The World Bank has painted a bleak picture of the impact of the government's social security schemes and has prescribed a solution of more private participation and direct cash transfer to the poor.
The bank had analysed 11 core schemes of the Central government which constitute about 2% of the Gross Domestic Product (GDP) and said only 40% poorest were able to reap full benefits of such large investments.
"There is problem of capacity and leakages," said John Blomquist, the bank's lead economist for social protection in India.
The Planning Commission asked the bank to conduct the study in 2004 and the report comes at the time the panel is preparing approach paper for the 12th five year plan.
The report - Social Protection For A Changing India - also found poorer states such as Uttar Pradesh and Bihar were making higher allocation for the poor but benefit being reaped by the poor was lesser than the richer states such as Himachal and Punjab because of capacity constraints.
The biggest resource drainer on the government was found to be the Public Distribution System (PDS), on which one percent of the GDP is spent, with 41% of the food grains reaching the poor households on account of high leakages.
"Majority of the poorest households were not accessing PDS grains with rich taking most of it," the report said.
The variation in access to subsidized food grains was much higher in urban areas where the off-take has fallen to half because of poor delivery in a decade with a marginal increase at the national level. About nine rich people have access to PDS as compared to just one in urban areas, the report said.
About 83.3% of Indian families have a ration card but only 23.3% of them get ration from the PDS system, the bank said, while highlighting the problem with poverty estimation and BPL survey methodology.
Overall, access to the PDS food grains was found to be lowest in richer states such as Himachal Pradesh, Punjab and Uttar Pradesh whereas Tamil Nadu and Andhra Pradesh were doing better because of fiscal support provided by the state governments.
Blomquist suggested the option of cash transfer, already recommended by a committee headed by Plan Panel deputy chairperson Montek Singh Ahluwalia to the government, and said food coupons have improved food grain access in Bihar.
On the National Advisory Council recommendation against the direct cash transfer, Blomquist said the bank was only suggesting an option and was not asking the government to replace subsidized food grain with money.
The bank had special praise for Mahatma Gandhi National Rural Employment Guarantee Scheme for inclusion of deprived sections and higher coverage than other social sector schemes but said there was a need for more transparency in its implementation.
On nine other schemes, the bank said the performance was mixed with 22% to 43% of the poorest getting benefited.
To improve efficiency, the bank said the government should consolidate all social sector schemes into three different categories -- social assistance, public works and basic social security -- and provide rest of the money as direct financial aid to the state governments.
Bihar chief minister Nitish Kumar and Chhattisgarh chief minister Raman Singh have already made a similar demand.