Finance minister P Chidambaram on Wednesday called for restructuring of the public distribution system and urged state governments to ensure local taxes don’t burden exporters battered by a persistent rise in the rupee.
“We need PDS for the poor, but unless it is efficient, procures adequate quantities of foodgrains and delivers food to the poor, it could become an albatross around our neck and an opportunity for rent seekers to enrich themselves,” Chidambaram said at the National Development Council meeting.
The minister said a recent study had found that the government spends Rs 3.65 to transfer Re 1 to the poor. “About 58 per cent of the subsidised grain doesn’t reach the target group, of which a little over 36 per cent is siphoned off the supply chain… Don’t the poor deserve a better PDS? How can we sit back and watch the poor being robbed off their meagre entitlements,” he asked.
Pointing out that a well-functioning PDS is critical to maintaining price stability of food articles, he said there were flaws on both the procurement and distribution aspects of the system. For instance, some rice-producing states make minimal contributions to the central pool but draw heavily from it for their own state’s PDS. “How is this fair to states that bear a disproportionate share of the burden of procurement? How is this fair to the Centre which is expected to maintain buffer stocks and put adequate quantities into the PDS system?”
Chidambaram said exports were under some stress due to the rapid appreciation of the rupee against a weak dollar. “At present, taxes are borne by exporters. They should be rebated or refunded. I would urge the state governments to look into this carefully,” he said. He added that in recent months, the Centre has announced several relief packages with the hope that they will bring some relief to exporters. “Regardless of the exchange rate or other external circumstances, it is a universally accepted principle that taxes shall not be exported. Any state that relieves exporters of tax burden stands to gain as more export-oriented industries will locate in that state.”