the MORD is essentially to

devise criteria for identifying the correct beneficiary in a rural setting. For

the urban scenario however a different criteria will have to be devised. The

committee in its report on Delhi had suggested that the basis for

determination as to whether a person is BPL or not should be based on the

minimum wage payable to an unskilled workman in the area i.e. to say if

the person is earning below this amount he would be deemed to be below

the poverty Line. The same criteria for the State of Orissa should be

adopted for the State of Orissa.

17. The Committee is also reiterating its suggestion/recommendation made in

the Delhi report that the Concept of APL be abolished. The Committee is

aware of the fact that there is going to be a great deal of opposition from

the fair price shop dealers and other vested groups against the abolition of

the APL category. If the Court is of the view that it may not be possible or

desirable to abolish the APL category altogether, it may consider limiting the

APL category to households whose annual income is Rs. One lakh. This is

based on the fact that a class IV employee of the Central Government in

Delhi gets a consolidated salary of about Rs. 8000/- per month making it

Rs. 96,000/- annually. This category may be called “Marginally above

Poverty Line (MAPL)”. This limit may however be revised as and when

required on a rational basis by the government. Reference may be made to

the said report for a detailed analysis of the said recommendation and it

may be added that the Committee in its visit to state after State has found

that the concept of APL is serving no useful purpose for food security but is

instead only a diversion tool.

18. Since August 2008, the State has formulated a scheme of giving rice to BPL

and AAY category at the rate of Rs.2 per Kg. Government has fixed days at

which the rice should be distributed. This has increased the demand for

BPL cards. There must be careful monitoring of this scheme to ensure that

Extra BPL cards should not result in depriving the real beneficiaries who are

to be targeted under the TPDS. Similar schemes are being introduced by

various States. These schemes which seemed to be driven by political

motivation rather than any desire to ensure food security need to be

carefully monitored. Increasing the BPL population to unrealistic level is not

only a drain on the resources of the State but may also act as a serious

disincentive to hard work on part of the population of the State.

19. The Committee has given a comprehensive report on computerization and

recommends that the same be acted upon. In the report the Committee has

suggested the whole process of computerization of the Public Distribution

System which includes using electronic weighing systems and integrating

the same with automated allocation and delivery systems.