Report No. 20300-IN India Improving Household Food and Nutrition Security Achievements and the Challenges Ahead (In Two Volumes) Volume 1: Main Report June 25, 2001 Rural Development Sector Unit South Asia Region Document of the World nanK CURRENCY Rs/ US$ Currency Official Unified Market 1980-81 7.89 1981-82 8.93 1982-83 9.63 1983-84 10.31 1984-85 11.89 1985-86 12.24 198647 12.79 1987-88 12.97 1988-89 14.48 1989-90 16.66 1990-91 17.95 1991-92 24.52 1992-93 26.41 30.65 1993-94 31.36 1994-95 31.40 1995-96 33.46 1996-97 35.50 1997-98 37.16 1998-99 42.00 1999-00 43.33 Dec 2000 46.75 Jan 2001 46.54 Feb 2001 46.52 Note: The Indian fiscal year runs from April 1 through March 31. Source: IMF, International Finance Statistics (IFS), line "rf'; Reserve Bank of India. a A dual exchange rate system was created in March 1992, with a free market for about 60 percent of foreign exchange transactions. The exchange rate was reunified at the beginning of March 1993 at the free market rate. Vice President Mieko Nishimizu Country Director Edwin R. Lim Sector Director Ridwan Ali Task Leader/Co-Task Leader Dina Umali-Deininger/Deepak Ahluwalia VOLUME I TABLE OF CONTENTS Page Abbreviations and Acronyms ............................................................... ix Acknowledgements ................................................................x India Country as a Glance ............................................................... xi Executive Summary ............................................................... xiii Chapter 1 Household Food and Nutrition Security in India: An Overview ........... ...............1 A. Introduction ................................................................1 B. Challenges and the Need for Action . ...............................................................2 Pervasive Food Insecurity in India ................................................................2 Malnutrition Among Children is Acute and Widespread ............................I...................3 C. Rising Social, Economic, and Fiscal Cost of Inaction ............................... ...................5 D. Food and Nutrition Security: A Conceptual Framework ...................... .......................5 E. Structure of the Report ................................................................7 Chapter 2 Food-Based Transfer and Nutrition Programs: Objectives, Mode of Intervention, and Program Costs .............................. ..................................9 A. Government of India's Food and Nutrition Strategy .9 B. Government Food and Nutrition Food-Based Transfer Programs .10 Targeted Public Distribution System .10 Antyodaya Anna Yojna .14 Anapurna Scheme.14 Price Stabilization Program and the GOI's Foodgrain Policy .14 Foodfor Work Schemes.17 National Program for Nutritional Support to Primary Education .18 Integrated Child Development Services Program .19 Other Direct Nutrition Programs .20 C. Food-Based Transfer Programs: Potential food and Nutrition Security Impact .21 D. Government Expenditures and Overall Program Costs ......................................... 22 Targeted Public Distribution System Program Costs ......................................... 23 Employment Programs ......................................... 24 Mid-Day Meals Program ......................................... 25 ICDS and Other Nutrition Programs ......................................... 25 E. Conclusion .27 Chapter 3 Assessing Program Implementation and Achievements .................. ..................... 29 A. Targeted Public Distribution Program: Does it Meet the Needs of the Poor ......... .... 29 TPDS Implementation in UP ................... ............................................ 31 B. How well did the GOI Foodgrain Stabilize Prices? ............................... ..................... 32 Over-Regulation of Private Markets ............................................................... 33 C. FCI Performance: Implications on All Food-Based Transfer Programs ...................... 35 D. Food For Work Programs ................................................................. 36 Performance in the 1990s ............................................................... 36 Implementation Effectiveness .................... ........................................... 37 Impact on Food and Nutrition Security ............................................................... 39 - ii - E. National Program of Nutritional Support to Primary Education ................................ 40 Effectiveness of Program Implementation ........................................................ 41 Impact of Mid-Day Meal Program .................. ...................................... 42 F. Integrated Child Development Services: Did it Meet its Program Objectives .............................................................. 43 Supplementary Nutrition: How Much do Beneficiaries Receive .............. ................... 44 Adoption of Desired Nutrition and Health Enhancing Caring Behavior .......... .......... 46 Inherent Weaknesses of Program Implementation ...................................................... 46 Assessing the Nutritional Impact of ICDS .............................................................. 48 G. Lack of Convergence of Programs .............................. ................................ 49 Chapter 4 Food-Based Transfer Programs: Meeting the Challenge of Improving Household Food and Nutrition Security ............................................... 51 A. Food and Nutrition Security Goals and Challenges ..................................................... 51 B. Targeted Public Distribution System .............................................................. 52 C. Reforming Foodgrain Policies for Food and Nutrition Security? ................................ 53 Integrated Foodgrain Policy Reform .............................................................. 53 Improving FCI Operational Efficiency ........... ............ ......... 55 D. Employment Schemes .............................................................. 55 E. National Program for Nutritional Support to Primary Education ................................ 56 F. Integrated Child Development Services Program ........................................................ 58 G. Decentralization and Community Ownership for Greater Effectiveness ..................... 59 H. Building Synergies Through Greater Inter-Program Coordination .60 I. Longer Run Agenda ....................... 60 References ....................... 63 LIST OF TABLES 1.1 Social Indicators in Selected Countries. 2 1.2 Per Capita Consumer Unit Consumption Indicators by Monthly Per Capita Expenditure Classes in Rural and Urban area in India, 1993/94 ........................................................................................................................... 2 1.3 Percentage of Malnourished Children (ages 1-5 years) in Rural Areas of Selected States, 1975-79 to 1996-97. 4 2.1 Food and Nutrition Safety Net Programs in India .12 2.2 Food and Nutrition Safety Net Programs in India-Interventions, Financing Arrangements and Coverage .13 2.3 Regulatory Controls on Private Grain Trade .16 2.4 Percentage of Grain Transfer (volume and calories) in Recommended Daily Allowance .22 2.5 Food-Based Transfer Programs: Source of Financing .23 2.6 TPDS/PDS Program Cost to Transfer Rs I of Foodgrain Transfer, constant 1997/98 prices .24 2.7 Ratio of GOI Mid-Day Meal Expenditure to Value of Foodgrain transferred .25 2.8 Andhra Pradesh and Orissa ICDS Project Costs, 1997/98 .26 2.9 Estimated Program Cost of Government Nutrition Programs, 1997/98 .27 2.10 Program Costs to Transfer Rs 1 of Foodgrains .27 3.1 Estimated Household Benefits in Increasing BPL Allocations to 20 kgs .31 - 111 - 3.2 Quantities Of Wheat And Rice Purchased From The Fair Price Shop by rural households in UP ................................................ 31 3.3 Percentage market share of Government Foodgrain Transfer Programs and Buffer Stocks in Total Domestic Marketed Supply of Foodgrains ..... 33 3.4 Percentage Share of Scheduled Castes and Tribes, Women, and Landless in Total Employment Generated under the JRY in 1993/94 and the JGSY in 1999/2000 .................. 37 3.5 Percentage Share of Scheduled Castes and Tribes, Women, and Landless in Total Employment Generated under the EAS, 10 month period ending in January 2000 .38 3.6 Main Indicators of Mid-Day Meals Outreach .40 3.7 Proportion of Eligible Children Receiving MDM and Frequency of Receipt of Food ......... 40 3.8 Changes in School Enrolment, Attendance Between Pre- And Post- NPNSPE Program Period ................ 42 3.9 Consistency between Anganwadi Worker Records and Responses from Beneficiaries ........... 44 3.10 Percentage of Children (6 - 23 months) Receiving Supplementary Food .45 3.11 Some Indicators of Adoption of Desired Child Caring Behaviors .46 3.12 Percentage of Children by Nutritional Status in ICDS and Non-ICDS Areas .48 3.13 Impact of ICDS on Nutritional Status of Children (1-5 years) .48 4.1 Fostering Household Food and Nutrition Security: Short and Long Term Measures .52 4.2 The Logistics of Different School Feeding Program Models .56 LIST OF FIGURES 1.1a Percentage Distribution of Underweight Children (1-5 Yrs), 1994 . 3 l.lb Percentage Distribution of Underweight Children (1-5 Yrs), 1995/96 . 3 1.2 Ratio of Percentage of Girls Over Percentage of Boys: Underweight and Severely Underweight (Rural Areas) ............................4 1.3 Determinants of Food And Nutrition Security - Conceptual Framework .......6 2.1 Government of India Food and Nutrition Related Safety Nets and Their Intervention Mechanisms .11 2.2 Foodgrain Policies and the Foodgrain Marketing System .15 2.3 Percentage Distribution of Central and State Government Expenditures on Food-based Transfer Programs ................................ 22 2.4 Central and State Expenditures on the TPDS, Rs million, constant 1997/98 prices ........ 23 2.5 Central and State Government Nutrition Expenditures, 1990/91 to 1997/98, Rs billion, 1997/98 prices .26 3.1 PDS/TPDS Offtake, million mt, 1991/92 to 1998/99 .29 3.2 Volume of TPDS foodgrain offtake in various States, Average of 1994/95 to 1996/97 (Pre-TPDS) and 1998/99 (Post TPDS) ............................ 30 3.3 Average GOI Buffer Stocks, Actual and Minimum Norms, million mt, 1992/93 to 1999/00 .............. 32 3.4 Economic Cost of Rice and Wheat, 1980/81 to 1998/99, Rs/mt, constant 1998/99 prices ............... 35 - Iv - 3.5 FCI Rice Procurement Price and Procurement and Distribution Costs, 1976/77 to 1998/99, Rs/mt, constant 1998/99 prices ............................ 35 3.6 Buffer Stock Cost of Rice and Wheat, 1980/81 to 1995/96, Rs/mt, constant 1998/99 prices ............... 36 3.7 Total Number of Workdays Generated and Foodgrain Distributed Under the EAS and JRY1991/92 to 1998/99 .36 4.1 How a Price Band Operates .54 LIST OF BOXES 2.1 How the ICDS Supplementary Feeding Component Works .21 3.1 Mid-Day Meal Food Distribution in a Sample Primary School .41 3.2 ICDS in Bihar: Some Findings on Program Implementation .45 3.3 Reasons for Lack of Improvement in Nutritional Status in ICDS areas .46 4.1 Intergenerational Cycle of Malnutrition .51 4.2 Key Elements in the Design of Employment Programs .55 4.3 Integrating Early Childhood Development: Joint District Primary Education and Integrated Child Development Services Initiative in UP ...................................................... 58 VOLUME II TABLE OF CONTENTS ANNEXES Annex A. Evolving Food Policy for Food Security and the Agenda under the Ninth Five Year Plan (1997-2002) ............... .............................................I Annex B. Evolution of Nutrition Policy in India and the Agenda under the Ninth Five Year Plan (1997-2002) .9 Annex C. TPDS in Uttar Pradesh: Implementation Difficulties .17 Annex D. National Program of Nutritional Support for Primary Education: Overview of Operations .23 Annex E The Design, Implementation And Impact Of Food Stamp Programs: A Review of and Lessons From International Experience .......................................... 29 Annex G New Mechanisms to Promote Transparency and Accountability Ofthe TPDS .............................................. 41 - v - STATISICAL TABLES AND FIGURES Chapter 1 Annex Tables A1.1 Social Indicators in Selected Countries .......................................................... 2 A1.2a Per Capita Consumer Unit Consumption Indicators by Monthly Per Capita Expenditure Classes in Rural and Urban Area in India, 1993/4 .................................................................3 A 1.2b Percentage of Distribution f Adults According to Body Mass Index in Rural Areas .................................................................4 A1.2c Percentage of Distribution of Adults According to Body Mass Index in Urban Areas and State Level, 1995-96 .........................................................5 A1.3 Percent Distribution of Underweight, Stunting, and Wasting in Children (I - 5 Years Old) .................................................6 Al.4 Anthropometric data of children (1 - 5 years old) in Rural Areas, 1994 .................................................7 A1.5 Per cent distribution of underweight children (1 -5 years): Weight forAge .................................................8 A1.6 Per cent distribution of stunted children (I - 5 years): Height for Age .................................................9 A1.7 Rice and Wheat Production, Area, Yield, and Percentage Area Irrigated 1949/50 to 1997/98 .............. .................................. 10 A1.8 Percentage Annual (Compounded) Growth in Foodgrains .10 A1.9: Quantity and Value of Monthly Average Consumption of Different Cereals Per Person for States and All-India in Rural and Urban Sectors, 1993/94 .11 Annex Figures A1.1 Foodgrain, Rice and Wheat Wholesale Price Index, Base Year 1990/91, Constant 1990/91 prices .................................... ................. 12 A 1.2 Percentage Distribution of Stunting in Children (1 - 5 Yrs), 1994 ......... ..... 12 A1.3 Percentage Distribution of Stunting in Children (1-5 Yrs), 1995/96 ......... ... 13 Al.4 Ratio of Percentage of Girls Over Percentage of Boys: Stunted and Severely Stunted (Rural Areas) 1994-96 ..................................................... 13 A1.5 Ratio of Percentage of Girls Over Percentage of Boys: Underweight and Severely Underweight (Urban Areas) 1995-96 ...................... ................ 14 A1.6 Ratio of Percentage of Girls Over Percentage of Boys: Stunted and Severely Stunted (Urban Areas) 1995-96 ..................................................... 14 Chapter 2 Annex Tables A2.la Central Issue Price of PDS/TPDS Rice, Rs/lOOkg, 19981 to 2000 15 A2.1b: Central Issue Price of PDS/TPDS Wheat, Rs/100kg, 1978 to 2000 ... 15 A2.lc Central Issue Prices of PDS Edible Oil and Sugar, 1988-1997 .......... .......... 16 A2.2 Rice and Wheat Allocation and Offtake from the PDS from 1993/94 to 1997/98 and the TPDS from 1997/98 to 1998/99, 000 mt . ....................... 16 A2.3a Total Number of Households and BPL Households, 1999 Fair Price Shops, and Ration Cards ........................................................... 18 A2.3b Total Number of Fair Price Shops, and Ration Cards, 1999 .......................... 19 A2.4 Volume of TPDS Rations in Various States, Kg/family/month, 1997/98 ........................................................... 20 A2.5a Retail Prices of TPDS foodgrain in various States, Rs. Per Kg, 1997/98 ........................................................... 21 - vi - A2.5b Retail Prices of TPDS edible oil and kerosene in various States, P.s. Per Kg, 1997/98 ......... 22 A2.6 Central Issue Price for Levy Sugar for the PDS, Rs/kg, 1988-1997 ............. 22 A2.7 FCI Foodgrain Stocks and Minimum Buffer Stock Norms, 1993- 2000, million mt ............................................... 23 A2.8 Export/Import Policy on Foodgrains, as of 26h October, 1999 .................... 24 A2.9 Levy rates for procurement of rice in India, Percent, 1983-84 to 1997-98 .25 A2.10 Mid-Day Meals Scheme: Type and Mode of Food Transfer in Different States .25 A2.11 ICDS Package of Services and Target Population .26 A2.12a State and GOI Food and Civil Supplies Expenditure, 1994/95 to 1996/97, Rs million, current prices .26 A2. 12b: State and GOI Food and Civil Supplies Expenditure, India, 1997/98, Rs million, current prices .26 A2.13 Food and Civil Supplies Expenditure, India, 1989/90-1998/99, Rs million, current prices .27 A2.14 GOI Department of Food, Ministry of Food and Civil Supplies Expenditures, 1989/90-1999/2000, Rs million, current prices .27 A2.15aJRY and EAS Expenditures (current prices) and Number of Workdays Created, 1992.93 to 1998/99 .27 A2.15b Estimated cost of the food component of current employment programs, constant 1997/98 prices .28 A2.15c: Total Economic Cost and Equivalent Food Subsidy Through Employment Programs, current prices .28 A2.16 CARE: Commodity Donations, volume and estimated value, 1997/98 and 1998/99 .28 A2.17 WFP Food Allocations, 1997-1998 .29 A2.18 WFP Country Program-India, 1997-2001 .29 A2.19 WFP Contribution in Food, Volume and Value, 1989 to 1998 .29 A2.20a Estimated 1997/98 Value of WFP Food Allocation by State (@$304.50/mt), US $ .29 A2.20b: Number of Beneficiaries supported by CARE and WFP and the Estimated Share of Food Aid Contribution in GSDP, 1997/98 .30 A2.21 Estimated 1998/99 Value of WFP Food Allocation by State (@$296.48/mt), US$.30 A2.22 Central Government, Department of Women and Child Development Nutrition Expenditures, 1988/89 to 1998/99, Rs million current prices .31 A2.23 Government of India, Department of Women and Child Development Nutrition Expenditures, 1988/99 to 1997/98, Rs million 1993/94 prices .31 A2.24 Number of ICDS beneficiaries, 000, 1985 to 1998 ................................... 31 A2.25 State Nutrition Expenditures in India, 1989/90 to 1998/99, Rs million, current prices .32 A2.26 Mid-day Meals Program and total Primary Education Expenditures of the Department of Education, Government of India .32 A2.27 Estimated National Nutritional Anemia Control and Vitamin A Prophylaxis Program, 1988/99 to 1998/99, Rs million, current prices .32 A2.28 Estimated Quantity and Caloric Equivalent of Food Transfer per Household through Selected Food-Based Transfer Programs .32 - vii - A2.29 Average Household Composition in India, 1993/94 ...................... ............... 33 A2.30 Economic Cost and Consumer Price Subsidy Per mt of Foodgrain Handled by FCI .................................................... 33 Chapter 3 Annex Tables A3.1a Average income transfer per household through the Public Distribution Systems by quintile in major states and poverty rates, 1994/95, Rspermonth .............................................................. 35 A3.lb Average income transfer per household through the Public Distribution Systems by quintile in rural areas in major states and poverty rates, 1994/95, Rs. Per month ............................................................ 36 A3.2 Average Transfer Per Month (Rupees) By Type Of Commodity In UP .............................................. 36 A3.3 Allocation Of BPL Cards and Income Distribution in UP .37 A3.4 Rice Marketed Surplus, 000 mt, 1992/93-197/98 .37 A3.5 FCVIState Rice Procurement as Percentage of Marketed Surplus, 1992/93-197/98 .37 A3.6 Wheat Marketed Surplus, 000 mt, 1992/93-197/98 .38 A3.7 FCI/State Wheat Procurement as Percentage of Marketed Surplus, 1992/93-197/98 .38 A3.8 Offtake of Foodgrains from Central Pool, million mt, 1989/90- 1998/99 ................................................ 39 A3.9 Domestic Supply of Foodgrains in the Market: Rice and Wheat, 000 mt, 1992/93-1997/98 ................. ...................................... 39 A3.10 Findings of Recent Market Integration Studies of Rice and Wheat Markets in India ...................................................... 40 A3.11 Proportion of Eligible Children Receiving MDM and Frequency of Receipt of Food ...................................................... 40 A3.12 Gender-wise Coverage of NPNSPE ...................................................... 40 A3.13a Coverage of NPNSPE by Household Income ............................................... 41 A3.13b Caste-wise Coverage of NPNSPE ...................................................... 41 A3.14 Proportion of Enrolled Students Receiving Foodgrains for 1997-98 ............ 41 A3.15 Quantity of Foodgrains Received by Children ............................................. 42 A3.16 Procedures Adopted for Distribution In Case of Shortage of Foodgrains ...................................................... 42 A3.17 Availability of Storage Facilities for Foodgrains ......................... ................ 42 A3.18 Parent's Opinion on Quality and Quantity of Foodgrains/Meals (Parents Whose Children Received Foodgrains/Cooked Meal) ........... ........ 42 A3.19 Involvement of Children in Distribution of Cooked Meals ............. ............. 43 A3.20 Type of Involvement of Children in Cooked Meals ..................... ................ 43 A3.21 Awareness Regarding Eligibility Criteria to Receive Foodgrain/Meals ...................................................... 43 A3.22 Number of Sample Households Covered by NPNSPE ................. ................ 44 A3.23 Number and Percentage of Schools Providing Different School Incentives ...................................................... 44 A3.24 Number of incentives Being Provided in Sample Schools .............. ............. 44 A3.25a: Results of Some Micro-studies on Composition, Employment and Wages of the MEGS Workers ...................................................... 45 A3.25b Labor attendance under the MEGS, by year and month, 1000 days, 1985/86 to 1990/91 ...................................................... 45 A3.26a Employment Assurance Scheme, Indicators of Progress, 1999-2000, 000 workdays, 1985/86 to 1990/91 .................................................... .. 46 - viii - A3.26b Jawahar Gram Samridhi Yojana, Indicators of Progress, 1999-2000, 000 workdays (as of January 10, 2000) ................................................. 47 A3.26c: Estimated Average Wage Rate Per Day under JGSY and EAS and Minimum Wage Rate for Unskilled Agricultural Workers, 1999- 2000 .48 A3.27 Percentage of JRY Workers Willing to Take Foodgrains as Part of Wages, 1993-94 .48 A3.28 State-wise ICDS Projects operationalized and coverage, as of March 31, 1998 .49 A3.29a Availability, Completeness and Reliability of Records in Anganwadi Centers (%) .50 A3.29b: Some Indicators of Activities for Improvement of Women's Nutrition and Health* .50 A3.30 Adequacy of stocks of supplies at Anganwadi Centers & Sub- Centers (at least for 2 months) (%) .51 A3.31 Percentage of Children Receiving Vitamin A Supplementation .................. 51 A3.32a Some Indicators of Adoption of Desired Child Caring Behaviors under ICDS ..................................................... 52 A3.32b Percentage Utilization of AWW, ANM, PHC, Private Doctor for Children under 2 ..................................................... 52 A3.33 Percentage of AWW Who Weighed The Child Correctly and Discussed Nutritional Grade ..................................................... 52 A3.34 Percentage of AWW and ANW With Correct Knowledge Regarding Health Practices ................. .................................... 53 A3.35 Adoption Of Complementary Feeding Practices In Children Between 12-23 Months .............. ....................................... 53 A3.36 Percentage of Women Adopting of Desired Breast Feeding Practices ..................................................... 54 A3.37 Percentage Availability of Equipment at AWC & Sub-Centers ................... 55 A3.38 Adoption of Practices to prevent and Rehabilitate Malnourished Children ..................................................... 55 A3.39 Adoption of Practices to Prevent and Manage Infection ............... ............... 56 A3.40 Completion of Growth monitoring and Promotion Activities ............ .......... 56 A3.41 Adoption of Practices to Promote Women's Nutrition and Health ............... 56 A3.42 Key Indicators for Project Implementation of the World Bank- Assisted ICDS and Second TINP Projects ................................................... 57 Annex Figures A3.1 Volume of TPDS Foodgrain Allocation in Various States, Average of 1994/95 to 1996/97 (Pre-TPDS) and 1998/99 (Post TPDS) ........... .......... 58 A3.2 FCI Rice Procurement Price and Procurement and Distribution Costs, 1976/77 to 1998/99, Rs/mt, constant 1998/99 prices ........................... 58 - ix - ACRONYMS AND ABBREVIATIONS AAA Antyodaya Anna Yojna AP Andhra Pradesh APL Above Poverty Line ANM Auxiliary Nurse Midwife AWW Anganwadi worker AWC Anganwadi Center BPL Below Poverty Line CARE Cooperative for Assistance and Relief Everywhere DPEP District Poverty Education Program DWCD Department of Women and Child Development EAS Employment Assurance Scheme ECA Essential Commodities Act FCI Food Corporation of India FPS Fair Price Shop FRHS Foundation for Research in Health Systems GOI Government of India ICDS Integrated Child Development Services Program JRY Jowahar Rozgar Yojna JGSY Jowahar Gram Samriddhi Yojna (formerly JRY) MEGS Maharashtra Employment Guarantee Scheme MDM Mid-Day Meals Scheme MHRD Ministry of Human Resource Development NIPCCD National Institute of Public Cooperation and Child Development NPNSPE National Program for Nutritional Support to Primary Education ORG Operations Research Group PHC Public Health Center PRI Panchayati Raj Institution RPDS Revamped Public Distribution System SC/ST Scheduled Caste/Scheduled Tribe TINP Tamil Nadu Integrated Nutrition Program TPDS Targeted Public Distribution Program UNICEF United Nations Childrens Fund UP Uttar Pradesh WFP World Food Program Units kg kilogram mt metric ton gm grams IU international units ha hectare Rs Rupees - x - Acknowledgements This report was prepared by a team led by Dina Umali-Deininger and Deepak Ahluwalia. It draws on contributions from Peter Heywood, Meera Priyadashi, Krishna Rao (nutrition programs), Venita Kaul, Kalpana Seethepali, Achim Fock (mid-day meals scheme), S. Selvarajan and Rashid Sulaiman (food and nutrition public expenditure review), Kene Ezemenari (international experience on food-based transfer programs) and the Food and Nutrition Policy Thematic Group (nutrition program best practice papers). The authors especially wish to thank Ridwan Ali (Sector Director), Gajanand Pathmanathan (Team Leader) and the peer reviewers, Harold Aldermen, Milla McLachlan and Kalanidhi Subbarao for their valuable guidance during the preparation of the study. We also thank Wolfgang Herbinger (WFP), Anand B. Chaudhury (CARE- India) and Francesca Erdelman (FAO) for generously providing background infornation on their respective programs, and Edward Heneveld, Lynn Brown, Judith McGuire, Graeme Donovan, and Alex McCalla for their helpful advice and detailed comments on the report. Production assistance was provided by Lilac Thomas and Jayashree Shaharia. We gratefully acknowledge the cooperation of and contribution by officials from the Departments of Economic Affairs, Food and Public Distribution, Women and Child Development, and Rural Development, and the Planning Commission. The report was discussed with Indian authorities in January-February 2001. - xl - India at a glance POVERTY and SOCiAL South Low. India Asia Incotnm Development diamond* Is"a Pooulation. mid-vear Imillions3 979.7 1.305 3.53 Life expectancy GNP Der cata (Atlas method. US$1 440 430 520 GNP (Atlas method. USS bilons) 427A 560 1.842 Averg annual growth. 1992-98 Pooulation(¶61 1 7 19 17 G G LaboJr force f%) 2.0 2.3 1,9 GNP Gross per pnm aiy Most recen .timatetatast vear available. 192481 capita / nmenl Povetv f% of toooulion below national cOvetv fine) 3S r Urban oooulaton 1% totatoooulatjirw) 28 28 30 Life exoectancv at birth fears) 63 62 63 Infant mortalitv (oa 7 000 five btklhs) 70 75 68 CiWd mainutriton 1% of children under 61 53 51 36 Access to safe water Acce5s to safe water I% of oomlation) 8t 77 73 IllfteracvI% ooooulationaoe 150. 44 47 31 Gross otrmarvenrolmient % od scloodame ooollonM 100 100 107 India Low-income group Maio 109 110 112 Female 90 90 102 KEY ECONOMIC RATtOS and LONG-TERM TRENDS 1978 1SW 1997 1998 Economic ratlo%* GDP (US$ billions) 134.6 289.7 407.9 419.7 Gross dotmestc investment/GOP 22.3 24.3 23.4 21.t Trade Exrots of ooods and seviceslGDP 6.2 6.3 11.1 11.3 Gross domstic savinos/GDP 21.1 21A4 19.9 191 Gross naional savin*slGDP 21.9 21 2 21+9 20.7 Current account balance/GOP 401 t 2.4 1.4 -1 .0 Domesc Interest wavmenWGDP 0.3 0.7 0.8 11 Saving s Investment Total debt/GDP 122 20.9 23.1 23.4 Total debt service/exoorts 13.0 28.5 18.6 17.0 Present value of debt/GDP - 18.7 Present value of debttexoorts 1S0,3 Indebtedness 197848 1988-98 19S7 1998 199802 faverase arnual orOwth) GOP 5.0 5.5 4.6 6.3 6.2 fndia Low-income group GNP oer caoita 2.6 3,7 2.9 4.3 4A4 Exorts of oods and services 4.2 11.9 6.2 4.5 7,0 STRUCTURE of the ECONOMY 1978 1988 1997 1998 Growth of investment and GDP (%) I% of GDP) Aoriculture 38.8 32.8 28.0 29.1 Industrv 24.2 26,8 27.1 25.7 20 Manufacturina 16.5 16.4 16.6 15.6 10 Services 37.0 40.4 44.9 45.2 o Private consumotion 69.3 66.4 68.8 69.9 |10- 93 94 r5 se 97 ss General aovemment consumotion 9.6 123 11.3 11.0 _GD ;GP Imoorts of aoods and services 7.4 9.3 14.5 14.0 (averaae annual arowthl 197848 1988-98 1997 1998 Growth of exports and Imports (%) Aoriculture 2.8 3.1 -1.9 7.2 40 Industrv 5.9 6.4 5.9 3.9 30 a Manufacturino 6.1 6.9 4.0 3.6 20 Services 6.2 7.3 9.0 8.3 10 Private consumrtion 5.1 5.6 1.6 103 General oovernment consumDtion 7.7 4.6 10.6 6.5 0 Gross domestic investment 4.8 5.6 13.1 -0.1 D3 94 98s as 87 De lmoortsofaoodsandservices 7.3 9.9 11.7 10.9 Exports 'Imports Gross national oroduct 4.9 5.6 4.7 6.3 Note: 1998 data are preliminary estimates. * The diamonds show four kev indicators in the countrv (in bold) comoared with its income-arouo averaoe. If data are missinag the diamond will be incomolete. x: I Executive Summary A. Overview 1 Food and nutrition insecurity in India remains widespread and of significant magnitude. Malnutrition afflicts an estimated 62 million children in all States. Estimates during the mid-1990s show that more than half of the children 1-5 years old in rural areas in 12 of the 14 larger Indian States are undernourished, with more girl children tending to suffer severe malnutrition. Chronic energy deficiency also persists among adults. In several large states, over 40-50% of adults suffer from chronic energy deficiency. The results of the National Sample Survey Organization 1993-94 quinquennial consumer expenditure survey, used to roughly approximate nutritional intake, suggest that the poorest 25% of the rural population consumed on average 1,900 calories or less per day, in contrast to the average recommended daily allowance (RDA) of 2400 calories. The poorest 25% of the urban population consumed on average 1,700 calories per day or less, compared to the average RDA of 2,100 calories. 2. The Government (Central and State) implements a number of food safety nets or food- based transfer programs. These include the Targeted Public Distribution System (TPDS), employment schemes that pay part of the wages in foodgrains, a mid-day school feeding program, and nutrition programs that include food supplementation, such as the Integrated Child Development Services Program, Balwadi Nutrition Program, and Day Care Center Scheme. While these programs aim to have a direct, positive and immediate outcome of alleviating household malnutrition, the associated inefficiencies in their operations and their perceived limited impact on household food and nutrition security are drawing increasing concern. Moreover, the tightening fiscal situation adds impetus to reassessing the rationale and cost-effectiveness of these programs. Total government expenditures on the various food-based transfer programs reached an estimated Rs130 billion ($3.5 billion) in 1997/98. Central food subsidies for the TPDS alone amounted to Rs 90 billion ($2.2 billion) in 1998/99. 3. Effective program design is essential to meeting the nutritional and fiscal challenges of the future. Despite India's progress in key areas, including attaining average food self sufficiency, reduction in poverty levels and malnutrition during the last 3 decades, and the on-going structural changes in critical sectors such as health, water supply and sanitation, and education, food insecurity and malnutrition continue to afflict a large number of adults and children. When the achievements made so far are juxtaposed against the substantial remaining nutritional, social, economic and fiscal challenges, they emphasize the need for a continuing re-evaluation and re-adjustment of the Government of India's (GOI) food and nutrition security strategy to effectively meet them. But how can food-based transfer programs more effectively serve as a lifejacket for the food and nutritionally insecure without becoming a straight jacket for overall development? 4. To help identify strategic priorities and options for reform, this report examines the performance of the GOI's primary food-based safety nets and explores options for improving their efficiency and cost effectiveness. It focuses on the public food distribution system and the GOI's foodgrain price stabilization, food for work, mid-day school meals and integrated child development support services programs. These programs merit special attention as they form one of the key pillars of the GOI's food and nutrition security strategy. While there is general agreement that measures to promote economic growth and the development of a strong human resource base would have a stronger and more permanent impact on food and nutrition security, these food-based transfer programs nonetheless could play a critical role in enabling the poor and vulnerable households to alleviate the gap not only in short-term caloric deficiencies due to inadequate incomes, but also to ease the constraints to the use of selected health and related nutrition services essential to achieving and maintaining longer term nutritional well-being. While issues relating to other key pillars such as sustaining food output growth and the improved functioning of other social services are also critical, they are discussed in more depth in other companion reports and will not be covered in this study. - xiv - B. Objectives and Mode of Intervention 5. The three pillars of the Government's food security system over the last half century were: (i) productivity-enhancing investments in agriculture, (ii) price support for key agricultural commodities, and (iii) the operation of buffer stocks and a public food distribution system to ensure availability of selected essential foods at reasonable costs at all times. In 1997, the public distribution system evolved into the Targeted Public Distribution System (TPDS). The TPDS sells primarily rice and wheat, and to a smaller extent sugar all over the country, and other commodities such as edible oils and coarse grains in some states, at subsidized prices. Based on estimates of state poverty levels, the Department of Public Distribution commits to supply rice and wheat to state governments at the rate of 20 kg per family per month for all below-poverty-line (BPL) households. The GOI also supplies an additional allocation of rice and wheat for the above-poverty-line households. In December 2000, the GOI introduced a new special program under the TPDS for the poorest of the poor. Targeted to about 10 million of the poorest (15%) of BPL households, it provides each family with 25 kgs of foodgrains per month at prices even lower than the BPL rates. TPDS foodgrain allocations are collected by the State Government from the Food Corporation of India for sale through a network of about 450,000 "fair price shops". These shops are private retail outlets that operate on commission basis. The size of the foodgrain rations that households could purchase is determined by the State. The GOI fully finances the price subsidy, while State governments cover intra-state distribution costs and the price subsidy on quantities exceeding the central allocation. 6. The Food Corporation of India (FCI), established in 1965, implements the GOI's foodgrain policy. It procures, stores, and distributes foodgrains intended for the TPDS and other food-based transfer programs. In addition, FCI maintains the foodgrain buffer stocks to stabilize prices, through procurement at harvest time, accumulation of stocks, and off-loading of these stocks into the market during supply shortfalls to dampen any drastic price up-swings. FCI relies on its procurement and price support operations of paddy and wheat, and forced procurement of rice from mills, to accumulate supplies to meet its grain requirements. To manage domestic foodgrain supplies and prices, the GOI also (i) imposes controls on private sector foodgrain storage, transport, access to trade financing, and imports and exports, and (ii) enforces a levy of 10-75% on private rice mill output at prices set below market prices. 7. The National Program for Nutritional Support to Primary Education (NPNSPE) aims to promote improved nutrition and attendance of primary school children in the whole country. The program, more popularly known as the Mid-Day Meals Program, seeks to attract children to enroll themselves in primary school, encourage regular attendance by providing supplementary feeding, and improve their nutritional status. Implemented by the Department of Education, it covers children enrolled in classes I to IV in government and government-aided schools in the whole country. In a few states, the program provides a cooked meal daily during the school year, but in the majority of States, support comes as a foodgrain ration (3 kgs per month). Eligibility requires 80% attendance in the previous month, although mere presence during distribution is usually adequate in many states. The program is 100% financed by the GOI, which in 1998/99 accounted for over 50% of the Department of Education expenditures for primary education. It covers the cost of foodgrains supplied free to States and transportation costs to district authorities for moving grain from the Food Corporation of India warehouses to the schools or villages. 8. The Department of Rural Development and Poverty Alleviation implements two nation- wide employment schemes in which workers are eligible to receive part of their wages in the form offoodgrains. The Jawahar Gram Samriddhi Yojana (JGSY) aims to create demand-driven village infrastructure, while providing supplementary employment to unemployed men and women in rural areas. Preference is given to scheduled castes and tribes, freed bonded laborers, and parents of child laborers. The Employment Assurance Scheme (EAS) aims to create additional wage employment opportunities for the rural poor through the creation of durable community, social and economic - xv - assets. Under the two programs, the State governments could provide foodgrains as part of the wages, amounting to 1 kg of subsidized rice or wheat per day (maximum of 10 to 15 kgs per month) The WFP is a major contributor of food to employment schemes in some states (e.g. Orissa, Bihar, Uttar Pradesh, Rajasthan, and Gujarat). The GOI and State governments share the cost of the program at a ratio of 75:25. 9. The Integrated Child Development Services (ICDS) Program aims to provide an integrated package of nutrition, health and early child development services, covering the whole country. It provides a number of services to 0-6 year old children and mothers, including nutrition services (supplementary feeding, growth monitoring and promotion, nutrition and health education), health services (immunization, health check-ups, referral services, treatment of minor illnesses), early childhood care for under threes and pre-school education for three to 6 years olds, and support for other services (e.g. safe drinking water). The adolescent girls' and women's' programs are intended to improve health and nutrition over the long term through improvement in women's skills and access to resources. The Anganwadi worker (AWW), a trained village woman, delivers the ICDS services at a village center called the Anganwadi. She is supported by an Anganwadi helper and assisted periodically in the health tasks by an Auxiliary Nurse Midwife (ANM) from the health sub- center. In April 2000, the GOI introduced a new program, the Pradhan Mantri Gramodaya Yojana that has a nutrition component that aims to improve the nutritional status of children 6 months to 3 years of age. It primarily provides additional financial resources to the ICDS to strengthen the supplementary feeding program for this age group, which had tended to be neglected earlier. The GOI also implements other minor nutrition programs, very much identical to ICDS, such as the Balwadi Nutrition Program and Day Care Center Scheme. In addition, micro-nutrient supplementation programs for iron and Vitamin A are implemented through ICDS. State governments, with assistance from international donor agencies such as CARE and WFP, cover the larger share, about two-thirds, of ICDS program costs in the form of supplementary food. The GOI finances the operational costs of the program. C. Government Expenditures and Overall Program Costs 10. India spends considerable resources on food-based transfer programs. hn 1997/98, total program costs (government and international food aid) of the major food-based transfer programs were estimated at about Rs134 billion ($3.6 billion) or 0.9% of the GDP. Of these, the government share amounted to about Rs130 billion ($3.5 billion). The remainder was contributed by international agencies such as UNICEF, CARE, and WFP. Subsidies to TPDS foodgrains and sugar accounted for about 70% of the total program costs. The more direct nutrition interventions (ICDS, Balwadi Nutrition Program, Day Care Center Scheme, iron and Vitamin A supplementation and NPNSPE) accounted for 19%, while foodgrain buffer stock subsidies amounted to 11%. The value of foodgrains transferred through employment programs remains limited at 0.4%. 11. Food aid accounts for a large share of food expenditures in nutrition programs and the food value of employment schemes in some States, which could pose a serious problem for the long-term sustainability of these programs. In several states (Andhra Pradesh, Bihar, Kerala, Madhya Pradesh, Orissa, Rajasthan, West Bengal and Uttar Pradesh), food aid covers from half to two-thirds of total food costs. In support of the joint forestry management program in Madhya Pradesh, for example, the WFP food contribution under JRY accounted for 30% of total program costs over the period 1995-99. This large dependence on food aid by several States for financing the ICDS food requirement and employment programs could pose a significant fiscal challenge to State governments and to the program's sustainability over the long term. 12. NPNSPE appears to be more cost effective relative to the other programs. In 1997/98, it cost NPNSPE about Rs 0.66 (without leakage) to Rs 0.94 (assuming 30% leakage) to transfer Rs 1 worth of foodgrains to households. The estimated cost to transfer Rs 1 of foodgrain under TPDS was Rs 1.11 (without leakage) to Rs 1.59 (assuming 30% leakage). For ICDS, it was Rs 1.35 and Rsl.49 - xvi - respectively. However, these figures do not take into account the relative differences in the rate of targeting to the poor and vulnerable groups, such a women and children. D. Assessing Program Implementation 13. Despite these large expenditures, Government programs had only a small impact on mitigating householdfood and nutritional gaps. Although existing programs could potentially have made a significant impact on chronic energy deficiency in India, especially for poor and vulnerable households, current indicators, show these programs are not effectively fulfilling their intended goals. This section examines each of the programs individually to examine what obstacles impeded their performance and effectiveness. 14. TPDS. The restructuring of the PDS into the TPDS in 1997 was a positive first step towards improving the targeting of subsidized food distribution towards the poor and more vulnerable segments of society. The transition contributed to some improvement in targeting in allocation towards states with higher poverty rates. Three states that significantly benefited from a sharp increase in foodgrain allocation are Assam, Bihar, and UP-- states with some the highest poverty rates in the country. Foodgrain allocations to Gujarat, Kamataka, and West Bengal, states with lower poverty rates, were cut significantly. 15. The revision of the TPDS pricing structure in April 2000 is expected to improve access by the poor to foodgrains and generate some savings for both BPL households and the budget. The impact of the change in pricing structure of the TPDS on BPL households could be roughly estimated by comparing the effect of the increase in price of the original 10 kg allocation with the counter-effect of price savings in buying the additional 10 kg of grain from the TPDS, rather than the open market. Assuming that FCI's economic cost mirrors the prevailing market price, BPL households would benefit from net savings of about Rs 418 per year by buying the 20 kg of rice from the TPDS and Rs 180 per year for wheat. The challenge for States would be to ensure that adequate foodgrains are available at fair price shops, while permitting households to purchase grain in smaller installments to accommodate possible cash constraints. On the fiscal side, assuming that the total foodgrain offtake stays at the 1999/2000 level of 10.3 million for rice and 7.2 million for wheat, the price change is estimated to reduce the fiscal subsidy burden to about Rs 69 billion per year. 16. A recent World Bank study of TPDS implementation in Uttar Pradesh during 1997/98, however, indicate some improvement in targeting, but problems of significant leakages persist. The study found that cash constraints among the poor and problems of unreliability of supplies in the fair price shops contribute to lower offtake levels. With the BPL allocations being raised to 20 kgs per month per household, liquidity problems could exacerbate . access difficulties by poorer households unless they are allowed to obtain smaller quantities per purchase. Implementation problems identified in previous studies of PDS are unresolved under the TPDS, undermining the effectiveness of the program. These include reports of: (i) alleged illegal diversions of foodgrains to other uses at various levels of the supply chain; (ii) prices charged at fair price shop exceeding the official price, on average by as much as 10% to 14%; (iii) low quality of foodgrains, some below established standards for human consumption; and (iv) weak monitoring, lack of transparency, and inadequate accountability of officials implementing the program. The study roughly estimates unaccounted-for leakages of grain of up to 40%. 17. Price Stabilization and Other Foodarain Policies. Sustained foodgrain output growth facilitated GOI's buffer stock operations, but the program is now faced with problems of plenty. Since 1993/94, actual buffer stockholdings consistently exceeded buffer stock norms, raising concern over their rapidly rising fiscal cost. By 2001, stock levels are expected to reach 50 million mt. Moreover, while the GOI buffer stock operations successfully stabilized prices in India, they also reduced the incentives for private storage. 18. Ironically, the foodgrain market regulations and interventions adopted by Central and State Governments leave poor and non-poor consumers alike dependent on an inefficient private - xvii - marketing channel for the bulk of their foodgrain needs. The large government presence in grain markets as part of price support and price stabilization operations, the stop-go implementation of storage, movement, credit, import, and export controls on trader operations, and levies on private rice mill output increase private transactions cost and hamper short term market integration that is essential for household food security. They also reduce the incentives for modernization investments that could increase market efficiency and reduce physical losses. Most storage facilities in India are small-scale low quality structures, contributing to high storage losses. About 30% of paddy is still milled using less efficient technology, with recovery rates about 5 to 20% lower than international norms. Extraction rates for wheat flour mills are 10% to 15% lower than international normns. Private transporters get only fourth priority on railway freight, forcing them to rely on more expensive truck transport. Poor marketing infrastructure and support services (roads, markets, ports, and market information), compounded by a large number of reporting requirements and official inspections to enforce the regulations (and associated occasional rent seeking which accompany inspections) further increase private transaction costs. 19. Private and public sector marketing inefficiencies are burdening society and the economy with large physical losses due to outdated systems and the higher marketing cost they impose on consumers and producers. Physical losses due to poorly performing foodgrain markets have been estimated to reach 12-16 million mt per year and are an unnecessary yet highly surmountable loss from the national food security perspective. High transactions cost in marketing have a depressing impact on farm output prices and an upward impact on consumer prices. In turn, these adversely affect farm incomes and the purchasing power of all consumers. 20. FCI Operations. FCI's operational inefficiencies penalize all food-based transfer programs. All foodgrains drawn by government agencies for APL households and other foodgrain- transfer programs are "priced" at FCI's economic cost, while BPL prices are set in reference (50%) to it. FCI's economic cost includes the procurement price plus all procurement and distribution costs. While it is to be expected that some economies of scale could be achieved with the increasing volume of operations, instead, FCI's per unit marketing cost (procurement and distribution cost excluding procurement price) increased over time. Between 1979/80 and 1998/99, FCI rice per unit marketing cost increased in real terms from Rs 83/mt in 1980/81 to Rs238/mt in 1998/99 (1998/99 prices); wheat marketing cost increased from Rs214/mt to Rs294/mt during the same period. If FCI interest rate subsidies (about 3-4% lower than market rates) and preferential access to rail transport are taken into account, its operating costs would be even higher. Personnel expenditures and storage and interest charges rose fastest (from 2 to 5 percent per year). Significant losses in storage and transport (officially reported at 1-2 percent but likely much higher) due to stock deterioration and theft add to the cost. Information on the relative costs of FCI and the private sector grain marketing is limited. But Sharma (1991) found the cost of public distribution wheat is double private sector cost, while Gulati et al. (1996) found FCI's storage cost in FCI owned godowns to be 70% higher than hired ones. 21. Technical and management problems contribute to rising FCI costs. Extensive use of covered and plinth (CAP) storage unnecessarily increase losses and increase the difficulty of implementing the first-in, first-out principle of inventory management. FCI officials admitted in 1997 that about half their stock is at least 2 years old; 30 percent, between 2 to 4 years old; and some grain as old as 16 years. The loss of value due to quality deterioration and aging in storage and weaknesses in inventory monitoring and control raise FCI's operating costs. More importantly, FCI has limited incentive to cut costs and improve efficiency as all its financial losses are subsidized by the GOI. 22. Employment Schemes. The total number of workdays generated by, and the level foodgrain offtake from, the JRY/JGSY and EAS have been declining since the mid-1990s. The decline in budget allocation to employment schemes since the mid-1990s, and the increasing average wage rate under JRY, led to the large decline in total number of workdays generated by these - xviii - programs. The off-take of food distributed under the EAS and JRY also declined dramatically after 1994/95. The elimination of the Central foodgrain price subsidy to States create a significant additional burden on already fiscally strapped State Governments, which likely undercuts incentives for States to distribute grains as part of the program. The decline in foodgrain offtake is also due to lack of interest among workers. The Second Round Review (1993/94) of the JRY commissioned by the Department of Rural Development found that on average, only about half of workers were willing to receive foodgrains as part of wages. The assets created under the two programs included rural infrastructure (roads, schools, anganwadis), housing under the Indira Awas Yojana targeted to SC/ST households, and social forestry projects, although roads projects tended to get the highest preference. 23. The JRY/JGSY and EAS continue to suffer from weak targeting, with the JRY/JGSY displayingfurther deterioration in the 1990s. Comparing the findings of the Second Round Review of the JRY in 1993/94 to the Department of Rural Development Progress Report on the JGSY in 1999/2000, the participation of target groups like the SC/STs and landless workers on average declined significantly, with great variation in pace of decline across states. It is only the participation of women that increased, but still remains at levels below the target of 30%. State level studies further confirm problems of weak targeting, poor administration, and indications of rationing as a result of setting program wages above market wages. Village level case studies in Maharashtra also find problems of cumbersome administrative procedures in applying to the program, requiring completion of multiple forms and multiple officials to deal with, late payment of wages, and complicated wage determination formulas that open opportunities for abuse of less literate workers. Village studies undertaken by the World Bank in IJP and Bihar indicate limited awareness of poor villagers regarding the rationale for the program. 24. Despite its implementation difficulties, evaluations of the longer running Maharashtra Employment Guarantee Scheme (MEGS) indicate that it played an important role in combating seasonal malnutrition among poor rural households. The MEGS achieved this by providing employment in the off-season or drought years or both. In contributing to seasonal stabilization of incomes and in reducing income variability, Dev (1995) suggests that it had a significant impact on seasonal malnutrition. Other studies found that laborers in MEGS villages had income streams that were 50% less variable than in non-MEGS villages. These findings indicate that given the size of the income risks workers face, the benefits could be substantial, which is important for reducing seasonal malnutrition in poor households. Although the EAS and the JRY/JGSY are reaching only a very small percentage of the total population and the total poor, national level and state level studies, however, indicate that it is more targeted to the poor than the PDS. 25. NPNSPE. The NPNSPE program expanded rapidly in the 1990s, but implementation problems hamper its effectiveness in achieving its intended goals. The number of student beneficiaries in 1998/99 is officially estimated at 97.9 million (90% of enrolled students), but these estimates are likely overestimated. A recent survey of school level participation in the MDM program found that in 6 States distributing foodgrains, on average only 66% of households with enrolled primary school children reported receiving their foodgrain allocations. The program is plagued with some critical implementation problems. The complex logistical arrangements and multi-agency, multi-level coordination required to implement the program lead to frequent delays in delivery of the foodgrains. In several states, the quantity of foodgrains received by students is below the officially designated amount. In addition, inadequate infrastructure (storage and cooking facilities) and weak monitoring and evaluation contribute to physical losses, illegal diversion of supplies, and unhygienic cooking practices. In a large number of schools, foodgrains are stored in classrooms, taking away space for teaching. Weak monitoring systems open opportunities for misreporting of student beneficiaries and theft of foodgrains. In Orissa and Gujarat where meals are served, only about 30% of teachers report having a separate shed or kitchen to cook meals. School children are asked to help with meal preparation, taking time away from schooling and other - xix - activities. Recent studies find that the nutritional impact of cooked meals is mixed-that meals are too little to make a difference vs meals add to caloric consumption. Some studies indicate that the NPNSPE (foodgrain rations and cooked meals) had some positive impact on enrollment and attendance, although weak monitoring and evaluation could not shed light on its impact on key education outcomes (i.e. learning, retention). In view of the fact that NPNSPE accounts for about 50% of the Department of Education's primary education budget, its effectiveness and efficiency in achieving its intended objectives are a major concern, particularly as it compares to other potential primary school incentive schemes. 26. ICDS. The number of ICDS beneficiaries increased rapidly over the last decade, but official estimates of the number of ICDS beneficiaries are likely overestimated. A recent study of ICDS (1996) in 7 states found a widespread tendency to over-report the number of beneficiaries as well as rates of provision of food and other services by the Anganwadi workers. Over reporting of receipt of food by children by the AWW ranged from about 21% in Bihar to 44% in Orissa. The pressure on staff to meet designated targets and weak monitoring lead to problems of over-reporting of food distribution and beneficiary participation. Since the current monitoring system for the ICDS relies on monthly progress reports prepared by AWW, with no formal mechanism to confirm with the "beneficiaries," this opens opportunities for over-reporting to meet program targets. 27. ICDS is only weakly meeting its program targets. Children under 2 are not being reached effectively for supplementary feeding under ICDS. In AP, Bihar and Orissa, the FRHS study (1996) found that about 69% of the children were eligible for supplementary feeding, but only 38% received them in Orissa, 50% in Bihar and 57% in AP. In MP, while 52% of the children were eligible, less than half (24%) of the eligible children received the food supplementation. Even fewer children received food for more than 3 days per week. This is in contrast to program targets of 60% coverage. The FRHS study also finds that supplementary feeding is neither reaching pregnant women nor nursing mothers. In MP, Rajasthan, and UP, less than one third of pregnant women and nursing mothers received supplementary food. In general, the food rations were shared with other family members, reducing the impact of the additional food on targeted group. The FRHS study and World Bank evaluations of ICDS projects similarly find insignificant progress in the distribution of iron and folic tables, reaching less than 20 percent of the target group, relative to the 70% goal. Poor growth monitoring by the AWW limits the program's effectiveness in targeting the more nutritionally vulnerable children, those under 2. The limited proportion of children under 2 that are weighed either at the AWC or at home limits the ability of the AWW to identify the malnourished and take preventive or corrective actions. The FRHS 7 State study and World Bank evaluations of ICDS implementation in Andhra Pradesh and Orissa find that growth monitoring and promotion are implemented minimally. 28. A number of critical problems that undermine program effectiveness have been identified in various reviews. The bias towards rapid expansion of the program contributed to a diversion of attention away from ensuring the delivery of high quality services. Frontline AWWs are unable to effectively deliver key ICDS services because of inadequate training. The FRHS study found that from 10% (AP, Bihar) to 70% (West Bengal) of the AWWs could not record the weight of the child correctly. And if the child is weighed, in all states on average, only about 60% could assign the nutritional grade correctly; in Rajasthan, UP and West Bengal, it went as low as one third. The preoccupation with food distribution reduces the AWW's attention and priority attached to inter- personal communications and counseling, which are vital to care-related determinants of child nutrition. This is also in part due to the large number of activities the AWW has to perform: run the center, feed and weigh the children, carry out pre-school activities, maintain records and growth charts, carry out surveys, and visit homes. Caste and other social related factors further impede AWW interactions with beneficiaries. Problems of inadequate equipment, supporting infrastructure, and poor supply management further circumscribe what AWWs could do. Unavailability of weighing scales, storage facilities, and irregular delivery of food and other supplies (IFA and oral - xx - rehydration solution packets, and the medicines) are reported as problems that hinder AWW activities. Weak monitoring and evaluation hampers correction of operational problems and opens opportunities for misappropriation of resources (e.g. the diversion and sale of food). The centralized nature of management and monitoring further impede quick feedback. The Department of Women and Child Development at the Central level is responsible for overall management, monitoring, collection and analysis of periodic reports. Moreover, weak supervision at the project level, and the lack of a mechanism to confirm data on reports prepared, permit inaccuracies to pass through the system. The recently approved Women and Child Development Project (1998) takes some steps in addressing the problem of poor quality of ICDS services in 5 states-Kerala, Maharahstra, Rajasthan, Tamil Nadu and Uttar Pradesh. The project focuses on improved worker training and fostering greater community participation in program implementation to improve its effectiveness. 29. Recent evaluations indicate that the ICDS contributed only to slight improvements in nutritional status. Recent evaluation studies of Bank-assisted ICDS projects in Andhra Pradesh and Orissa and the Integrated Nutrition Project in Tamil Nadu suggests improving trends in child nutritional status in the project areas. The study found a reduction in severe, but minimal impact in reducing moderate, malnutrition. The projects also contributed to a reduction in the infant mortality rate and the incidence of low birth weights. The study, however, noted that the "overall paucity of relevant, reliable, and timely data" made it difficult to draw "a definitive judgement on project outcomes." A study by the National Institute of Public Cooperation and Child Development (NIPCCD, 1992) found that the nutritional status of children in ICDS areas were only slightly better than in non-ICDS areas. The percentage of severely malnourished children under three in ICDS areas is lower by 1.8 percentage points than the non-ICDS areas, and for children 3-6 years old, by 1.5 percentage points. The percentage of moderately malnourished in ICDS areas is 2.5 and 3.4 percentage points lower than in the non-ICDS areas for the two subgroups. Between 1975-79 and 1988-90, the contribution of ICDS to the decline in the percentage of severely malnourished is about 8% (Radhakrishna et al. 1998). They also estimate that the percentage of severely malnourished children declined by 6.3 percentage points during this period, but in the absence of ICDS, it would have still declined by 5.8 percentage points. E. Options for Reform 30. To more effectively contribute to eliminating food and nutrition insecurity in India, a reorientation and adjustment of the Government's food and nutrition security strategy, particularly the food-based transfer programs is urgently needed. Reviews of implementation of these programs, show that they only weakly achieved their intended objectives, despite their increasing fiscal costs. Widespread implementation problems, exacerbated by poor monitoring and evaluation of the operations, lead to unreliable delivery, leakages of food and overall poor quality of services. 31. In developing a long term strategy for food and nutrition security and a vision for the role to be played by these programs, it is critical to maintain an appropriate balance between support these short term safety nets and other more long-term productivity enhancing interventions. For the short to medium term, achieving this balance poses a complex and politically delicate challenge. The causes of food and nutrition insecurity are multiple, its intensity chronic or transitory, with needs varying according to its scope (national, regional, community, household, or individual). It is broadly recognized that India over the last half century made remarkable progress in ensuring food and nutrition security at the national level, primarily through investments and policies that led to rapid agricultural productivity growth and a reduction in poverty levels. These successes, however, leave no room for complacency. At the current annual population growth rate of 1.7%, India's population would reach 1.4 billion in 2020. Its foodgrain (rice and wheat) demand alone is expected to increase to as much as 227 million mt by the same year. The package of actions needed to sustain the needed long term agricultural productivity growth and overall income-enhancing, poverty-reducing economic growth, that would permit achievement of more permanent food and nutrition security for - xxi - all of India's households, is beyond the scope of this study. What is clear, however, is that these "longer term growth oriented" programs require considerable immediate public investments in key sectors to ensure future needs are met. Given the existing tight fiscal situation, this would require a delicate balance in the allocation of scarce Government fiscal resources between the "short term safety nets" such as food-based transfer programs and these growth-promoting programs. 32. How can food based transfer programs more effectively serve as a lifejacket for the food and nutritionally insecure without becoming a straight jacket for overall development? In the short term, this would require (i) allowing States greater flexibility in adopting or reorienting programs to better suit their specific needs, while placing the highest priority to ensuring better targeting and improving efficiency and cost effectiveness in reaching their intended beneficiaries and (ii! promoting the efficient functioning of food markets on which both poor and non-poor consumers depend on for the majority of their food needs, to reduce the sizeable physical losses and marketing costs. Increased decentralization of implementation, including greater community and local government (Panchayat Raj Institution) involvement, could play a critical role in ensuring more effective village level implementation. Stronger coordination among the food based transfer programs, and between them and other poverty alleviation programs, would also bring about significant synergies in their impacts. To effectively address medium to long term needs, rigorous and in-depth evaluation, to begin immediately, is critical as this would serve as the benchmark for charting required program adjustments and help deter=mine whether the full package of existing programs would be needed at all or whether some programs should be phased out. The next section outlines a possible agenda for reform. Targeted Public Distribution System * Reduce leakages through adoption of administrative measures to increase transparency and accountability in grain transactions and beneficiary selection, including capacity building of PRIs for beneficiary selection, program supervision, and monitoring of performance of Fair Price Shops and other local government agencies involved in implementation. * In parallel, implement pilot alternative mechanisms for foodgrain distribution, such as food stamps or coupons, in one or two States where strong interest exists, starting in a few communities where a private retail grain marketing network is well developed. Integrated Program for Reforming Food Grain Policies (i) Promoting private sector efficiency and investments through: * FCI open market sales at market prices; * Formulation and adoption of "price band" rules that allow efficient private sector participation, supported by a strengthened market information system; * Phase out the rice levy over the medium term; * Foster the development of negotiable warehouse receipt systems; * Formulate and implement a competition policy to ensure fair trading practices by private traders; * Upgrade market infrastructure and support services, such as mandi facilities, telecommunications, roads, ports, grading, and market information systems. (ii) Concurrently with the above, improving the efficiency and effectiveness of FCI by: * Modernize grain handling systems through subcontracting arrangements of marketing operations to private sector, subject to overall FCI coordination; * Improve management incentives for efficiency and operating under hard budget constraints. Food for Work Program * To improve self-targeting to the poor, test other wage setting mechanisms (piece rate, poverty program rates) that would not exceed market wages. * Strengthen institutional capacity of panchayat raj institutions to implement the program. - xxii - * Improve targeting and effectiveness of assets created through greater community awareness campaigns about the program. National Program for Nutrition Support to Primary Education * Decentralize management to States and local governments and allow States to adopt new or to re-orient programs to suit State specific needs and initial conditions * Enhance nutritional impact by providing a meal, preferably a mid-morning snack, rather than take home rations. Explore potential for subcontracting meal provision to private meal preparers (local societies, local women's groups, private vendor) where qualified providers and interest exist, subject to community supervision. * Expand efforts for community awareness and convergence with other programs, especially early childhood education with ICDS and child health with Health Department Integrated Childhood Development Services Program * Freeze further expansion until quality of existing projects meet the design standards, which is achievable in 3-5 years * Decentralize management to States and local governments * Strengthen focus on 6-24 month old children and pregnant women, by hiring a second worker or by separating the pre-school education for 3-6 years old from the rest of the program through greater convergence with primary education. * Improve quality of services through better training and supervision of the AWW and greater community involvement in ICDS implementation, factoring in caste and other social factors in the community in the selection and hiring of AWWs * Expand efforts for community awareness and convergence with other programs, especially early childhood education with the Education Department and child health with Health Department Annapurna Scheme . Re-evaluate relevance in view of TPDS grain allocation revision and examine cost effectiveness relative to the other programs for the aged, e.g. Old Age Pension Schemes Imp:rove Monitoring and Evaluation of Programs * Refine current monitoring and evaluation systems to keep accurate track of inputs, processes, outputs and more importantly of outcomes, and strengthen performance of feedback systems * Adopt coordinated evaluation efforts among various programs 33. In the longer term, careful assessments of the food and nutrition situation would be essential to permit adjustment to changing needs and to determine whether the full package of existing programs would be needed. An issue therefore for the longer run is where future priorities should lie. Another related issue is what role should food supplementation play in the longer run? If malnutrition is largely associated with health or care factors-as is likely in food secure households-then supplementary feeding would be less appropriate in the long term than communications for behavior change. Supplementary feeding may have a role in the short term, though it will be vital that it is linked to efforts to improve the capacity and practice of adequate care to the targeted individual through behavior change interventions. This has important long run implications in the design and priorities of existing programs, i.e. the possibility phasing out the food supplementation component of ICDS or the NPNSPE. A precondition to a future strategy that addresses these issues, however, is a thorough and accurate understanding not only of the day to day outputs of these programs, but more importantly, the joint outcomes of these food-based transfer and all the other poverty oriented programs-that is the level of food security and nutritional well-being achieved at the household level. For this, as noted above, greater attention and resources in joint and coordinated monitoring and evaluation would be vital. In this respect, the National Food and Nutrition Council, in close collaboration the respective departments and the Planning Commission, could play a major role. Chapter 1 Household Food and Nutrition Security in India An Overview A. Introduction 1.1 Ensuring food and nutrition security has been a major priority of the Central and State governments of India. Threats of famines and acute starvation especially in the early years of independence, pervasive chronic energy deficiency and malnutrition among a large share of the population due to poverty, low literacy levels, and limited access to safe water, sanitation and health care, shaped the multi-pronged, multi-sectoral strategy of the Govemment of India (GOI) to ensure the food and nutrition security of its population. The main thrusts of the strategy include: (i) promoting rapid domestic foodgrain output and income growth to achieve food security at the national level through rural infrastructure investments, agricultural production enhancement and price support programs; (ii) strengthening household capacity to access food through public food distribution, food price stabilization, and food-for-work programs; and (iii) improving intra- household food utilization by implementing nutrition, health, water supply and sanitation, and education programs. Today, ensuring food and nutrition security is one of the nine objectives of the Ninth Five Year Plan (1997-2002). 1.2 India achieved considerable progress in improving food and nutrition security over the last 50 years. Rapid foodgrain1 productivity growth, exceeding the population growth rate, contributed to increased per capita availability of foodgrains from 469 to 512 grams per day between 1961 and 1997. Until 1997/98, it kept foodgrain prices in real terms at or below 1981/82 price levels (Annex Figure A1.1). Rice and wheat output growth primarily buttressed the increased availability of foodgrains. Rice and wheat per capita availability jumped from 266 to 400 grams per day during the same period. Large-scale famines have practically been eliminated, thanks to increased food availability at the national level and better early waming systems facilitating more rapid transport of foodgrains to needy areas. Rising incomes and the reduction in poverty levels--a major determinant of household capacity to access food--from 53% (head count index) in the early 1950s to about 35% in 1993/94 have been instrumental in improving food and nutrition security at the household level. The nutritional well-being of households was further aided by increasing literacy rates from 24% in 1961 to 62% in 1997 (Department of Education 2000) 2and further protected by increased access to safe water (the percentage of the population with access to safe water increased from 17% to 81% between 1970 and 1996), access to sanitation facilities (from 8% to 29% between 1985 to 1996) and access to health care, which reached 85% of the population in 1995 (ul Haq & Haq 1998; UNICEF 1998). Progress in these areas are important factors contributing to a halving of the under-five mortality rate from 236 to 111 per 1000 between 1960 and 1996, the reduction in the percentage of malnourished under-five children from 71% in 1977 to 53% in 1995 and the increased life expectancy at birth from 41 in 1961 to 62 years in 1996. 1.3 Notwithstanding the progress made, considerable challenges remain in ensuring food and nutrition security in India. At the national level, malnutrition despite the marked decline is still very high, with under-five levels of malnutrition3 in India three times China's (16%) and 76% higher than Sub-Saharan Africa's (30%) (Table 1.1). India accounts for less than 20% of the world's child population, but it has 40% of the malnourished children (about 62 million children). Despite its decline, poverty in India (as measured by the headcount index) is almost 4 times that of China's (9%) in the early 1990s. (World Bank 1997a). Foodgrains include rice, wheat, coarse cereals such as sorghum, bajra, ragi, and millet and pulses such as gram mungbean, chickpea, peas, etc. Female literacy levels increased from 13% to 50% during the same period. This is the percentage of children under five who are moderately and severely underweight. 2. Table 1 1: Social Indicators in Selected Countries Sub-Saharan Indicators India China Indonesia Bangladesh Sri Lanka Pakistan Ghana Africa Basic Under 5 Mortality Rate 1996 (%) 111 47 71 112 19 136 110 170 Infant Mortality Rate < 1 1999 (%) 7.1 3.0 4.2 6.1 1.5 9.0 5.7 9.2 Life Expectancy at Birth 1999 (yrs) 63 70 66 60 73 63 58 47 GNI per Capita 1999 440 780 600 370 820 470 400 490 Nutrition Infants wl Low Birth Weight 33 9 14 50 25 25 7 16 1990-94 (%) Under fives moderately & severely 53 16 11 56 38 38 27 30 underweight: 1990-97(%) Popn with Access to: Safe water 1990-96 (%) 81 67 62 na 57 74 65 49 Adequate sanitation 2000' (%) 29 24 51 48 63 47 55 44 Health services 1990-95 (%) 85 88 93 45 93 55 60 na Note: GNI- gross national income. Source: UNICEF, The State of the World's Children 1998; UNDP, Human Development Report 1998, World Bank Development Indicators. B. Challenges and the Need for Action Pervasive Food Insecurity in India 1.4 Food insecurity remains significant and widespread in India. A large number of adults suffer from chronic energy deficiency. In several of thffer larger States, theser amoucienttoasmuc ras 40% Table 1.2:Percentage Distribution of Chronically Energy Deficient the larger States, these amount to as much as 40% /oAdults (Ž18 years old) Using the BMI Index, 1995-1997. to 60% of the adult population (Table 1.2). IChronic Energy Deficiency Prevalence % Moreover, one fifth to a quarter of adults suffer State/UT ISevere Moderate I Mild Total from moderate to severe chronic energy deficiency, 1996-97 NNMB Sur eyl/ Andra radsh 13% [15% 27% 55% which would have important implications on their Gujarat 16% 15% 27% 59% productivity. According to the 50" National Karataka 13% 14% 26% 54% Sample Survey Organization (NSSO) quinquennial K la t6% 7% 15% 27% Maharashtra 9% 12% 27% 47% consumption expenditure survey (1993-94), food Mahrissta 10% 12% 27%/ 487% continues to account on average for about two- Tamil Nadu 9% 11% 22% 41% thirds of total per capita expenditures in rural areas Pooled 10% 12% 24% 47% and over 50% in urban areas (Annex Table Al.2a). Assam 2% 4% 22% 17% They take up an even higher share for the poorest Arunachal Pradesh 2% 2% 4% 8% 30 percent of the population. Using the consumer Bihar 15% 12% 24% 51% expenditure survey to roughly approximate Delhi 4% 4% 12% 1 90/0 expenulture survey to ~~~~~~~~~~~Haryana 4% 6% 160% 260% nutritional intake, the poorest 25% of the rural yimachal Pr. 7% 8% 23% 38% population consumed on average 1,900 calories or Punjab 4% 5% 14% 23% less per day, in contrast to the average Rajasthan 10% 8% 17% 36% per in ~~~~~~~~~~ ~~~~~Sikkim 2% 1 2% 9% 13% recommended daily allowance (RDA) of 2400 Chandigarh 3% 6% 11% 190/0 calories. The poorest 25% of the urban population Manipur I 2% 10% 13% consumed on average 1,700 calories per day or Meghalaya 1% 2% 11% 14% Mizoram 2% 2% 11% 15% less, compared to the average RDA of 2,100 NMazoramand % 2% 6% 1% calories. The average consumption of protein and Tripura 6% 5% 17% 27% fats are similarly below the recommended daily Dadra Nagar Haveli 12% 11% 20% 43% Daman &Diu 2% 5% 18% 25% allowances, with the gap between the required daily Goa 8% 8% 18% 34% allowance and actual consumption worsening Note: BMI = weight (kg)/square of height meters. Severe=BMI <1 6, significantly among lower income groups. The Moderate= BMI 16-17; Mild= BMI 17-18.5 large share of food in total per capita expenditue . Source: 1/National Nutrition Monitoring Bureau Report of Second large share of food in total per capita expenditUre Repeat Survey-Rural, 1996-97. 2/Data from District Nutrition and the estimated widespread caloric deficiencies Profile survey of 18 States, 1995-96, Department of Women and in a significant share of the population, emphasize Child Development their vulnerability not only in terms of ability to purchase food when it is available in the market, but also to price shocks and temporary downturns in income. -3 Malnutrition Among Children is Widespread 1.5 Malnutrition afflicts a large proportion of children in aUl States in India. In nutrition surveys by the Department of Women and Child Development (DWCD) in 1995/96 and the National Nutrition Monitoring Bureau (NNMB) of rural areas (where the majority of the population reside) in 1994, they find that in 12 of the 14 States covered Figure 1.1a:Percentage Distribution of Underweight Children (1-5 Yrs) in Selected States, 1994 morthe 14Sthanth coferthe (Underweight - Disease 4. -- .. Disease & Quali ) Env't \ ~~~~~~~ ~ ~~~~............ Poor Intro- ~~~~~~~~~Poor Irnra-Hlousehold Poor Intra- INTRA- 0 X f~~~~~~~~~Household '11d C aftCure lme Use& < Household Allocattion t;f gy HOUSEHOLD Food Distribtion cohring ehovior of Health Services W f0 Inadequate Household 0 : 0 0 Inadequate Household Time Inadequate Household It Food Availability & Available for Child Care & Use of Health Services I X ;__Poor_Processing ______,_____>Poor Child Care Behavior < & Lack of Safe Water : Ethnicity, e te):; d0000; 0:} 0 A; & Sanitation Faciities ;} Inadequate Household IT Weather Food Supply & Envtal Risks Purchased Home Weak Household Food Prodn Inadequate Household Assets <-Education & Other HOUSEHOLD :-_________________,,______ _ Social Capital Lackof Assets Low Family I (Land Capital Labor I Livestock, etc) Productivity .------… ---- -… ------ Markets,Prices, Marketing Support Services and Inadequate Household Income Infrastructure,*.. National Food Supply , . I '(Prodn Stocks, Net Exports) . ----_------ ---- 4 Agriculture & Industry, Finance & National National .............................. ........ . . .. ; Allied Services Services Sector Education System Health System NATIONAU Sector | STATE INTERNATIONAL Macro-Economic and Sectoral Policy Environment TRADE - 7 - Central and State government programs to address food and nutrition insecurity, this study adopts the framework illustrated in Figure 1.3. 1.15 Food security, in its many dimensions-national, community, household, and individual; urban and rural; chronic and transitory-is the ability to access safe food of sufficient quantity and quality at all times for an active and healthy life. A person's food security is dependent not only on the availability of food-sourced from home produced, own stocks, or purchased from the market. It is also influenced by several other factors. It depends on the individual's access to resources and cash to obtain the kind of foods when and where needed, which in turn is constrained by the level of income (farn and non-farm), wealth, and the behavior of markets and prices as it influences a person's purchasing power. It also depends on the one's ability to effectively utilize the food consumed to meet the daily dietary requirements. Food security and nutritional well-being are linked through the actual utilization of foods by individuals. 1.15 Nutrition security is the ability to access and effectively utilize the macro- and micro nutrients required by an individual to develop and maintain a healthy and productive life. Nutritional well-being, however, depends not only on the amount and quality of food consumed, but also on the body's ability to utilize the nutrients supplied by such foods. This is affected by one's health status, which in turn is influenced by intra-household use of health and sanitation services, safe water, and general household caring behavior and practices. Critical caring practices that impact on nutritional status are child feeding practices, care for women and children, food preparation and processing, hygiene practices, home health care and psycho-social care. Clearly, the determinants of food and nutrition security are many, complex and interdependent, demanding multi-pronged strategies. How the Govemment of India sought to tackle this complex challenge is discussed in depth in the next chapter. 1.16 India is at an important juncture and there is no room for complacency. Despite India's progress in key areas, including attaining average food self sufficiency, reduction in poverty levels and malnutrition, and the on-going structural changes in critical sectors such as health, water supply and sanitation, and education, food insecurity and malnutrition continue to afflict a large number of adults and children. When the achievements made so far are juxtaposed against the substantial remaining nutritional, social, economic and fiscal challenges, they underline the need for a continuing re-evaluation and re-adjustment of the instruments of the GOI's food and nutrition security strategy, especially since some were designed for challenges at the time :-)f country's independence which may no long be as relevant today. E. Structure of the Report 1.17 This report focuses on the performance of and future challenges for, the GOI's primary "direct food and nutrition safety nets" or food-based transfer programs designed to alleviate short-term food and nutrition insecurity and improve caring behavior within households. This study focuses on the public food distribution system, the GOI's buffer stocking operations for foodgrain price stabilization, food for work programs, the mid-day meals program and the integrated child development support services program. A common denominator of this package of interventions is that they all provide direct food assistance to households to mitigate chronic and/or temporary shortfalls in household food consumption. 1.18 These programs merit special attention as they form one of the key pillars of the GOI's food and nutrition security strategy. While there is general agreement that measures that promote economic growth and the development of a strong human resource base would have a stronger and more permanent impact on household food and nutrition security, these food-based transfer programs nonetheless play a critical role in enabling the poor and vulnerable households to alleviate the gap not only in short-term deficiencies in food consumption due to inadequate incomes, but also to ease the constraints to the use of selected health and related nutrition services essential to achieving and maintaining long-term nutritional well-being. Moreover, the special focus on these food-based 8 programs could contribute to both a more broadbased understanding of their operations and to opening more avenues for coordination among them, and between them and other poverty alleviation programs. Two World Bank studies, "India Foodgrain Marketing Policies, Reforming to Meet Food Security Needs" (1999) and "Wasting Away, The Crisis of Malnutrition in India" (1998) recently reviewed the nature and impact of the GOI's interventions in the foodgrain sector and nutrition programs, particularly the ICDS. This report draws extensively from these studies. 1.21 While issues relating to other key pillars such as sustaining food output growth and the improvedfunctioning of the domestic health, water supply and sanitation, and education systems are also critical, they are discussed in more depth in other World Bank companion reports (See for example, India Towards Rural Development and Poverty Reduction (1999), India Rural and Urban Water Supply and Sanitation (1998); India Achievements and Challenges in Reducing Poverty (1997), India New Directions in Health Sector Development at the State Level: An Operational Perspective (1997), and Primary Education in India (1997)). The following three chapters concentrate on the scope, the mechanisms used, and effectiveness of the direct food and nutrition food-based transfer programs, and explores options for strengthening their contribution to the country's food and nutrition security agenda. Chapter 2 Food-Based Transfer and Nutrition Programs: Objectives, Mode of Intervention, and Program Costs A. Government of India's Food and Nutrition Strategy 2.1 The Government of India, since independence, adopted a multi-sectoral, multi-pronged strategy to combat food insecurity and major nutritional problems. The key elements of India's food security strategy in general and food policies in particular took root during the critical decades after independence, when the country faced two major problems: (i) the threat of famine and acute starvation due to low agricultural productivity and a poorly functioning food distribution system, and (ii) chronic energy deficiency due to widespread poverty, low literacy, and poor access to safe drinking water, sanitation and health care (Planning Commission 1999). These challenges shaped the policy regime and programs adopted by the Government of India (GOI) since then. They spurred broadbased initiatives to increase food production, improve food distribution, increase household food availability through direct and indirect food subsidies to improve household purchasing power, and strengthen health services delivery so as to better tackle micro-nutrient deficiencies, infection and unwanted fertility which increases chronic energy deficiency (See Annex A and B for an overview of the evolution of the GOI's food and n-utrition security policies). 2.2 Over the last half century, food self sufficiency has been a major pillar of Government's food security system. To achieve this objective, the GOI efforts focused on: (i) productivity- enhancing investments in agriculture, (ii) price support for key agricultural commodities, and (iii) the operation of a buffer stock and a public food distribution system to ensure availability of selected essential foods at reasonable prices at all times. Employment programs and income generation schemes were subsequently adopted to ensure that the poor have adequate entitlement to purchase food either through the market or the public distribution system. Having achieved self-sufficiency in the 1990s, the GOI's strategy has now shifted to addressing the broad issue of food security. This involved some change in orientation, such as recognizing trade as a potential instrument for food security, and an increasing focus on food security at the household and individual level. 2.3 Although India achieved progress towards food self-sufficiency, the blight of continuing widespread chronic energy deficiency prompted the GOI to take further action. Supplementary feeding and provision of selected health and nutrition services to identified vulnerable groups, particularly women and children, were introduced. The Integrated Child Development Services (ICDS) program, launched in the 1970s, provides essential health and nutrition inputs to women, children and pre-school children in urban and rural areas. A mid-day meals program for school children was introduced in many states. Programs to prevent iodine deficiency disorders, anemia, and blindness due to Vitamin A were also initiated. 2.4 The Ninth Five Year (1997-2002), building on past experience, reiterates the need for a comprehensive multi-sectoral strategy for food and nutrition security.6 The National Nutrition Policy 1993, subsequently elaborated under the National Plan of Action on Nutrition (NPAN) 1995 elicited commitments for action from 14 Ministries and Departments whose activities could contribute to improved food and nutrition security. These government agencies include the Departments Agriculture, Consumer Affairs and Public Distribution, Education, Forestry, Under the National Nutrition Policy, direct short term interventions include: univeralization of ICDS, nutrition education of mothers, better coverage of expectant women, reaching the adolescent girls, control and elimination of micro-nutrient malnutrition, popularization of low cost nutritious foods, fortification of food, and universal coverage of Iron and Folic Acid, Vitamin A and Iodine Deficiency Disorder Programs. Jndirect long term interventions include: ensuring household food security, improving dietary pattens, improving purchasing power, strengthening PDS, land refomi, better health and farnily welfare coverage, basic nutrition and health coverage, basic health and nutrition education, nutrition surveillance, information, education and communication, research, education and literacy, and improving the status of women (Planning Commission 1999). - 10 - Information and Broadcasting, Health, Family Welfare, Labor, Rural Development, Urban Development, Welfare, Women and Child Development, Food Processing Industries, etc (See Annex B). The major national goals envisaged under the 1993 Nutrition Policy to be achieved by year 2000 were to: (i) reduce severe and moderate malnutrition among young children by half; (ii) reduce the incidence of low birth weight to less than 10 percent; (iii) eliminate blindness due to Vitamin A deficiency; (iv) reduce iron deficiency anemia in pregnant women to 25 percent; (v) reduce iodine deficiency disorders to 10 percent through salt iodization; (vi) produce 250 million mt of foodgrains; and (vii) improve household food security through poverty alleviation programs. The Ninth Five Year Plan (1997-2002) reaffirms these goals. The goals under the Ninth Plan are: (i) to achieve freedom from hunger through increasing food production, effective distribution, and improvement of purchasing power of the population; (ii) reduce under-nutrition and its health consequences through universalization of ICDS, screening of at-risk groups, growth monitoring, better targeting of food supplements to those suffering from undernutrition, close monitoring of under-nourished persons receiving food supplements, and effective inter-sectoral coordination between health and nutrition workers; and (iii) prevention, early detection and effective management of micronutrient deficiencies and associated health hazards. 2.5 Having passed the year 2000, it is clear that none of the GOI's food and nutrition security goals have been met. Th rates of malnutrition and poverty remain far higher than envisaged. Ironically, in the midst of burgeoning public sector stocks, a large proportion of the population continue to suffer from food insecurity and chronic protein-energy malnutrition. Why were these targets not achieved? To begin to answer this question, this chapter elaborates on the objectives, scope and design of, and the level of expenditures on, these programs intended to provide a "food and nutrition safety net" for vulnerable groups. B. Government Food and Nutrition Food-Based Transfer Programs 2.6 The Central and State Governments of India implement a broad package of food and nutrition food-based "safety net" programs. They include the Targeted Public Food Distributions System (TPDS) and its sub-programs (Annapuma Scheme and the Anthodaya Anna Yojna), a foodgrain price stabilization program, food-for-work programs such as the Jawahar Gram Samriddhi Yojana/Jowahar Rozgar Yojna (JGSY/JRY) and the Employment Assurance Scheme (EAS), the Mid-Day Meals Program (MDM), and a number of direct nutrition programs--Integrated Child Development Services Program, Balwadi Nutrition Program, Day Care Centers Scheme, and Vitamin A and Iron Distribution Programs that are linked with the ICDS. The following sections describe the nature and scope of these programs. Figure 2.1 illustrates intervention points of these programs aimed at easing specific household food and nutrition security constraints. Table 2.1 summarizes their objectives and implementing agency; while Table 2.2 summarizes the program's method and size of the food transfers and their coverage. Targeted Public Distribution System 2.7 The Targeted Public Distribution System (TPDS), introduced in June 1997, aims to ensure access by the poor and other vulnerable groups to essential food commodities. The program supplies rice, wheat, and sugar nationally, and other commodities such as edible oils and coarse grains in some states, at subsided prices. The shift to the TPDS in 1997 is a significant milestone in the GOI's food security strategy, as it targeted a larger foodgrain subsidy to the poor relative to the non-poor. Its predecessor, the Public Distribution System, by contrast was a general entitlement scheme, and consequently was widely criticized for its failure to serve the population below the poverty line. It was also criticized for its urban bias, negligible coverage in States with the highest concentration of rural poor, lack of transparent and accountable arrangements for delivery -11- FIGURE 2.1: Government of India Food and Nutrition Related Safety Nets and Their Intervention Mechanisms Poor Nutritional Status Inadequate Dietary / \ D Intake (Quantity & ( 3 Disease < Disease Quality) Env't ....... ......... Poor Intra- PoJr-HueldPoor intra- I.J) Houtsehold Choild Care flae Use & > - ousehold Allocation Food Distribution Caring Behavior of Health Serices PMGY& t 1 t ffi~~~~~~~0 Day Care (integrated with SOCIO- Inadequate Househol equate Household Time _ , Vitamin A and Iron CULTURAL Food Availability Available for Child Care & Use of Health ervices ENVIRONMENT Poor Processing Poor Child Care Behavior * & Lack ofe Water Supplementation) (Caste Geder Sn lte Cthmsicty,ctc) t5tti}/ Balwadi Weather ' Inadequate Household & Envtal Food Supply Nutrition Risks Purchased Home Fooi Prodn Weak .shld EE2gProt~ram >< -- Foodi 5 - Prodn ~~~~~~~~~~~ 8_ ~Education & Othe+ rra t t >1 ~~~~~~~Inadequate Household , Inadequae Hous Income Farm Non-FarmUr Mid-Day Meals Foodgrain Price Tarueted Public Distribution Food for Work Prourams Stabilization System,Annapurna Scheme, (JGSY/EAS) Antvodava Anna Yoina - 12 _ Table 2.1: Food and Nutrition Safety Net Programs in India Implementing Program/Scheme Agency Program Objectives A. Targeted Public Dept of Food and Public * Ensure access to essential food commodities at affordable prices, by Distribution System Distribution providing price subsidies for a fix quantity of food to poor and non-poor 1. Antyodaya Anna Dept. of Food and Public * Ensure access by the poorest of the poor to foodgrains, by providing a Yojna Distribution higher price subsidy than the TPDS 2. Annapurna Scheme Department of Rural * Ensure access to foodgrains by indigent senior citizens who do not Development receive pension and without children residing with them B. Foodgrain Price Dept of Food and Public * Protect consumers from drastic upward food price shocks through Stabilization Distribution/ Reserve domestic food supply and price management Bank of India * Promote food production growth and ensure a reasonable income for farmers through commodity price support. C. Food for Work Dept of Rural Devt and * Creation of demand driven village infrastructure, in favor of the rural I .Jawahar Gram Poverty Alleviation/Gram poor for their direct and continuing benefits Samriddhi Yojana Panchayats * Generation of supplementary employment of unemployed men and (formerly Jowahar women in rural areas Rozgar Yojna) . Imrprovement in the overall quality of life in rural areas * Increase entitlements of the rural poor, including access to food, by paying part of wages paid in the form of foodgrains 2. Employment Dept of Rural Devt and * Increase entitlements of the poor, including access to food, by providing Assurance Scheme Poverty Alleviation/Zilla gainful employment and part of wages paid in the form of foodgrains to Parishads underemployed and unemployed adults * Create economic infrastructure and community assets for sustained employment and development D. Mid-Day Meals Dept of Education * Encourage enrollment and attendance in primary school. Scheme . Improve the nutritional status of school children E. Nutrition Schemes Dept of Women and * Improve the health and nutritional status of children (0-6 years) of age, 1. Integrated Child Child Devt pregnant and nursing mothers Development Services . Promote psychological and social development of pre-school children Scheme/ Tamil Nadu through early stimulation and education Integrated Nutrition . Enhance child care behavior among mothers through health and nutrition Program education . Promote coordination of policy and implementation among various departments 2. Pradhan Mantri Dept of Women and * Eliminate malnutrition among children 6 months to 3 year olds through Gramodaya Yojana Child Devt supplementary feeding 3. Day Care Centers Dept of Women and * Provide day care services to weaker/poor sections of society Child Development . Improve health and nutritional status of children below 5 yrs 4. Balwadi Nutrition Dept of Women and * Improve nutritional status of children 3-5 yrs Program Child Devt * Promote social and emotional development of children 5. National Nutritional Dept of Family Welfare * Prevent, detect and address nutritional anemia among women of Anemia Control Program reproductive age and pre-school children 6. Vitamin A Prophylaxis Dept of Family Welfare . Prevent, detect and correct Vitamin A deficiencies in children 6 months to 5 years and sizeable leakages to the open market.' At its introduction, Below Poverty Line (BPL) households were eligible for 10 kgs of foodgrains (rice, wheat or a combination) at a much lower price than Above Poverty Line (APL) households. Annex Tables A2.la & b list the TPDS pricing structure. Based on estimates of state poverty levels, the Department of Food and Public Distribution of the Central Government (GOI), commits to supply to State governments their total BPL requirement of rice and wheat. In addition, the GOI also supplies an additional allocation of rice and wheat for the above-poverty-line households in each state, amounting to the difference between the average of the preceding 1O-year State PDS allocation and the amount already committed for the BPL households in the State (Annex Table A2.2). 2.8 In April 2000, the TPDS crossed another important milestone in exclusively targeting the price subsidy to thepoor. The size of the foodgrain ration of BPL households was raised from 10 to The Public Distribution System (PDS), the predecessor of TPDS, was a general entitlement scheme begun after independence. A revamped PDS (RPDS) was launched in 1992 to improve the reach of the PDS in tribal areas and drought prone desert and hill areas. Under RPDS, foodgrains were supplied to 1775 blocks at 50 paise per kg less than the Central Issue Price. - 13 - 20 kgs per month, priced at about 50% of the economic cost of the Food Corporation of India. The price of APL foodgrains was raised to the full economic cost, thus completely eliminating any price subsidy. Table 2.2: Food and Nutrition Safety Net Programs in India-interventions, Financing Arrangements and Coverg Volume of Food-Base Program/Scheme Transfer Program Interventions Coverage A. Targeted Public BPL: 20 kg rice or wheat/family/month Price subsidies on rice wheat, sugar, All-India Distribution System APL: 10-40 kg rice or wheat/family/month edible oils. 1. Antyodaya Anna Yojna 25 kg of rice and wheat per family A higher price subsidy on rice and All India classified as poorest of the poor wheat than BPL rates 2. Annapuma Scheme 10 kg! month/indigent senior citizen Free grain to indigent senior citizens All-India B. Foodgrain Price Foodgrain procurement and price All India Stabilization support, rice and wheat buffer stocks and open market sales at below market prices; Controls on private storage, movement, access to credit, rice milling, extemal trade C.Food for Work I kg of rice or wheat/workday Employment in lean agricultural Rural areas .Jawahar Gram Samriddhi season for rural workers below except Delhi Yojana (formerly Jowahar poverty line &Chandigarh Rozgar Yojna) 2. Employment Assurance I kg of rice or wheat/workday 100 days employment during lean Rural areas Scheme agricultural season up to 2 members/family D. Mid-Day Meals 3 kg rice or wheat/child/month for 10 mos. Cooked meal or distribution of All India Scheme Or Cooked meal (100gm) for 200 days foodgrains to primary schools E. Nutrition Schemes 0 to 6yrs: 300 calories (ready to eat food) Supplementary feeding, growth All-India I. Integrated Child + 8-10 gm protein for 300 days monitoring and promotion, nutrition Development Services Malnourished Children: 600 calories + 20 and health education to adult women Scheme/ Tamil Nadu gm protein for 300 days and adolescent girls, pre-school Integrated Nutrition Adolescent girls: 500 calories + 20-25 grn education to 3-6 years old, Program protein for 300 days immunization, health check-ups and Pregnant & nursing mothers: 500 calories referrals, income generating programs + 20-25 gm protein for 300 days 2. Pradhan Mantri 300 calories and 8-10 gms of protein for Supplementary feeding All India Gramodaya Yojana Grade I and 11 children, double the amount for Grade III and IV children. 2. Day Care Centers 300 calories + 12 -15 gm protein for 270 Day care services to children below 5 Selected areas days yrs to low income families, supplementary nutrition, health care, medical check up and immunization 3. Balwadi Nutrition 300 calories + 12 -15 Supplementary feeding to children 3-5 Non-ICDS areas Program gm protein for 270 days yrs, promote child's social and emotional development 4. National Nutritional Iron folate tablets for 100days Integrated with ICDS, iron and folic All India Anemia Control Program acid given to expectant mothers and children 5. Vitamin A Prophylaxis 6-11 mos: 0.1 million IU per 6 mos Integrated with ICDS, Vitamin A All India Program 1-5yrs: 0.2 million l.U. per 6 mos provided to infants at 9 mos to 5 years, with immunization against measles. 2.9 While the Department of Food and Public Distribution is responsible for the GOI's foodgrain policy overall, the Food Corporation of India (FCI) serves as its implementing arm. FCI, established in 1965, procures, stores, and distributes to States the foodgrains intended for the TPDS and other food-based transfer programs. In addition, FCI also maintains the nation's buffer stocks for the GOI's price stabilization program (This is discussed in greater detail in the next section). In the case of sugar, FCI or its designated state agency directs the amount which must be delivered by each sugar mill to the PDS from buffer stocks held at the mill.. Sugar is also sold at subsidized prices through the public distribution system at an administered price (Annex Table A2. I c). - 14 - 2.10 State TPDS foodgrain and sugar allocations are sold at subsidized prices through a network of 'fair price shops". State Civil Supplies Corporations and State Marketing Federations draw the foodgrains and sugar from designated FCI depots located throughout the country for distribution and sale at about 450,000 Fair Price Shops (FPS). These shops are private retail outlets operating on commission basis (about 7%). The final size of the rations that households could purchase varies by State. For example, although the official ration size was 10 kg per household prior to February 2000, BPL households were allowed to purchase as much as 20 kg at BPL prices in Tamil Nadu and Andhra Pradesh (Annex Table A2.4). As per official guidelines, however, the retail price of TPDS foodgrains at the fair price shop for BPL households cannot be more than 50 paise per kilo higher than the Central Issue Price (CIP). However, States have discretion in setting APL retail prices (Annex Table A2.5). State governments are responsible for identifying families below the poverty line, issuing ration cards, and supervising and monitoring the operations of the fair price shops. Antyodaya Anna Yojna 2.11 The Antyodaya Anna Yojna (AAA) Program aims to improve food security among the poorest of the poor by providing access to foodgrains at highly subsidized prices. Launched only in December 2000, the program is targeted to about 10 million (15%) of the poorest of BPL households. Under the program, the eligible BPL family could purchase 25 kg of foodgrains per month from the fair price shop, priced at Rs 2 per kg for wheat and Rs3 per kg for rice. These prices are about half the regular BPL rates. In the process of being operationalized, the identification of the AAA families will be carried out by the State governments. Annapurna Scheme 2.12 Also linked to the TPDS is the Annapurna scheme. This program provides 10 kgs of foodgrains per month for free to indigent senior citizens living alone. Approved during the 1999/2000 budget, it is now being operationalized. It is targeted at those who are eligible for old age pension, but do not receive them and who do not live with their children in the same village The Ministry of Rural Development is charged with its implementation, with an annual foodgrain requirement estimated at 166,000 mt, issued by FCI at economic costs. Price Stabilization Program and the GOI's Foodgrain Policy8 2.13 The TPDS and the price stabilization program are two of the three key pillars which support the of GOI's foodgrain policy, and their implementation is closely linked to the third pillar, the GOI's procurement and price support operations. The GOI's foodgrain policy, as noted earlier, is one of the chief instruments in the GOI's food security strategy. Because of the critical interdependence between them, any adjustment in one element (e.g. elimination of the price subsidy to APL households) would have important ramifications for the other programs. To gain a clear understanding of the context under which the GOI's price stabilization program operates, this section will discuss not only its operational arrangements, but also how it links to both the procurement and price support operations and the TPDS. Figure 2.2 presents a simplified illustration of the relationship among these three programs. 2.14 At the start of the process and with the aim of ensuring farmers a remunerative return, the Food Corporation of India procures wheat and, to a lesser extent, paddy. Paddy procurement generally amounts to about 20% of total rice procurement.9 Wheat and paddy are purchased at a pan- territorial and pan-seasonal minimum support price (MSP).'° The MSP operates in practice only This section is drawn from World Bank, 1999, "India Foodgrain Marketing Policies: Reforming to Meet Food Security Needs," Report No.18329, Washington, D.C.:World Bank. Paddy refers to the unprocessed grained directly harvested from the rice plant. Rice is the product when paddy is milled. The MSP is based on cost of production, changes in input prices, supply and demand, stock levels, inter-crop price parity, the likely effect of changes in prices on the cost of manufacturing of industrial goods and the cost of living, international price trends, and the parity - 15 - during the harvest season as a Figure 2.2:Foodgrain Policies and the Foodgrain Marketing System cushion against sharp price declines. In addition to occasional imports, FCI's rice POS e PricSbizationD ( Sbiaon and wheat purchases are the l Plie primary means of acquiring supplies for the public food ' ' distribution program and for WHEAT MKTG SYSTEM RICE MKTG SYSTEM buffer stocks. For rice, State FCI/Public Private FCMPublic Private Channel Channel Channel Channel governments also impose a "rice levy" on rice mills, Procurement Procurement Procurement Procurement resulting in a two-tiered -Panterritorial, -Panterritorial, Panseasonal Panseasonal pricing-dual marketing Wheat MSP paddy MSP system. State Levy Control v Movement, credit Movement, credit Orders require private mills to sore, export & storage, export & deliver from 10% to 75% of trade controls imnport controls their rice output to FCI and to state governments. For these (buffer.stocks) {Rice Levy} deliveries, the mills receive a State-prescribed pan- territorial and pan-seasonal Distribution Distribution Distribution Distribution "levy price", that is based on -Panterritorial, FCI open mkt sales -Panterritorial, FCI open market sales the MSP for paddy plus pan-seasonal -FCI imports pan-seasonal -FCI imports 44 ~~~~~~~~TPDS wheat TPDS rice price "average" rice milling costs price and a "margin" of profit for the millers (CACP 1998). Only after meeting levy commitments can private mills sell their remaining rice output in the open market. 2.15 These public sector stocks of rice and wheat are then sold either through the TPDS, to the open market to stabilize prices, or distributed through other food-based transfer programs. In some states (West Bengal, Uttar Pradesh and Madhya Pradesh), procurement and distribution of state TPDS foodgrain requirements have been decentralized to the respective State governments. Government stocks are also used to stabilize domestic prices. They are sold wholesale in the open market at below-market prices to dampen sudden price spikes. In 1999/2000, the minimum buffer norms ranged from about 16 to 24 million mt, varying across lean and harvest periods (Annex Table A2.7). Sustained increases in the minimum support price since the mid-1990s, which boosted domestic prices above world market prices and restricted exports, combined with the limited offtake from the TPDS, led to burgeoning buffers stocks. By early 2001, foodgrain stock levels have reached 50 million mt. 2.16 To support these operations, the GOI adopted a highly interventionist approach in the private marketing system. These regulations have important implications to the food and nutrition security of households, because they influence the efficiency of private markets, on which households depend for the major share of their foodgrain needs. Movement and storage controls and limits on access to trade credit restrict private market operations. Dating from the Essential Commodities Act (ECA) 1955 and intended to facilitate accumulation of supplies for the government food distribution and price stabilization programs, a variety of GOI and State Orders control and regulate the marketing and distribution of specific commodities to ensure the availability of essential mass consumption items at reasonable prices (Table 2.3). Traditionally, these restrictions between prices paid and prices received by farmers (Tyagi, 1990). The Commission of Agricultural Costs and Prices formulates and recommends the MSP to the Cabinet which decides on the final prices to be implemented These are submitted to various ministries, the Planning Commission and State govemments for cormments, before submission to the Cabinet. The MSPs are announced during sowing time, for wheat in October and for rice in July. 16 _ Table 2.3: Regulatory Controls on Private Grain Trade PolicyfRegulation Market Territorial GOI State Implication Coverage 1. Rural Wholesale Markets Essential Commodites Act FCI panterritonal Minimum Support Price All India-adjusted 1955 yearly Agricultural Produce Restricts farmer marketing channel to State regulated Most States Market Acts markets Multi-point market fees and sales tax UP II. Transport Essential Commodities Act Restricts interstate movement, sporadically enforced in All India: 1955 recent years lifted/sporadic Jute Packaging Materials Restricts transport of rice and wheat intended for retail All-India (Compulsory Use in Packing sales to gunny bags Comrnodities) Act Sales Tax Legislation Unequal taxation discourages interstate movement Most states State Restricts intra or interstate movement West Bengal, Paddy/Rice(Restricbo Orissa,Tamil Nadu, ns and Movement) Andhra Pradesh, Order Jammu & Kashmir III. Storage Essential Commodities Act State Storage Control Imposes stock quantity limits, frequent revised and All India: 1955 Orders sporadically enforced in recent years lifted/sporadic Uncertainty discourages banks from accepting warehouse All-India receipts Negotiable Instruments Act Restrict use of warehouse receipts as a financial instrument All-India to CWC RBI Selective Credit Restricts access by setting working capital borrowing All-India: Controls limits, frequently revised lifted/sporadic IV. Grading Agricultural Produce FAQ grading standards periodically relaxed, differentiated All-India (Grading and Marking) Act, across states 1937 Prevention of Food Adulteration Act (1954) V. Processing State Levy Control Forced rice mill output (7-75%) delivery to FCI Most states, Orders Restricts open mkt sales till levy commitment filled Most states Fixes processing margins of levy rice Most states Rice Milling Industry Restricts rice milling to small-scale firms All India-abolished (Regulation and Licensing) 1997 Act 1959 Amendment prescribes modemization of hullers & All-India hullers/shellers New Rice Mill Levy and sales tax exemptions to new mills Some states (Eastem Incentives UP, WB) VI. Distribution Essential Commodities Act, Price Stabilization through buffer stock operations; All-India 1955 sporadic FCI open market sales at below market prices Distribution of rice and wheat at subsidized prices (TPDS) All-India Export quota on non-basmati rice and wheat products; sporadic export restrictions and bans. All imports All-India canalized, sporadic lifting Forward Contracts Bans on futures trading of rice and wheat. Basmati futures All-India (Regulation) Act 1952 approved State Licensing Acts Requires licenses for dealers and traders, prescribes Most states storage limit - 17- bottled upgrain supplies and thus kept market prices low enough to ensure adequate supplies for the public distribution system and buffer stocks. At present, movement controls are not being enforced, except in West Bengal and Jammu and Kashmir. However, such bans could be reimposed with no advanced notice and for any length of time. It was temporarily activated for wheat in 1996/97. 2.17 Storage Control Orders under the EC Act regulate foodgrain stockholdings by private traders. The limits vary depending on the severity of supply shortfalls and price rises. Although the storage control order is lifted in most states, except Andhra Pradesh, Tamil Nadu and Jammu and Kashmir, these restrictions could be reintroduced at any time. Any private trader owning excess stocks has 15 days to comply with the limits. The control orders were temporarily enforced nationally in December 1996, with ceilings set at 15 days of the operational requirement. In addition, state licenses prescribe storage ceilings for traders and millers of paddy, rice and wheat. In April 1998, the Department of Public Distribution advised states to abolish stock limits on wheat due to the comfortable food situation; but by September 1999, the Department advised states to reimpose the stock limits. 2.18 Credit controls, implemented by the Reserve Bank of India (RBI) under the Selective Credit Control Policy, are another instrument for preventing private traders from driving prices up by holding stored grain (and other commodities) back from the market. The RBI issues directives to the Scheduled Commercial Banks from time to time to regulate credit by limiting margins against the value of security of commodity stocks and resetting credit ceilings and interest rates."' Margins and credit ceilings operate at the level of the individual borrower. Margins refer to the proportion of advances permitted to the value of stocks. Ceilings relate to the peak level of advances attained in any of the three preceding years by the borrower. The terms for accessing trade credit are frequently revised. For example, between 1990 and 1997, the credit terms for wheat were revised 13 times. A related issue is the way in which FCI also crowds out the private sector in the formal financial system. During the early to mid-90s, private trade credit amounted to only 6 to 25 percent of trade credit extended to the FCI. 2.19 External trade policy - specifically, the FCI's traditional but recently and intermittently relaxed monopoly on rice (excluding Basmatie2) and wheat imports-also supports price stabilization programs and national food security. Exports of rice and wheat/wheat products were liberalized in 1994, banned in 1996/97 and permitted subject to quota in 1997/98. For 1999/2000, the wheat export ceiling was set at 1 million mt. Imports remain canalized through FCI although private imports of low-quality rice were permitted for a short period. Because of high world prices, however, no private imports arrived. Due to declining world market prices and problems of burgeoning buffer stocks, the GOI recently raised the import tariffs for rice and wheat from 0% to 80% and 50% respectively. Food for Work Schemes 2.20 The Department of Rural Development and Poverty Alleviation implements two employment schemes in which workers are eligible to receive part of their wages in the form of foodgrains. The first is the Jowahar Rozgar Yojna (JRY), which was restructured into the Jawahar Gram Samriddhi Yojana (JGSY) in January 1999. The JGSY aims to create demand-driven village infrastructure, while providing supplementary employment to unemployed men and women in rural areas during agricultural slack periods. In recruiting participants, preference is given to scheduled castes and tribes, freed bonded laborers, and parents of child laborers. Wages paid to workers are either the minimum wage or higher wages fixed by the State. An important change from the JRY to A Scheduled Commercial Bank is one that is registered with the Bank Schedule of RBI upon fulfilling certain conditions pertaining to the amount of paid-up capital and the conduct of business. Basmati rice is a high-quality, long-grain, fragrant rice, which accounts for a small percentage of total rice production (about 800,000 mt per year). It is not subject to the same controls as common rice varieties: Basmati rice exports were shifted to Open General License in the late 1 980s. Their minimum export price restrictions were abolished in 1994, and they were exempted from the rice levy. - 18 - the JGSY is the transfer of responsibility for implementation to village panchayats or the lowest elected body, including the Gram Panchayat, Mandals, Nagar Panchayats and traditional village institutions like Village Councils and Village Development Boards having statutory authority. An action plan is prepared by the District Rural Development Agency/Zilla Parishad (District Panchayat) and after necessary approval is handed down to the Village Panchayat for implementation. 2.21 The second program, the Employment Assurance Scheme (EAS), aims to create additional wage employment opportunities for the rural poor through the creation of durable community, social and economic assets. The EAS was launched in 1993, but was restructured in January 1999. It aims to provide employment on demand (up to 100 days) during the lean agricultural season, when employment tends to be scarce. Any 2 members of a family aged between 18 to 60 years old, who are in need and desiring of work are eligible. Under the restructured program, EAS activities are to be implemented by the Zilla Parishads, and by paying the minimum wage is intended to be self targeted to the rural poor. 2.22 Central assistance under the JGSY and EAS to States/Union Territories is allocated on the basis of the proportion of rural poor in a State to the total rural poor in the country. District wise allocations (in a state) are on the basis of an index of backwardness which takes into account the proportion of rural SC/ST population and the inverse of the agricultural production character (Ministry of Rural Development 1999). For EAS, 70% of the funds allocated for each district would be allocated to the Panchayat Samitis (Intermediate Panchayat), and the remainder will be reserved at the district level and will be utilized in the areas suffering from endemic labor exodus and areas of distress. By contrast, the entire funds allocated to each district under JGSY are to be distributed to the village panchayats. 2.23 State governments could provide foodgrains as part of the wages. However, under the new JGSY and EAS guidelines, the State government will supply the foodgrains through their own arrangements and since foodgrains drawn from FCI by the State are priced at their economic costs, the State government also has to bear the cost of any subsidy required. Prior to June 1997, foodgrains issued to JRY and EAS beneficiaries were valued at the price fixed by the state in the fair price shops. After June 1997, they are issued at 50 paise over the BPL price. Under the EAS and JRY programs, workeTs are entitled to I kg of subsidized rice or wheat per day (maximum of 10 to 15 kgs per month). 2.24 The World Food Program (WFP) is a major contributor of food to employment schemes in some states. In Orissa, Bihar, Uttar Pradesh, Rajasthan, and Gujarat, the WFP supplies food to workers under the joint forestry management program implemented by the Forestry Department. The food rations, consisting of 2 kgs of rice or wheat, 200 gms of pulses and 75 gms of oil for each day worked, are priced at half the value of the ration or 40% of the daily wage, which ever is less. The ration is estimated to amount to an income transfer of about 25% over their regular wages. Subsequently, the revenues generated from the donated food are to be used to support a village investment fund to finance schemes and activities that benefit the target group. In a similar manner, the WFP contributes food to be sold at concessional prices to workers employed in the Indira Gandhi Nahar (Canal) Project (IGNP) in Rajasthan and the Malaprabha, Ghataprhabha and Upper Krishna Irrigation Projects in Kamataka. In addition, the WFP provides free food rations for 24 months for IGNP settlers (about 20,000 by 1997). National Program for Nutritional Support to Primary Education 2.25 The National Program for Nutritional Support to Primary Education (NPNSPE) aims to promote improved nutrition and attendance of primary school children. The program, more popularly known as the Mid-Day Meals or Noon Meals Scheme, aims to improve child enrollment in primary school, to encourage regular attendance by providing supplementary feeding, and to improve their nutritional status. Implemented by the Department of Education, it is a Centrally - 19 - sponsored scheme launched in 1995 and covers children enrolled in classes I to IV in government and government-aided schools in the whole country. The Central support under the program involves the provision of foodgrains to States free of cost and reimbursement of transportation costs to district authorities for moving grain from the Food Corporation of India warehouses to the schools or villages. During the Ninth Plan period (1997-2002), the program is expected to be universalized to all rural blocks and urban slums. 2.26 Supplementary feeding under the NPNSPE is either in the form of afoodgrain ration or a cooked meaL The Committee on the NPNSPE established the per child food ration on the basis of the estimated additional nutritional value required by ckildren in the primary school age group to meet their nutritional deficiency. In Andhra Pradesh, Gujarat, Maharashtra, Orissa, and Tamil Nadu, the program provides children with cooked meals (100 grams per day) during the 200 days of school year (Annex Table A2.10). In Delhi and Chandigarh, processed foods are distributed. In all other states, the program supplies foodgrains to each child, primarily to reduce the transaction cost and complexity of cooking meals. Each child is eligible for 3 kg of rice or wheat per month for 10 months. In most states, the foodgrains are distributed in school. In Karnataka, Madhya Pradesh and Uttar Pradesh, the government adopted a coupon system, where the coupon can be redeemed at the local fair price shop. In most states, eligibility requires 80% attendance in the previous month, although mere presence during the distribution of the cooked meal or foodgrain is usually adequate in many states (e.g. Gujarat, Jammu, Rajasthan, and Orissa). The Food Corporation of India supplies foodgrains to the program, valued at their economic costs. These are released directly at the district level following instructions from the Central Department of Education. 2.27 Tamil Nadu was the first state to implement a mid-day meals program. Initated in 1956, the program's objective was to reduce primary school dropouts, promote universal education, and improve the nutritional status of children. Children between the ages of 2-14 years attending 68,000 Balwadis and schools receive a free meal of roughly 400 calories, comprising rice, lentils and vegetables and more recently vitamin tablets and an egg every fortnight. Andhra Pradesh initiated a mid-day meals program in 1962, which in 1982/83 expanded to cover all school children in grades 1- 5 in the state. Since 1985, the program is being run with assistance from CARE. Maharashtra provides supplementary nutrition to school going children ages 6-11 years in grade 1 in multi-teacher schools, grades 14 in single teacher schools in rural areas and grades 1-4 in tribal areas. Under the scheme, each student receives 100 gm "paushtik ahar" or 150 ml boiled milk or one boiled egg for about 200 days per year (except Sundays, holidays and vacation). Integrated Child Development Services Program'3 2.28 The Integrated Child Development Services (ICDS) Program is one of the largest programs in the world aiming to provide an integrated package of nutrition, health and early child development services. The program was launched in 1975, as an experimental government initiative in 33 blocks, under the auspices of the Department of Women and Child Development. It expanded over the years, and during the Ninth Plan period (1997-2002), the target is universal coverage of all blocks. The program is based on an integrated approach for converging basic services for improved child care, early stimulation and learning, health, nutrition, and water and environmental sanitation. Specifically, the program aims: (i) to improve the nutritional and health status of children 0-6 years and pregnant and nursing mothers; (ii) to lay the foundation for the proper psychological, physical and social development of the child; (iii) to reduce the incidence of mortality, morbidity, malnutrition and school drop-outs; (iv) to achieve effective coordination of policy and implementation amongst various departments to promote child development; and, (v) to enhance the capability of mothers to look after the normal health and nutritional needs of their child through proper nutrition and health education. The philosophy and approach behind the scheme is that the This section draws from World Bank, 1998, "India Wasting Away, The Crisis of Malnutrition in India," Report No. 18667, Washington,D.C.: World Bank. - 20 - overall impact would be greater if different services are delivered in an integrated manner, as the efficacy of one service depends on the complementary support it receives from other services. ICDS was developed to take a holistic view of the development of the child. 2.29 In order to reach these goals, the program provides a number of services to 0-6 year old children and mothers. These include nutrition services (supplementary feeding, growth monitoring and promotion, nutrition and health education), health services (immunization, health check-ups, referral services, treatment of minor illnesses), early childhood care for under threes and pre-school education for three to 6 years olds, and support for other services (e.g. safe drinking water). The adolescent girls' and women's' programs are intended to improve health and nutrition over the long term through improvement in women's skills and access to resources. 2.30 The Anganwadi worker (A WW), a trained village woman, delivers the ICDS services at a village center called the AnganwadL She is supported by an Anganwadi Helper and assisted periodically in the health tasks by an Auxiliary Nurse Midwife (ANM) from the health sub-center. The population coverage for the AWW is approximately 1000 in rural and 700 in tribal areas. Presently, there are on average 125-150 AWCs per project/block. The program is supposed to be targeted at poor areas and households. Program coverage varies by activity. For example, immunization aims at 100% coverage while food supplementation aims for 40% coverage in rural/urban projects and 75% in tribal areas. Pradhan Mantri Gramodaya Yojana 2.31 The nutrition component of the Pradhan Mantri Gramodaya Yojana (PMGY) aims to improve the nutritional status of children 6 months to 3 years old. Introduced by the GOI in April 2000, PMGY is a broad-based program that aims to promote human development at the village level. The PMGY provides additional fiscal support for strengthening basic minimum services, including rural roads, primary health, education, shelter, drinking water and nutrition. The nutrition initiative primarily involves additional financial assistance to strengthen the supplementary feeding program for children 6 months to 3 years old participating in the ICDS program. The budget allocation under PMGY is intended to bridge the under-provisioning of resources to the 0-3 year age group in the ICDS. The State government is responsible for implementing the scheme. Other Direct Nutrition Programs 2.32 In addition to the ICDS, there are a number of smaller programs involving supplementary feeding of children. These include the Wheat Based Supplementary Nutrition Program, the Balwadi Nutrition Program and the Day Care Center Scheme. Two programs, the National Nutritional Anemia Control Program and the Vitamin A Prophylaxis Program, that are implemented in coordination with the ICDS, are also discussed. 2.33 Wheat Based Supplementary Nutrition Program. This program follows the norms of the nutrition component of the ICDS and was meant to enlarge the scope of existing programs in tribal areas, urban slums and backward rural areas. It is a 100 percent centrally sponsored scheme introduced in 1986 and is implemented by the Department of Women and Child Development. Central assistance for the program consisted of the supply of free wheat and supportive costs for other ingredients, cooking, transport, etc. This program was transferred to State Governments in 1993/94. 2.34 Balwadi Nutrition Program. This program aims to promote early childhood development and improved nutrition. Launched in 1970/71, it aspires to meet the basic nutritional requirement of children 3-5 years of age by providing nutritional (wheat-based) supplements amounting to 300 calories and 12-15 gms of protein for 270 days per year. In addition, the Balwadi centers aim to provide for the social and emotional development of children. The program is 100% financed by the Department of Women and Development, but implemented by the Central Social Welfare Board and four national level voluntary organizations that extend assistance to local voluntary agencies to - 21 - implement the program. The program operates 5,641 centers throughout the country and continues only in non-ICDS areas. 2.35 Day Care Center Scheme. The Day Care Center Scheme aims to provide day care services to children below 5 years belonging to weaker sections of society, whose family income does not exceed Rsl,800 per month. The creches run under the scheme also provide health care, supplementary nutrition, medical check up and immunization to children whose parents are away at work sites or are incapacitated due to illness. The scheme, 100% financed by the Department of Women and Child Development, is implemented by the Central Social Welfare Board and with the help of voluntary organizations. 2.36 National Nutritional Anemia Control Program. This program aims to prevent nutritional anemia among women of reproductive age and pre-school children by providing iron-folate supplements. It is implemented by the Department of Family Welfare and was launched in 1970. The program includes providing iron-folate supplementation for a period of 100 days, identifying and treating cases of severe anemia, and promoting the consumption of iron-rich foods (Annex 1). Expectant and nursing mothers are given 1 tablet of iron and folic acid containing 60 mg of elemental iron and children in the age group 1-5 years are given 1 tablet of iron containing 20 mg elemental iron. The supplements are distributed through ICDS in ICDS areas. 2.37 Vitamin A Prophylaxis Program. This program provides Vitamin A supplements to children 5 years and younger. Children between the age of 1 to 5 years receive an oral dose of 0.2 million IU of Vitamin A and 6-11 month infants receive 0.1 million IU every 6 months. Therapeutic doses are given to those with detected deficiencies. The program also promotes dietary intake of Vitamin A rich foods. The program is implemented through ICDS in ICDS areas. C. Food-Based Transfer Programs :Potential Food and Nutrition Security Impact 2.38 Based on their intended objectives, had the government's package of programs been implemented effectively, they could potentially raise the caloric consumption ofpoorer households to the recommended daily allowance. It is estimated that the package of food and nutrition interventions (TPDS, JGSY/EAS, Mid-Day Meals and ICDS) in total, if they all operated as per their design specifications, could transfer the caloric equivalent of about 36.5 kgs of grains per household per month (Annex Table A2.29). Taking the average household size of the bottom 5% of the population of 5.7 persons (2.7 adults and 3 children) as a reference (NSSO 50d Round 1993/94, Annex Table A2.30), these transfers equal about 0.28 kg of grains per person per day (Table 2.4). For the average person (based on 1993/94 standards), this grain transfer would amount to about 62% of average per capita cereal consumption per day for rural consumers and about 78% for urban consumers. It would account for about 40% of the recommended daily caloric allowance. While these transfers could make a marked difference on an individual's caloric consumption, their impact must also assessed in terms of their impact on household behavior and their fiscal implications. Box 2.1: How the ICDS Supplementary Feeding Component Works ICDS aims to supplement the daily nutritional intake of children and expectant and nursing mothers by providing about 300 calories and 8-10 grams of protein for pre-school children; 600 calories and 20g of protein to severely malnourished children and 500 calories and 20-25 gms of protein to expectant and nursing mothers for 300 days a year. Assuming 100% food availability and delivery, a family with a pregnant woman and a pre-school child will receive 800 calories a day towards its food supply needs. This increment to food security constitutes roughly 5.7 kg of food per month (at 3,500 calories per kg). Children from two to six years are to eat their food allocations on site daily at the AWC, while pregnant women, nursing mothers and children under two years of age are given "Take-Home Rations" weekly. The type of food provided varies depending on the availability, administrative feasibility and type of beneficiaries. The guiding principle is that it should be easily digestible, palatable, acceptable to beneficiaries and prepared from seasonal locally available foodstuffs. In Tamil Nadu, it consists of a ready to eat mix of wheat, gram, groundnut cake, sugar, maize, and vitamin and mineral mix, delivering 380 calories per ration, served in the form of "laddus" or a small bell-shaped snack. In CARE funded areas, the com-soybean blend is served, consisting of commeal, soybean flour and oil and a vitamin mineral mix. In WFP funded areas, the food supplement, called "Indiamix" consisted of roasted or extruded blend of wheat, maize, and soybean in a proportion of 40:40:20 respectively per 100 gm of flour. Source: WFP 1998, CARE 1997, National Institute of Public Cooperation and Child Development 1992, World Bank 1990 - 22 - Some studies find that food transfers could have a possible negative incentive effect on labor, i.e. a reduction on work effort (Sahn and Alderman 1995). As discussed below, they also have significant fiscal implications, which highlight the trade off between these more short-term oriented food safety nets and other more long-term growth oriented programs of the government. Table 2.4: Percentage of Grain Transfer (volume and calories) in Recommended Daily Allowance. Food and Nutrition Security Grain Equivalent Grain Transfer as Percent of Caloric Equivalent Caloric Equivalent of Grain Transfer Per Average Cereal Per Capita of Grain Transfer5' Transfer as Percent of RDA Consumer Unit4' Consumption Per Day" Intervention Kg/day Rural Urban Calorie/day Rural Urban TPDS (20 kgs) 0.15 34% 43% 530 22% 24% JGSY/EAS (I person) 0.06 14% 18% 221 9% I 0o/o Mid-Day Meals (I child) 0.02 4% 5% 66 3% 3% ICDS (Ichild & mother) 0.04 10% 12% 152 6% 7% ALL PROGRAMS 0.28 62% 78% 969 40% 44% Notes: I/ Assumes I kg x 100 person days/12 months; 2/ Assumes: (3 kgs/month x 10 months)/12 months; 3/ Assumes (800 calories x 300 days)/12 months4/ Assumes an average of 5.7 persons per household (2.7 adults and 3 children under 12 years) equivalent to 4.4. consumer units per household (see Table A3.xx), 30 days per month, and programs working at 100% effectiveness ; 5/ Average per capita consumption of cereals per month taken at 13.4 kg in rural and 10.6 kg in urban based on 1993/94 NSSO 50th round survey; 6/ Assumes 3,500 calories per kg of grain. D. Government Expenditures and Overall Program Costs 2.39 India spends a substantial amount ofpublic resources onfood-based transferprograms. In 1997/98, the estimated total program expenditures (govemment and international food aid) of the maj or food-based transfer programs amounted taor fsoo4-billio ($3.6fe billon)aor 0.9%ofnthed Figure 2.3: Percentage distribution of Central and State Govemment tbli 3609% of theExpenditures on Food-based Transfer Programs GDP. Of total program cost, the govemment share of expenditures amounted to Rs130 NU i VittA Md-Day billion. The remainder was contributed by 10% 8% international (i.e. UNICEF, CARE, and WFP). Fo*-o Subsidies to TPDS foodgrains and sugar Work accounted for about 70% of the total program 0.4% expenditures (Figure 2.3). The more direct nutrition interventions (ICDS Program, PDS Sugar Balwadi Nutrition Program, Day Care Center 3% Scheme, Iron and Vitamin A supplementation Foodgrain and the NPNSPE) accounted for 19%, while buffer the foodgrain buffer stock subsidy amounted to stock foodgrain 1 1 %. The value of foodgrains transferred 11% 67% through employment programs remains limited at 0.4%. 2.40 Although the cost sharing arrangements between the Central and State governments vary by program, the GOI assumes most of the cost of the programs. For the Targeted Public Distribution System, the GOI finances the price subsidy associated with the foodgrains and sugar that it allocates to each State (Table 2.5). The GOI also shoulders the costs of buffer stock operations for foodgrains and sugar. The State governments finance the additional intra-state TPDS distribution costs (e.g. storage, transport, losses) and additional price subsidies for the quantity exceeding the Central foodgrain or sugar allocation (e.g. Andhra Pradesh, Karnataka, Tamil Nadu). The program costs of employment schemes (JGSY and EAS) are shared between the Central and State Governments at a ratio of 75:25, supplemented by donor grants in some states (Bihar, Gujarat, Madhya Pradesh, Orissa, Rajasthan and UP). With the exception of the ICDS, the other nutrition related programs are financed 1 00% by the Central Government. - 23 - 2.41 ICDS receives financing from both the government and international agencies. The Central Goveniment bears the cost of meeting the operational requirements of ICDS,14 while the States finance the larger share (about two thirds) of the cost in terms of the Table 2.5: Food Based Transfer Programs: Source of Financing supeetar food distributed. The Central/State Shares in FCI Foodgrain supplementary food distributed. The Progran/Scheme Financing supplied at States finance the nutrition component Targeted Public Central: price subsidy (issue Central Issue through the Special Nutrition Program Distribution System less procurement price) Price budget, which was launched in State: Intra-state distribution costs, price subsidy on quantity 1970/71 as part of the Minimum _ exceeding central allocation Needs Program. ICDS also receives Foodgrain Price Central: 100% Buffer stocking Less than significant financial support from Stabilizahon Central 75%; State 25% economic cost international agencies. The United Yojna Nations International Children's Fund Employment Assurance Central:75%; State: 25% Economic Cost (UNICEF) provides equipment and Scheme Donotrs Mid-Day Meals Scheme Central: 100% Economiic Cost support at the national level. The Integrated Child Central: Operational costs Economic Cost World Bank provides assistance for Development Services States/Donors: Supplementary strengthening infrastructure and nutrtion comnponents is Day Care Centers Central: 100%0 Economic Cost management in selected states. The Balwadi Nutritdon Program Central: 100% Economic Cost World Food Program (WFP) and the Iron and Vitamin A Central: 1000/O Cooperative for Assistance and Relief supplementation Everywhere (CARE) provide assistance to the States in the form of food aid to meet the supplementary food requirements of the ICDS. Local transportation, storage, fuel and condiment costs associated with these food donations are borne by the State Governments.16 FCI operates as the "Food Bank" for the World Food Program (WFP) projects. Figure 2.4: Central and State Expenditures on the TPDS, Wheat and rice received from the WFP are merged with Rs million, constant 1997/98 prices stocks held by FCI and an equivalent is released to project " 120- areas from the nearest depot. io0 - 2.42 Notably, the States are by design required to draw 60| their rice and wheat requirement for the employment and c 40* nutrition-related programs from the Food Corporation of 20 India at the economic cost. In 1997/98, this amounted to .a 20 about 1.8 million mt. Up to 1996/97, wheat intended for X ICDS was released by FCI to State Governments at the central issue price on pre-payment basis. Beginning 1997/98 c State Expenditure * GOI Price Subsidy it is issued at FCI's economic cost. Thus, the costs of these Note: GOl subsidy=foodgrain offtake x consumer programs are also closely linked with the operational subsidy/unit performance of FCI. Source: State budeets. Economic Survev. 1997/98. Targeted Public Distribution System Program Costs 2.43 The TPDS foodgrain program cost (GOI price subsidy and State TPDS expenditures) increased rapidly during 1990's. By 1998/99, the GOI foodgrain price subsidy (estimated by offtake x consumer subsidy per unit), reached an estimated Rs 84.4 billion ($2 billion) (Figure 2.4). Additional State expenditures in the same year amounted to about Rs 28.4 billion ($676 million). Of total program costs, the GOI still bears most of the burden. GOI subsidies rose by about 80% in real 14 These include the establishment cost (rent, salaries, office expenditure etc at the Anganwadis) and the health component, consisting of medicines and related expenditure on health care. These included Tamil Nadu Nutrition Project 1(1980) and 11(1990), Integrated Child Development Services Project 1 (1990) and 11 (1992), the Women and Child Development Project (1998), and Andhra Pradesh Economic Rehabilitation Project (1999). The Swedish International Development agency provided support to over 40 ICDS centers in Tamil Nadu up to 1998. - 24 - Table 2.6: TPDS/PDS Program Cost to Transfer Rs I of Foodgrain Transfer, constant 1997/98 pnrces Total Program cost of Est. GOI and State Cost to Transfer Rs lof Foodgrain the PDS/TPDS (A) Subsidy (B) @ 0% leakage @30% leakage @50% leakage Year Rs billion Rs billion (A/B) (A/B)/0.7 (A/BV)/0.5 91/92 40.58 35.66 1.09 1.56 2.18 92/93 45.23 36.34 1.15 1.64 2.30 93/94 40.10 34.32 1.12 1.61 2.25 94/95 40.06 34.28 1.17 1.67 2.34 95/96 58.37 51.42 1.14 1.62 2.27 96/97 74.95 69.64 1.08 1.54 2.15 97/98 89.34 80.46 1.11 1.59 2.22 98/99 102.80 90.62 1.13 1.62 2.27 Note: GOI subsidy=total foodgrain offtake x consumer subsidy/unit., Total Program Cost= GOI price subsidy + total state expenditures in food and civil supplies. Source: GOI expenditure budget, State expenditure budget terms between 1991/92 and 1998/99, while the State's share of expenditures increased by about 50% during the same period. The recent strengthened targeting of the TPDS by the GOI was expected to help contain the rising subsidy. As described in chapter 2, the issue prices of both the BPL and APL allocations were raised effective April 1, 2000 to permit full cost recovery for APL foodgrains. The BPL allocations are issued at 50% of the economic costs. The Government estimated that these changes could generate savings of around Rs 15 billion. 2.44 The GOIfinancial transfers, as measured by the TPDS price subsidy, varied across States, and were only weakly related to existing State poverty levels (Annex Table A2.12b). Based on the estimated size of the price subsidy (offtake times consumer price subsidy/kg) received by each state, Rajasthan, Bihar, Madhya Pradesh and Orissa with higher poverty levels, receive less support than West Bengal and Tamil Nadu, where poverty rates are lower. In 1997/98, Andhra Pradesh, Kerala and Maharashtra received the largest subsidies in the country. The amount of additional State TPDS expenditure is also significant, and is generally less than 1% of GSDP, with the exception of Tamil Nadu. Many State governments are highly dependent on support from the GOI for the TPDS. In all states, except Andhra Pradesh and Tamil Nadu, the GOI shoulders from 60% to 90% of the total TPDS program cost. 2.45 The cost of transferring Rs 1 worth of TPDSfoodgrains under varying assumptions range from about Rsl.13 to Rs2.27 in 1998/99 (199 7/98 prices). Taking the value of the total GOI and State foodgrain subsidies per year as the rupee equivalent of the "free" foodgrain given to households and comparing it with the total program cost (Central and State), it is possible to obtain a rough estimate of the amount of public expenditure required to transfer "Rs I worth of foodgrains" to households (Table 2.6). If all TPDS foodgrains reach consumers, in 1998/99 on average it costs Rsl.13 to transfer Rs I of foodgrains. This figure is considerably lower than previous estimates, because previous analyses had not taken into account additional State subsidies. A recent study by M/s Tata Economic Services (1998), commissioned by the Ministry of Consumer Affairs and Public Distribution, estimated that diversions of rice and wheat into the open market at the national level amounted to 36% and 31% respectively. If such leakages, assumed at 30%, are taken into account, the cost rises to Rs 1.62. Taking into account the weak targeting of the TPDS, for example assuming sales of an additional 20% sales to the non-poor, then the cost of transferring foodgrain to the poor rises to Rs 2.22. Employment Programs 2.46 The total expenditure of the GOI on employment schemes declined significantly in real terms between 1994/95 and 1998/99 from Rs 58 billion to Rs 37 billion (1997/98 prices). JRY suffered a major expenditure cut of nearly 60% from Rs 44 billion to Rs 19 billion in real terms. This was only slightly compensated by an increase in EAS expenditures in real terms from Rs 14 billion to Rs 18 billion during the same period (Annex Table A2.15b). The introduction of a large number of other poverty alleviation programs likely contributed to the decline in budgetary support to employment schemes. - 25 - 2.47 A similar decline in foodgrain offtake also reduced the Department of Rural Development's food expenditures and food subsides transferred to workers. Since the offtake of foodgrains from the two programs declined sharply from 388,000 mt to about 11,000 mt between 1994/95 and 1998/99, foodgrain expenditures in real terms likewise dropped from about Rs2.3 billion to Rs 103 million (1997/98 prices) during the same period (Annex Table A2.15c). These foodgrain expenditures are estimated by valuing foodgrains at the CIP prior to June 1997 and at their economic costs thereafter. State governments generally issued the foodgrains to workers at the PDS price. During this period, the total "income transfer" equivalent to all workers, based on FCI's per unit consumer subsidy, declined by over 90% from Rs 542 million to Rs 47 million. Two factors likely contributed to this rapid decline. First, is the shift in valuation of grains issued by FCI from the central issue price to the much higher FCI economic cost after June 1997. Second is the transfer of the subsidy burden from the Central to the State governments. Prior to June 1997, foodgrains distributed to JRY and EAS were procured by States from FCI at the Central Issue Price, so that the GOI assumed the food subsidy costs. After June 1997, foodgrains are issued to States at the economic costs, transferring the burden to the States. With several states facing fiscal crises, the transfer of the subsidy burden to State governments would have a depressing effect on food transfers through employment programs. 2.48 In addition to public expenditures on food, food aid supports a major share of the food value transferred through employment schemes in some States. In support of the joint forestry management program in Madhya Pradesh, for example, the WFP food contribution accounted for 30% (Rs 870 million) of total program expenditures in the State over the period 1995-99 (Madhya Pradesh Forestry Department 2000). With declining government expenditures overall and in food terms, the WFP share in the value of total food transfers amounted to over 90% of food costs in 1997/98. This high degree of dependence on external funding has important imnplications for the long-term sustainability of these programs in these States. Mid-day Meals Program 2.49 Central government expenditures on the Mid-Day Meals program increased rapidly after 1995/96, reaching Rs 14 billion in 1998/99. In 1999/2000, however, it declined to Rs 10.3 billion. Notably, the mid-day meals program accounts for about half of the total Department of Education budget for primary education. As noted earlier, in most states, the supplementary food is provided in the form of 3 kgs of rice and wheat per month per student. Taking the value of the foodgrains at the economic cost (as this is the "price" at which the grains are "purchased" from FC1), and comparing it with total GOI expenditure for the Mid-Day Meal Program, it is possible to obtain a rough estimate of the cost of transferring a Rs I worth of "free" foodgrains (Table 2.7). In 1998/99, it cost the GOI Rs 1.07 to transfer Rs l value of foodgrain. Table 2.7: Ratio of GOI Mid-Day Meal Expenditure to Value of Foodgrain transferred Category o 95/96 1 96/97 97/98 98/99 GOI Expenditure, Rs billion (A) 6.1 8.0 10.7 14.0 Value of Foodgrain Transferred Rs billion (B) 4.0 7.5 16.1 13.1 Ratio (A/B) 1.53 1.07 0.66 1.07 Ratio (A/B), 1997/98prices 1.75 1.13 0.66 0.87 Note: Foodgrains are valued at econornic costs. Source: Annex Table 2.27 ICDS and other Nutrition Programs. 2.50 ICDS is the largest nutrition initiative in scale and cost for the Central and State Governments of India. The Central Government's share of expenditures reached Rs 9.8 billion ($232 million) in 1998/99, accounting for about 97% of GOI Department of Women and Child Development nutrition expenditures (Annex Table A2.22). The larger share of the ICDS costs, however, is borne by the States, estimated at two-thirds of the total costs (Bhalla and Krishnamurty 1996), in the form of supplementary food. - 26 - 2.51 International agencies, such as CARE and the WFP, cover a large share of the food costs in several states. Of the 24 million beneficiaries in 1997/98 (Annex Table A2.24), CARE and WFP met the supplementary food requirement of about 8.5 million mothers and children, equivalent to 35% of the total ICDS beneficiaries (Annex Table A2.20b). The value of food donated per ICDS beneficiary per month coming from WFP and CARE is estimated at around Rs2O to Rs4O. In 1997/98, this translated to an estimated food (aid) value of about Rs3.1 billion ($84 million). In States where WFP and CARE participate, they cover a larger share of the beneficiaries, exceeding 70% of the beneficiaries in Orissa and West Bengal. In the long run, as the ICDS becomes institutionalized, the major challenge would be for States to generate sufficient resources to take over these food costs currently borne by international food aid agencies. Currently, the value of the food aid amount to as much as 0.2% of the GSDP of Orissa. 2.52 Under varying assumptions, it is estimated that it is costing ICDS from Rs1.35 to Rs 1.49 to transfer Rs I of 'free" food in 1997/98. Radhakrishna, et al. (1998) estimated the costs of the ICDS operations at the project level in Andhra Pradesh and Orissa in 1997/98. The recurring costs consisted of three main components, Table 2.8: Andhra Pradesh and Orissa ICDS Project Costs, 1997/98 namely: food costs of the nutrition Project Costs, Rs million Total Cost/ component, the establishment costs Salaries Food Cost Others Total Food Cost Project ____- I L (A) _ ..(BL. .iA /B) (salaries, rent, office expenditure, etc ANDHRA PRADESH at the anganwadi center and project Etoomagaram (rural) 1.94 5.17 0.2 7.31 1.41 headquarters) and the health Marpalle (rural) 1.59 3.57 0.15 5.31 1.49 ORISSA component (medicime, and related Bhubaneswar (urban) 1.55 4.95 0.18 6.68 1.35 expenditure) (Table 2.8). Food costs Khurda (rural) 1.14 3.45 0.07 4.66 1.35 accounted for the major share (67- Source:Radhakrishna, Indrakant and Ravi, 1998, ICDS Program Assessment and 74%) of project costs. These transfer costs, however, are overestimated as the total costs also include expenditures on other complementary nutrition and health related activities. 2.53 GOI expenditures for the other nutrition programs declined in the 1990s as the emphasis shifted to ICDS. The Balwadi Nutrition Program expenditures were cut sharply in real terms (1997/98 rupees), from Rs 120 million to Rs 55 million between 1994/95 and 1997/98, as Balwadi centers were absorbed into the ICDS program. Expenditures on the Day Care Scheme similarly declined in real terms from Rs 286 million to Rs 222 million in Figure 2:5: Central and State Goverment the same period. The two programs by 1997/98 accounted for Nutrition Expenditures, 1990/91 to 1997/98, only 2.8% of the DWCD nutrition budget. It is estimated that Rs billion, 1997/98 prices total GOI and State Govemment expenditures on nutrition | 12.0 programs (ICDS, Balwadi Nutrition Program and Day Care | 11.0 8. 10.0 Scheme) reached Rs 10.9 billion ($293 million) in 1997/98. co 9.0 - 2.54 Total Central and State nutrition expenditures 70 8. (excluding UP) dipped in the mid-1990s,, but increased 6.0- thereafter. As a result of the renewed govemment focus on 5.0- nutrition security in the 1990s, govemment nutrition n 3.0 - expenditures increased between 1993/94 and 1998/99, rising at S 2.0 an average rate of 10% per year in real terms (Figure 2.6). ' Q .g , Tamil Nadu posted the highest annual growth rate (37%) in 8 O , nutrition expenditures in real terms (1997/98 prices) during this 0 period, which helped it achieve one the lowest levels of Source: State Budgets malnutrition in the country (see Chapter 1). Bihar, Madhya Pradesh, and West Bengal increased by over 20% per year during this later period. The two exceptions were Haryana and Kerala, where expenditures declined at a rate of 5% and 2% respectively in real terms per-year. Strikingly, there is only weak correlation between the level of nutrition expenditures and the rates of malnutrition among the States. - 27 - Table 2.9: Estimated Program Cost of Government Nutrition Programs, 1997/98. Estimated Nutrition Expenditures Malnourished Percentape Share of State (RE) Food Aid Total Children (1-5 yrs) Total Cost in Food Aid in State Rs million Rs million Rs million Percent2/ GSDP Total Cost Andhra Pradesh 460 421 881 65% (R) 0.09% 48% Bihar 76 265 341 59% 0.07% 78% Gujarat# 1,047 1,047 77% (R) 0.13% Haryana 187 187 51 % 0.05% Karnataka# 770 770 66% (R) 0.12% Kerala 105 87 192 50%(R) 0.05% 45% Madhya Pradesh# 798 489 1,287 64%(R) 0.18% 38% Maharashtra# 1,607 1,607 64%(R) 0.08% Orissa# 605 553 1,158 69%(R) 0.40% 48% Rajasthan 476 418 895 47% 0.17% 47% Tamil Nadu# 3,337 3,337 51%(R) 0.38% West Bengal 104 526 630 0.07% 84% Himachal Pradesh 62 62 57%(R) Uttar Pradeshl/ 418 332 750 61% 0.06% 44% All States 10,885 3,135 14,020 0.10% 22% Note: #Mid-day meal expenditures were deducted from total State nutrition expenditures. I/UP figure is 1996/97 SNP expenditure. 2/ Percentage of underweight children (weight for age), R-rural only. Source: State Budgets, CARE New Delhi, WFP New Delhi. 2.55 Taking into account external assistance, in 1997/98, the estimated total nutrition program cost reached Rs 14 billion ($376 million), amounting to about 0.10% of GDP (Table 2.9). Total GOI and State government expenditures are not equivalent to the total program cost, due to the significant share of international food aid. The expenditures on the National Nutritional Anemia Control and Vitamin A Prophylaxis programs would add another Rs 924 million ($24.9 million) (Annex Table A2.28), raising expenditures further to Rs 14.9 billion ($401 million). For food aid receiving states, food aid covers from half to two-thirds of nutrition program costs. This large dependence on food aid by a large number of States for financing the ICDS program as it is currently designed, however, could pose a significant fiscal challenge to State governments and to the program's sustainability over the long term. E. Conclusion 2.56 Central and State Governments have used food-based transfers, integrated into several major food and nutrition initiatives, to address problems of chronic energy deficiency of households. At an estimated cost of $3.6 billion per year, the Central and State Governments with assistance from some international agencies (World Bank, WFP, CARE) together support some of the largest food distribution and nutition programs in Table 2.10: Program Costs to Transfer Rs I of the world. Comparing the cost effectiveness of the Food, 1997/98 various programs, in 1997/98, the NPNSPE displays the Cost to Transfer Rs I lowest cost (Table 2.10). The difference in estimated TPDS of Food cost between TPDS and ICDS is smaller than previously Rs 1.59 (@30% leakage) estimated. However, this does not take into account the NPNSPE Rs 0.66 ____________Rs 0. 94 (@30% leakage) relative differences in the rate of targeting to the poor ICDS* Rs 1.35 to Rs 1.49 and vulnerable groups (children and women). tNote: *for AP and Orissa 2.57 Despite these expenditures, these programs appear to have had only a small impact in mitigating household food and nutritional gaps. Although the significant volume of food transferred under existing programs could potentially have had a significant impact on chronic energy deficiency in India, especially for poor and vulnerable households, current indicators, as shown in Chapter 1, indicate these programs are not effectively fulfilling their intended goals. The next chapter examines each of the programs individually to examine what obstacles impeded their performance and effectiveness. - 28 - Chapter 3 Assessing Program Implementation and Achievements 3.1 The Government of India implements a large number of food safety nets to mitigate widespread chronic and transitory householdfood deficits and nutrition insecurity. Over the last 5 decades, the Government of India utilized the public food distribution system (PDS/TPDS) and employment schemes (JRY/JGSY and EAS) to improve household access to food. With frequent threats of famine, they were originally aimed at the whole population. But with improving domestic foodgrain supply, the TPDS and employment schemes are increasingly being targeted to the poor. Several nation-wide nutrition-oriented programs were also subsequently launched, including the Integrated Child Development Services Program (1975) and the Mid-Day Meals Program (1995). The inability of the PDS/TPDS and employment schemes to achieve their objective of eliminating chronic and transitory food deficits of households was a major driving force shaping the design of these programs. In addition to their other nutrition and education-related objectives, a key priority and most costly aspect of these programs is similarly food distribution. They are targeted at vulnerable groups (children and women) as a means to further reduce unmet household food needs. But in spite of these multiple food-based transfer programs, there still remains widespread food and nutrition insecurity. This chapter examines how these programs are performing on the ground and to what extent they have contributed to reducing food and nutrition insecurity in India. It summarizes recent evaluations of these programs. A. Targeted Public Distribution Program: Does it Meet the Needs of the Poor 3.2 Of the food-based transfer programs that are currently in operation in India, the most far reaching in coverage today is the Targeted Public Distribution System (TPDS). It caters to the I billion people in all States and Union ternitories. Figure 3.1 PDS/TPDS Offtake, million mt, 1991/92 to 1998/99 Over the last decade, it distributed from 13 to 19 million mts of foodgrains annually (Figure 3.1). 20 - Wheat offtake in general is greater than the rice 16 offiake. 3.3 The restructuring of the PDS into the = TPDS in 1997 was a positive first step towards 8 improving the targeting of subsidized food E - distribution towards the poor and more 6 LT vulnerable segments of society. An analysis of 0 - _ _ _ T access of rural households to the PDS using data > z z s z from the 1993-94 National Sample Quinquennial C o oll Ch Survey of Consumer Expenditures17 demonstrates n Rice 0 Wheat that the PDS, despite its escalating fiscal costs, Source: Ministry of Food and Consumer Affairs was ineffective in reaching the group that needed it most-the poor. The middle and upper classes (3rd and upper quintiles) in several states (e.g. Kamataka, Maharashtra, Haryana UP, West Bengal) purchased as much or more than the poor from the PDS (Annex Table A3.1a). With the exception of Andhra Pradesh, Kamataka, Kerala and Tamil Nadu, PDS grains accounted for only a very small share in total household grain consumption of the poor in other States. Thus in absolute terms, it contributes little to their food security. Ironically, these poor households remain highly dependent on the open market; a market, which as elaborated below, is plagued with significant inefficiencies and high cost brought on by long term government interventions in the private foodgrain marketing system. While PDS/TPDS provided an income 17 This NSSO 50th round survey consists of a nationally representative sample of 69,206 rural and 46,148 urban households, covering a total of 564,537 persons. - 30 - transfer in the form a price subsidy on one hand, inefficiencies in the private market tax consumers on the other. 3.4 Under the PDS, the upper income groups tended to capture a larger income transfer relative to poor. At the all India level, the average income transfer per month to the middle and upper classes (3rd and 4h quintiles) exceeds the average income transfer to the poorest and 2nd quintile households (Annex Table A3. 1b). In Bihar, Haryana, Kamataka, Maharashtra, Orissa, and Uttar Pradesh, the income transfer to middle and higher classes through foodgrains exceeds the income transfer to the poorest households. 3.5 The TPDS had a slow start up in 1997. Despite an All-India allocation of foodgrains for BPL households of 7 million mt in 1997/98, State govemments only drew 5.97 million mt. Delays in the process of identifying Below Poverty Line (BPL) and Above Poverty Line (APL) households delayed the commencement of the program in some states. Above poverty line foodgrain offtake in 1997/98, however, remained high, at 12.72 million mt, notably exceeding the original APL allocation of 9.4 million mt. 3.6 The transition to TPDS in 1997 contributed to some improvement in targeting foodgrain allocations toward states with higher poverty rates. Three states that significantly benefited from a sharp increase in foodgrain allocation are Assam, Bihar, and UP-- states with some of the highest poverty rates in the country (Annex Figure A3.1). Gujarat, Karnataka, and West Bengal had their allocations cut considerably. Most surprisingly, despite its high poverty rate (44%), Rajasthan's allocation was also cut appreciably. This sizeable cut may be due to the fact that despite having foodgrain allocations of over I million mt per year during the PDS era, Rajasthan had only been drawing down half or less than half of its allocation. 3.7 Most States posted increases in foodgrain offtake with the shift to TPDS (Figure 3.2). Assam, Bihar, Delhi, Kerala, Madhya Pradesh, Maharashtra, Orissa and Uttar Pradesh displayed the highest increases in foodgrain offtake in 1998/99, relative to pre-TPDS levels. While offtake in Tamil Nadu and Kerala still remain at above I million mt, they did register a small decline. Strikingly, foodgrain offlake in Rajasthan, already quite low, declined further by an additional 200,000 mt. It is not clear, however, if this could be due to implementation delays, the tight fiscal situation in the state, or worsening purchasing power of the poor. Unfortunately, no national level data are available to date to quantitatively assess the impact on the poor of the shift to TPDS. A recent state level evaluation of initial implementation of the TPDS in UP, discussed below, presents a preliminary picture. 3.8 The recent revision of the TPDS pricing structure is expected to improve access by the poor to foodgrains and generate some savings for both BPL households and the budget. The impact of the change in pricing structure of the TPDS on BPL households could be roughly Figure 3.2: Volume of TPDS foodgrain offlake in various States, Average of 1994/95 to 1996/97 (Pre-TPDS) and 1998/99 (Post TPDS) 3.0 E2.5 - _ _ ._ _ _2.0 - _ 0 E0.5 - 0.0 < *Ave:94/95-96/97 * 98/99 Source: Data from the Ministry of Public Distribution and Consumer Affairs. - 31 - estimated by comparing the effect of the increase in price of the original 10 kg Table 3.1: Estimated Household Benefits in Increasing BPL Allocations allocation with the counter-effect of price t20 kgs. Item Rice Wheat savings in buying the additional 10 kg of BPLTPDS Price 1999, Rs/kg 3.5 2.5We grain from the TPDS rather than the open BPL TPDS Price 2000, Rs/kg 5.9 4.5 market. Assuming that FCI's economic cost FCI Economic Cost,1999/2000, Rs/kg 11.78 8.0 Increase in TPDS Price, Rs/kg, 1999 to 2000 2.4 2.0 mirrors the prevailing market price, BPL Household Loss from Inc Price: O1kg -24.0 -20.0 households would benefit from net savings Household Gain fromMkt Price Savings:l Okg* 58.8 35.0 of about Rs418/year by buying the 20 kg of Net Savings/household,Rs/month 34.8 15.0 *Assuming FCI Economic Cost = Open Market Price rice from the TPDS and Rsl80/year for Source: Author's computation. wheat (Table 3.1). The challenge for States would be to ensure that the adequate foodgrains are available at the fair price shop, while permitting households to purchase grain in smaller installments to accommodate possible cash constraints. On the fiscal side, assuming that the total requirement stays at the 1999/2000 level of 10.3 million for rice and 7.2 million for wheat, the change in pricing structure is estimated to reduce the fiscal subsidy burden to about Rs 69 billion/year. The foodgrain price subsidy in 1998/99 was Rs84.4 billion. 3.9 A national survey conducted by ORG-MARG in 1999 found general dissatisfaction among beneficiaries of the TPDS. The study, commissioned by the Auditor General of India, included 64,292 households distributed over all the State and Union Territories. The study found that households on average obtained only 12% of their wheat and 16% of their rice requirement from the TPDS. In Madhya Pradesh, Assam, Haryana, Jammu and Kashmir, Nagaland, Manipur, Uttar Pradesh, Rajasthan, Chandigarh, and Bihar, TPDS met only 10% of the rice and wheat consumption requirements. The survey respondents reported problems of inability to obtain ration cards, charging higher prices than officially prescribed, infrequent openings of fair price shops, frequent stock-out situations, under-weighing by the fair price shop owners, inferior quality of foodgrains, and non- existence of grievance redressal channels (Auditor General of India, 2000). TPDS Implementation in UP 3.10 A recent World Bank study of TPDS implementation in Uttar Pradesh during 1997-98 seems to indicate some improvement in targeting, but problems of significant leakages persist. 18 The study finds improvements in the identification and allocation of cards to BPL households (Annex Table A3.3). The households in the poorest quintile were roughly four times more likely to be classified as BPL compared to households in the highest quintile, although there were still poor households excluded from the BPL lists. There households excluded from the BPL lists. There Table 3. 2: Quantities Of Wheat And Rice Purchased appears to be better targeting of sales of TPDS From The Fair Price Shop by rural households in UP foodgrains to poorer households (Table 3.2). Average household purchases Despite the continued low levels, purchases of Income Quintile / Group (k . /month) TPDS foodgrains (1.5 to 2 kgs per month) by the (percapitaconsumption) 1.29 Rice Total Poorest ~ 1.29 0.60 1.89 bottom 20% of sample households are higher than 2 1.05 0.40 1.45 those estimated for 1993/94. The study found that 3 0.95 0.47 1.42 cash constraints among the poor and problems of 4 0.86 0.48 1.34 irregular supply in the fair price shops contribute 5 0.47 0.19 0.66 BP adholders only 2.88 1.28 4.16 to the lower offtake levels. With the BPL Non-BPL households w/ 0.08 0.06 0.14 allocations being raised to 20 kgs per month per Getting BPL grain household, liquidity problems could exacerbate Overall 0.92 0.42 1.34 access difficulties by poorer households unless The study is part of the 1997-98 UP-Bihar Survey of Living Conditions and covered 1217 households in the Eastem and Southem NSS statistical regions of UP and Bihar. - 32 - they are allowed to obtain smaller quantities per purchase. 3.11 Implementation problems identified in previous studies of PDS are unresolved under the TPDS, undermining the effectiveness of the program. The UP study documented a number of critical implementation problems that impede the effectiveness of TPDS in meeting the food security needs of poor households. These include reports of: (i) alleged illegal diversions of foodgrains to other uses at various levels of the supply chain; (ii) prices charged at fair price shop exceeding the official price, on average by as much as 10% to 14%; (iii) low quality of foodgrains, some below established standards for human consumption; (iv) weak monitoring, lack of transparency, and inadequate accountability of officials implementing the program. Appendix C describes in detail problems of TPDS implementation in Eastem and Southern UP in more detail. The study roughly estimates unaccounted-for leakages of grain of up to 40%. 3.12 The Ministry of Consumer Affairs and Public Distribution is promoting several initiatives for State Governments to adopt to foster greater transparency and accountability in the TPDS. These include the establishment of Vigilance Committees at the village, block and district levels, the adoption of a Citizen's Charter and "model" measures to increase the involvement of Panchayat Raj institutions in monitoring the operations of the TPDS (See Annex G). Implementation of these initiatives so far is highly variable across states. In UP, although over 76,000 vigilance committees exist at the FPS level, only about 8% are functional (Kreisal and Zaidi 1999). For these measures to succeed, greater commitment from State Governments is required. B. How wetl did GOI Foodgrain Stabilize Prices? 3.13 Sustained foodgrain output growth facilitated GOI's buffer stock operations, but the program is now faced with problems of plenty. Figure 3.3:Average GOI Buffer Stocks, Actual and Minimum Between the early 1970s and late 1990s, rice Norms, million mt, 1992/93 to 1999/00- and wheat output more than doubled from about 35.0 - 65 million mt to about 150 million mt (Annex 30.2 Table Al .7). As a result of consecutive sizeable 30.0 -2_ --27 0 government procurement volumes due to high E 25.0 -_ 23 minimum support prices, a decline in offtake . 19.9 from the PDS/TPDS in mid-1990s, and periodic = 20.0 __ __ _ external trade controls, govemment stocks have 15.0 - V7 -2 I 7.2- 7-2-4---6 mushroomed. Since 1993/94, actual buffer stockholdings consistently exceeded buffer 10.0 stock norms (Figure 3.3), raising increasing X concern about their rapidly rising fiscal cost -.-. ca -- Mm Nor m (See chapter 2). In 2001, buffer stocks are Actual Min.Norm expected to hit 50 million mt. Source: Economic Survey, various issues. 3.14 Government of India (GOI) buffer stock operations successfully stabilizedprices in India, but they also reduced incentives for private storage. An indicator of price stability is the coefficient of variation of the random component of prices.t" Purn (1996) finds that rice and wheat prices in the majority of wholesale markets in India showed lower rates of price variability between 1985-90 and 1991-95. The seasonal price index, a rough measure of whether seasonal price increases adequately cover storage costs-approximated by the cost of working capital of 15 percent,20 is a guide to the incentives (or their absence) for private foodgrain storage. Reflecting the price-dampening effect of govemment interventions, a recent study (Purl 1996) of 15 major wheat wholesale markets for the To measure the degree of price instability, the seasonal, trend and cyclical components of price movements are filtered out. The coefficient of variation of the remaining random components is then estimnated as a measure of price instability. The coefficient of variation is estimated by dividing the standard deviation of the random component by the last fitted value of estimated regression. The cost of capital generally accounts for the largest share of storage costs. - 33 - years 1991-95 found seasonal price increases covering intra-seasonal storage costs in only 5 markets. The major rice markets are even more significantly affected, with only 4 out of 18 examined giving farmers and traders seasonal earnings high enough to meet intra-seasonal storage costs. The dampened seasonal fluctuations and resulting disincentives to private procurement and storage, in addition to other regulatory policies (see below) led to burgeoning buffer stocks and costs. Over-regulation of Private Market2' 3.15 Ironically, the foodgrain market regulations and interventions, designed to support the TPDS and the GOI's price stabilization and price support operations, fostered inefficiencies in the private marketing system, on which consumers were dependent on for the bulk of their foodgrain needs. Given that poorer households are highly dependent on the private market, this implies that they are also bearing a large share of the cost of any inefficiencies that persist in the marketing system. Ironically, the same government interventions designed to protect them also had a big hand in shaping the evolution of the existing inefficiencies in the private marketing system. 3.16 The government is a major player directly and indirectly in the foodgrain marketing system. Adding all the foodgrain that flow through the public marketing channel (TPDS, employment schemes, mid-day meal, and other smaller grain-based programs of the GOI ), these account for as much as 16% to 30% of total marketed supply between 1992/93 and 1997/98 (Table 3.3). The TPDS foodgrain distribution alone account for as much as 15% to 22% of domestic marketed supply. On top of this, buffers stocks impose an additional and powerful "threat" on private sector marketing activities, with stocks maintained equivalent to as much as 15% to 36% of the grains that flow through market. Taken in totality, government handled grain and stockholdings amount to as much as 38% to 65% of grains flowing through market during the period 1992/93 to 1997/98. This large government presence in grain markets plus the stop-go implementation of a large number of restrictions on trader operations (storage, movement, credit, rice milling) not only increase private transactions cost, but also reduce the incentives for modernization investments to increase efficiency and reduce physical losses. 3.17 Public procurement and TPDS operations, FCI open-market sales of rice and wheat at below-market prices, government marketing controls and the uncertainty regarding the severity and timing of their enforcement strongly undermines private trade and discourages much-needed modernization. These interventions over time repressed private foodgrain marketing, undercutting its potential contribution to long-term food security. Market congestion, large handling and storage losses, high transport costs and low milling recovery rates in wheat and rice all point to a marketing and processing system in great need of improved technology and infrastructure. Investments in such up-grading, however, are unlikely to come from private traders as long as govemment policies heighten their risks and costs by imposing unpredictable limits on their marketing margins and offer them little or no reward for raising efficiency. These contribute to the poor integration of foodgrain markets in the short run, which can be very critical in times of shortfalls. Annex Table A3.10 lists Table 3.3: Percentage market share of Govemment Foodgrain Transfer Programs and Buffer Stocks in Total Domestic Marketed Supply of Foodgrains ________________________________________ Percentage Market Share over Total Domestic Marketed Suppy / Government Intervention 92/93 93/94 94/95 95/96 96/97 97/98 PDS/TPDS 22.3% 19.9% 15.9% 18.3% 20.90/o 15.2% PDS/TPDS & Open Market Sales 22.4% 23.8% 22.8% 28.4% 25.3% 15.4% Average Buffer Stocks 14.7% 26.1% 32.8% 35.6% 23.3% 27.3% All Grain Transfer Program2/ 22.8% 24.3% 23.5% 29.7% 26.8% 16.3% All Grain Transfer Programs & Ave. Buffer 37.5% 50.4% 56.4% 65.3% 50.1% 43.5% Stocks I _I_I_I_I_I Notes: 1/ Total Domestic Market Foodgrain Supply = All India marketed surplus - change in govemment stocks - net exports. Change in govemment stocks= Ending stocks-beginning stocks. Marketed surplus = production - home use (home consumption, seeds, feed, etc) 2/ All grain transfer programs include: PDS/TPDS, JRY, EAS, nutrition programs, mid-day meals and foodgrains for the scheduled castes/scheduled tribes and backward classes hostels, Modern Food Industries Ltd and its franchise units, and BPL food manufacturing units. - 34 - several state level studies documenting poor short-run integration of foodgrain markets. Illegitimate trade, moreover, flourishes on leakages from the PDS/TPDS. These shortcomings burden India's farmers, traders and consumers with costs that a smoother, more modem operation would not incur. GOI foodgrain marketing policies, whatever their original intent, have brought into being small-scale and fragmented industries characterized by outdated technologies and associated inefficiencies. 3.18 Most storage facilities in India are small-scale, low-quality structures such as covered and plinth (CAP) storage or covered godowns. CAP storage involves stacking grain in bags in a pyramid on a cement or wooden platform raised about 30 cm above the ground and covered with synthetic sheets held down with ropes. It is used extensively by grain dealers, millers, the FCI and State agencies. Storage losses from CAP could amount to as much as 20 percent. Yet, experience in other countries indicates potential economies of scale of more modem marketing facilities (e.g. bulk handling and storage). Extensive government price stabilization activities and storage, credit and movement controls and their stop-go implementation, however, discourage such modernizing investments. 3.19 Most of India's roughly 6,800 wholesale state operated markets or mandis are severely congested and rapidly deteriorating due to inadequate maintenance. The predominantly manual system and aging infrastructure result in considerable wastage (especially spillage), quality deterioration and increased cost of marketing. In Punjab, a major foodgrain producer, officials estimate losses in government operated wholesale markets, or mandis, to amount to as much as 3.4 percent. 3.20 About 30 percent of paddy is still milled using less efficient technologies, such as hullers and shellers with recovery rates of 50 to 68 percent compared to modem rice mill's 70 to 72 percent. The modem rice mills with an average capacity at 10 mt/hr are small by international standards. This was in part due to the reservation of rice milling to small-scale enterprises, which was removed only in 1997. Wheat milling is mostly done by less efficient, small-scale operations -- about 26,000 chakkis -- that turn 85 percent of India's wheat into coarse brown flour or "atta". The remaining wheat is processed in 812 roller flour mills, with average capacity of 70 mt/day, whose extraction rates (60 to 65 percent) are significantly below international norms (72-75 percent). The rice levy reduces mill profitability while government storage, credit and movement controls and their stop-go implementation increase uncertainty of inputs, discouraging investments in larger scale and more modern facilities. 3.20 Private cost-effective foodgrain transport is restricted by regulations, that give private transporters only fourth priority for railway freight and force them to rely on more expensive hired trucks. Road transport, moreover, requires passage through a large number of checkpoints that increase cost and reduce profitability, because of inordinate delays and the payment of "speed money". Along with poor roads and slow trains, GOI open market sales at below market prices, importing and exporting grain without pattern, and of imposing and lifting movement controls also undercut private transporters. Inadequate port infrastructure further adds to the cost of imports and exports. For example, in Kandla port, which handles 70% of the country's rice exports, the average turnaround for ships is 19 days and 33 days for ships carrying imported wheat. In developed countries, the turn around time is about 5 days. Illegal port charges further add to the costs. A large number of government reporting requirements, supporting enforcement of the various Government marketing regulations, further add to private trader transaction costs. In addition to the reports each of the many agencies (e.g. 12 in West Bengal, 17 in Uttar Pradesh, and 18 in Andhra Pradesh) enforcing the regulations require, many traders also have to contend with numerous inspections and unofficial fees demanded by some inspectors. 3.21 In summary, these private and public sector marketing inefficiencies are not only burdening the economy with physical losses due to outdated systems, but also consumers and - 35 - producers due to the higher marketing cost they impose. As indicated earlier, physical foodgrain losses due to poorly performing markets estimated to reach 12-16 million mt per year is an unnecessary yet highly surmountable loss from the national food security perspective. High transactions cost in marketing have a depressing impact on farm output prices and an upward impact on consumer prices. In turn, these adversely affect farm incomes and the purchasing power of all consumers. C. FCI Performance: Implications on All Food-Based Transfer Programs 3.22 FCI operational efficiency has a significant Figure 3.4: Economic Cost of Rice and Wheat, impact on the overall costs of all food-based programs. 1980/81 to 1998/99, Rs/mt, constant 1998/99 prices With the exception of foodgrains for BPL households, all 11,000 foodgrains drawn by government agencies for APL 10,500 . households and other foodgrain-based supplementation c 9,500 programs are "priced" at their economic costs (procurement t 8,500- price plus all FCI procurement and distribution costs). BPL _ 8,000 prices are also set in reference to (50%) it. Other food- E 7,000 based programs transfer programs in 1998/99 drew about X 6500 1.4 million mt of foodgrains from FCI, and this is expected 6,000 _, to increase with the universalization of some programs. 3.23 FCIs rising economic costs penalize food-based IRce -Wheat transfer programs. While the economic costs of rice and Source: Food Corporation of India Annual Report, wheat declined in real terms during the late 1980s, the varou issues. economic cost of rice increased rapidly in the 1990s, while that of wheat fluctuated significantly, but similarly tended to follow an increasing trend (Figure 3.4). These have two important implications. First, GOI subsidies of FCI operations have also been rising rapidly over time because its rice and wheat marketing margins (issue or selling price less procurement price) covered on average only about 30 percent of its costs. The recent shift towards issuing APL foodgrains to States at economic costs, however, would help in reducing the fiscal burden of the TPDS. Second, the inefficiencies raising FCI's operating costs also penalize all foodgrain-based transfer programs. 3.24 FCIs economic costs increased as a result of both rising operating costs and upward adjustments in the procurement price. FCI employs about 65,000 employees and over 170,000 direct contract labor. Its procurement operations almost tripled, from 7-8 million mt per year in the early 1970s Figure 3.5: FCI Rice Procurement Price and Procurement to 20-25 million mt during the mid-1990s. While it is to and Distribution Costs, 1976/77 to 1998/99, Rs/mt, be expected that some economies of scale could be p achieved with the rising scale of operations, instead, 900- 300 FCI's per unit marketing cost (procurement and .m 850 - 250 , distribution cost excluding procurement price) increased 8s- 200 over time (Figure 3.5). Between 1979/80 and 1998/99, 3 FCI rice per unit marketing cost increased in real terms ~7010 from Rs 83/mt (1998/99 prices) in 1980/81 to Rs238/mt X 700 100 X in 1998/99; wheat marketing cost increased from 2 o.650v 50 0 Rs214/mt to Rs294/mt during the same period (Annex . Figure A3.2). If FCI interest rate subsidies (about 34% 600 - 0 lower than market rates) and preferential access to rail 0 a) co transport-second priority vs fourth priority for private sector--are taken into account, it operating costs would - Proc. Price -a--- Roc & Distrn Cost be even higher. Personnel expenditures and storage and Note: Costs exclude procurement price. interest charges rose fastest (from 2 to 5 percent per Source: Food Corporation of India Annual Report, year). Significant losses in storage and transport various issues, Swaminathan 1999. - 36 - (officially reported at 1-2 percent but likely much higher) due to stock deterioration and theft add to the cost. Information on the relative costs of FCI and the private sector grain marketing is limited. Sharma (1991) found the cost of public distribution wheat is double private sector cost, while Gulati et al. (1996) found FCI's storage cost in FCI owned godowns to be 70% higher than hired ones. 3.25 FCI's per unit buffer stocking cost also rose rapidly in the 1990s (Figure 3.6). By 1998/99, it reached Rs 1,729 per mt, increasing by nearly 50% in real terms between 1990/91 and 1998/99. This increasing trend in Figure 3.6: Buffer Stock Cost of Rice and Wheat, per unit cost is contrary to expected economies of scale 1979/80 to 1998/99, Rs/mt, constant 1998/99 potentially achievable in larger scale storage operations. Pnles Consequently, the total buffer stock subsidy rose to Rs 14.6 2000 billion ($394 million) by 1997/98. 2, 1-00 3.26 Technical and management problems contribute to 2!1600 rising FCI costs. Extensive use of covered and plinth (CAP) X ffi ~ - 400 storage unnecessarily increase losses and increase difficulties on in implementing the first-in, first-out principle of inventory e 1200 management. FCI officials in 1997 admitted that about half E their stock is at least 2 years old; 30 percent, between 2 to 4 X years old; and some grain as old as 16 years. The loss of 800 value due to quality deterioration and aging in storage, and a ; X X z weaknesses in inventory monitoring and control, unnecessarily raise FCI's operating cost. More importantly, Source: Food Corporation of IndiaAnnua Report, FCI has limited incentive to cut costs and improve efficiency as all its financial losses are subsidized by the GOI. D. Food For Work Programs Performance in the 1990s 3.27 The sharp budget cut since the mid-1990s and increasing average wage rates under JRY contributed to the large decline in total number of workdays generated by employment programs. The JRY/JGSY and the EAS together make up one of the largest employment programs in the world; they generated about 1.24 billion workdays in 1995/96 (Figure 3.7). Since 1995/96, despite the expansion of EAS, the sharp decline in JRY workdays resulted in a 36% drop in total employment generated to 792 million workdays by 1998/99, about the same level as in 1992/93 (Annex Table A2.15c). This decline is largely driven by both the government cut in JRY expenditures from Rs 35 billion Figure 3.7 : Total Number of Workdays Generated and to Rs 21 billion (current prices) during the same period Foodgrain Distributed Under the EAS and JRY, 1991/92 to At the same time the nominal JRY wage rate per day increased steadily. Taking into account only Central 1200 expenditures (note that States co-finance the program) 1000 and dividing these by total number of workdays 800 generated, the central share of the wage rate rose from 600 Rs 26/day/person in 1992/93 to Rs 55/day/person in 400 1998/99 (Annex Table A2. 15b). The Central share of 200 EAS nominal wage rates hovered round Rs 45- 50/day/person. Notably, these estimates of the central 0 O share of JRY/JGSY and EAS average daily wage rates O v O ON alone, with the exception of Haryana, Punjab and JRY (days) EAS (days) Delhi, are above the State mandated minimum wage & Food (000 rt) rates, which were mostly in the range of Rs 20-45/day. Source: Economic Survey, various issues and Ministry of (Annex Table A3.26c). Public Distribution and Consumer Affairs. - 37 - 3.28 Adding the State program expenditures further widen the wage differential between the minimum and program wage rates. State level nominal daily wage rates (estimated by the Central and State expenditures divided by the number of actual work days generated in 1999/2000 as reported by the Department of Rural Development), was on average Rs76/day for the whole country for both programs, , with considerable inter-state variation. For JGSY, it ranged from Rs50/day in Karnataka to Rs 149/day in Haryana; for EAS it ranged from Rs48/day in Karnataka to Rs 167/day in Haryana (Annex Table A3.26c). Unfortunately, market wage rates are not available for comparison. Nonetheless, the wage differential has important implications to the program's effectiveness in reaching the vulnerable groups it is designed to target. As the wage rate is a key self-targeting mechanism, a big wage differential between program and market wages will tend to attract participation of the non-poor. 3.29 The off-take of food distributed under the EAS and JRY also declined dramatically after 1994/95. As noted in Chapter 2, the elimination of the Central foodgrain price subsidy to States creates a significant additional burden on already fiscally strapped State Governments, which likely undercuts incentives for States in including this option. There are indications also of limited worker interest in receiving foodgrains as part of wages. The Second Round Review (1993/94) of the JRY commissioned by the Department of Rural Development found that on average, only about half of workers were willing to receive foodgrains as part of wages, with wide variations across states (Annex Table A2.27). Willingness ranged from 18% of workers in Kerala, 24% in Uttar Pradesh, 37% in West Bengal, 66% in Maharashtra, 80% in Rajasthan and Andhra Pradesh, to 92% in Karnataka. Implementation Effectiveness 3.30 The assets created under the two programs included rural infrastructure (roads, schools, anganwadis), housing under the Indira Awas Yojana targeted to SC/ST households, and social forestry projects. The Second Round Review (1993-94) of JRY indicated that construction of rural roads received the highest priority among village panchayats. Of total assets created, 76% were found to be satisfactory, 8% were poor, 5% were incomplete or not to design standards, and 0.4% were not useful. Table 3.4: Percentage Share of Scheduled Castes and Tribes, Women, and Landless in Total 3.31 The JRY/JGSY Employment Generated under the JRY in 1993/94 and the JGSY in 1999/2000. continues to suffer from % sC/ST % Women %Landless weak targeting, even State/UT 93/94 2000 93/94 2000 93/94 2000 Andhra Pradesh 71% 39% 20% 35% 700/o 58% displaying further Assam 36% 49% 5% 8% 47% 30% deterioration in the Bihar 68% 59% 3% 27% 72% 53% 1990s. Comparing the Gujarat 63% 62% 31% 24% 76% 34% Ha ana 62% 60% 10% 21% 95% 96% findings of the Second Kamataka 67% 39% 26% 28% 80% 40% Round Review of the Kerala 53% 31% 28% 28% 48% 10% JRY in 1993/94 to the Madhya Pradesh 68% 64% 20% 33% 58% 33% Progress Report on the Maharashtra 48% 52% 31% 36% 47% 33% Progress Report on the Orissa 174% 68% 32% 34% 58% 18% JGSY in 1999/2000, the Punjab 84% 73% 1% 3% 99% 88% participation of target Rajasthan 68% 64% 36% 34% 43% 13% groups like the SC/STs Tamil Nadu 64% 50% 30% 35% 93% 58% Uttar Pradesh 64% 490/o 4% 17% 39% 20% on average declined WesttBengal 59% 51% 11% 17% 61% 48% significantly from 64% to ALL India 64% 55% 17% 27% 55% 37% 55%, with a larger Source: 1993/94 data- Evaluation of JRY, Second Round June 93-May 94, Department of Rural Development; 2000 data-Statement of Physical Progress, as of January 2000, Department of Rural proportional decline in Development. some States (Table 3.4). States recording the largest declines include Andhra Pradesh (71% to 39%) and Kamataka (67% to 39%). Only Assam posted a significant increase in SC/ST participation. - 38 - 3.32 Participation of landless workers suffered an even larger decline, from about half to one- third. With the exception of Haryana, the participation of the landless declined in the other 14 larger States, with Orissa, Gujarat, Kamataka, Kerala and Rajasthan posing the largest declines in landless participation. As the landless tend to be more vulnerable to seasonal income shocks, the decline in their participation indicates further weakening in the program's targeting of the poor. Indeed, the Second Round Review (1993-94) of JRY found that on average, below poverty line families (earning less than Rs 11,000 per year) accounted for only 31% of the total number of families employed. Participation rates in State with the highest poverty levels were very low: 19% in Assam, 28% in Bihar, 36% in Madhya Pradesh and 40% in Uttar Pradesh. 3.33 It is only the participation of women which improved significantly, but in many states are still below the target of 30%. Women's participation increased from 17% to 27% on average between 1993/94 and 1999/2000, but this is still below the program target of 30%. At the State level, only Andhra Pradesh, Madhya Pradesh, Maharashtra, Orissa, Rajasthan and Tamil Nadu exceeded this target by 1999/2000. The provision of on-site creches or day-care centers has been mentioned as an important element favoring the participation of women in Maharashtra (Gaiha 2000). Despite slight increases, women's participation in Assam (8%) and Punjab (3%) remains insignificant. Although similar comparative time series data are not available for EAS, the percentage participation of vulnerable groups-SC/STs, women and landless workers-in 1999/2000 follows a similar pattern to that of the JGSY (Table 3.5). 3.34 State level studies confirm problems of Table 3.5: Percentage Share of Scheduled Castes and Tribes, weak targeting, poor administration, and Women, and Landless in Total Employment Generated under the aticipatio nthe Maharashtra EAS, 10 month period ending in January 2000. rationing. Participation inth Marsta %Share of Weaker Sections Employment Guarantee Scheme (MEGS) fell State/UT SC/ST Women Landless during the period 1980 to 1997. Although the AndhraPradesh 61% 31% 28% reduction is partly due to a reduction in the Assam 51% 9% 34% budget over time, the hike in the wage rate to Gujarat 69% 32% 44% levels above market rates in 1988 led to rationing Haryana 59% 22% 98% of employment thereafter (Gaiha 1996a,b,&c, Kamataka 38% 290/o 40% Kerala 36% 32% 108% 2000, Dev 1995, Ravallion et al. 1993). Between Madhya Pradesh 64% _ 35% 32% 1979 and 1989, the share of the non-poor as a Maharashtra 47% 36% 32% proportion of total workers rose from 52% to 72% Orissa 68% 29% 21% Punjab 62% 3 9 (Gaiha 1996b). The increase in participation of Rajas 62% 38% 13% non-poor workers is largely attributed to the hike Tamil Nadu 47% 34% 96% in wages above market wages, thus weakening Uttar Pradesh 50% 13% 15% the self-targeting aspect of the program. West Bengal 52% 23% 62% IAll India 55% 2% 41% However, the duration per participation increased, source: Statement of Physical Progress as of January 2000, indicating that most of the employment security Department of Rural Development. and benefits were being captured by the non-poor. While MEGS activities was found to favor the least developed areas, the share of tribals fell from 13% to 9% between 1991-96. The share of women over all participants increased from 30% to 39%. Village level case studies also find problems of cumbersome administrative procedures in applying to the program, requiring multiple forms and multiple officials to deal with, late payment of wages, and complicated wage determination formulas that open opportunities for abuse of less literate workers (Gaiha 1996a). In UP, a recent study found that the number of workdays created per registered person under the EAS varied considerably by district, ranging from 3 days to 86 days, but still below the target of 100 days (Subbarao 1998). 3.35 Village studies undertaken by the World Bank in UP and Bihar indicate limited awareness of poor villagers regarding the rationale for program. Village studies of poverty and the use of public programs were undertaken in 30 villages located in southeastern UP and north and central - 39 - Bihar in 1997. The study utilized participatory rapid assessment methods and semi-structured interviews. In most study areas, respondents did not know that the basic objective of the program was to provide employment security for them. Instead villagers perceived the JRY and EAS as infrastructure projects to build roads, bridges, install hand pumps and irrigate previously unproductive lands (through the million wells scheme that was formerly party of the JRY). In several cases, housing for SC/STs had been built under the aegis of the JRY. As such, the programs were valued by the poor for improving village conditions and expanding access to outside employment. Some villagers reported incidents of misuse of JRY and EAS funds by officials in some areas and work being undertaken by contractors using trucks and tractors instead of labor- intensive methods. Similar manipulation of wages and expenditures has also been reported in Maharashtra (Dev 1995). Impact of Food and Nutrition Security 3.36 Food for Work Programs could contribute to food and nutrition security in direct and indirect ways. In receiving partial payment of wages in foodgrains, they contribute directly to the household consumption basket. Indirectly, the programs provide supplemental income to targeted groups, i.e. the poor and other vulnerable groups, which in turn could improve their capacity to meet food and other consumption needs. They could also generate secondary benefits through: (i) the longer term income enhancing effect of the assets that are created (e.g. roads, wells, water conservation infrastructures, etc); (ii) the potential upward pressure they could impart on overall wages; and (iii) as a form of employment insurance to prevent costly adjustments, such as distress sales of productive assets or livestock, that would have a long term adverse impact on the households income generating ability. With the exception of the Maharashtra Employment Guarantee Scheme (MEGS), however, there has been extremely limited systematic review and evaluation of the impact of employment programs, either from a poverty perspective or from a food and nutrition security perspective. The findings of more recently available reviews are presented below. 3.37 Despite its implementation difficulties, evaluations of the longer running Maharashtra Employment Guarantee Scheme (MEGS) indicate that it played an important role in combating seasonal malnutrition among poor rural households. The MEGs achieved this by providing employment during the agricultural slack periods or drought years or both (Subbarao 1992, Gaiha 2000). The MEGS complemented agricultural employment since MEGS employment was high in the lean agricultural season (April to June) and low in the peak season (Annex Table A3.25). In contributing to seasonal stabilization of incomes and in reducing income variability, Dev (1995) suggests that it also has a significant impact on seasonal malnutrition. Other studies found that laborers in MEGS villages had income streams that were 50% less variable in non-MEGS villages (Walker and Ryan 1990 and Bhende et al. 1992). These findings indicate that the given the size of the risks faced by these households, the benefits could be substantial, which is important for reducing seasonal malnutrition in poor households. 3.38 Although the EAS and the JRY/JGSYare reaching only a very smallpercentage of the total population and the total poor, national level and state level studies indicate that it is more targeted to the poor than the PDS. The EAS and JGSY are designed to provide gainful employment to poor rural households. While non-poor households are also gaining employment under the program, Lanjouw and Ravallion (1998) using the 1993-94 NSS Survey found that the average odds of participation in public works programs are higher for the poorest quintile than the richest (1.23 vs 0.83). By contrast, the average participation of the poorest quintile under the PDS was lower (0.92) than the richest quintile (1.0). An analysis of the MEGS found that participation rates are highest for the poorest households (Ravallion and Datt 1995). Dev and Ranade (1998) found that JRY is contributing substantial income to families working under the scheme; a JRY worker earns on average 40% of the poverty line threshold. - 40 - E. National Program of Nutritional Support to Primary Education 3.39 The National Program of Nutritional Support to Primary Education (NPNSPE) or the Mid-Day Meals (MDM) Program is one of the largest schoolfeeding programs in the world today. The program is in a phase of rapid expansion, in view of the target of universal coverage during the Ninth Plan (1997-2002). By 1998/99, it covered 688,000 primary schools in 544 districts, including 5558 rural blocks and 205 blocks in urban, municipalities, corporation and notified areas (Table 3.6). This GOI scheme began in 2446 blocks under the Revamped Public Distribution System (RPDS)/Employment Assurance Scheme (EAS), two border blocks in Jammu & Kashmir and 37 low female literacy blocks in Punjab which had no RPDS/EAS blocks. To give preference to weaker sections in society, urban slums in Delhi, Chandigarh, Goa and Pondicherry were also included. During 1996-97, the second year of the program, 1,927 low female literacy blocks were added. The program aims to cover the whole country by 2002. 3.40 The number of student beneficiaries is officially se{tumatednto Table 3.6: Main Indicators of Mid-DO Meals Outreach benef'ciaries IS of ficially estimated to Year 95-96 96-97 97-98 98-99 have nearly tripled to 97.9 million in (3131/99) 1998/99, but this is likely Districts covered 378 475 510 544 overestimated. Based on these Blocks covered 2,499 4,426 5,451 5,763* overestimated. Based on these Schools covered (thousand) 322 474 641 688 figures, the program is reaching about Student beneficiares (million) 33.4 55.7 91.0 97.9 90% of the 108.7 million students Lifting of food grains (1000 MT) 565 980 1,797 1,310 enrolled in primary school in 1997/98 Food grain lIfted/student (kg/yr) 17 18 20 13 Note::* includes 205 urban/municipality/corporation/notified area. (Department of Education 2000). This Source: Department of Education, Ministry of Human Resource Development, is equivalent to about 81% of all Government of India, Food Corporation of India children eligible to go to primary school. A recent survey by the Operations Research Group (ORG, 1999) of school level participation in the MDM program23 found, however, that in 6 States distributing foodgrains, on average only 66% of households with enrolled primary school children reported receiving their foodgrain allocations, with distribution rates ranging from 47% in Madhya Pradesh to 76% in UP and West Bengal (Annex Table A3.1 1). In Gujarat, the ORG study estimates that only 65% of the households with enrolled primary school students reported receiving cooked meals; 78% in Orissa. 3.41 Although the Mid-Day Meals Program is not intentionally targeted to the poor, participation rates suggest that children from lower income groups are Table3.7: Proportion of Eligible Children Receiving MDM and Frequency of capturing the benefits of the program Receipt of Food State % Receiving Mid-Day Meal with Frequency of (Annex Table A3.13a). With the per month I in 2 months tain 34 months Less Often exception of Haryana, the ORG study a) Food-grain found that over 70% of students Distribution Haryana 44% 30% 13% 13% receiving foodgrains or cooked meals Kamataka 67% 12% 20% 1% (Gujarat and Orissa) were from Madhya Pradesh 45% 16% 31% 8% households eaming Rs 2000 or less per Rajasthan 2% 28% 62% 9% Uttar Pradesh 5% 72% 12% 1 % month (Annex Table A3.13a). The West Bengal 1% 2% 41% 56% program also had a higher coverage of Total 24% 30% 31% 15% SC/ST students--7 1 percent of the b) Cooked Meals Everyday I per 2-3 days I per 4-7 days Less Often SC/ST studets--1 perent o the Gujarat 87%/, 7% 6% students being from these two Orissa 68% 20% 4% 8% categories; with 94 per cent of the ST Total 75% 16% 2% 7% and 88 percent of the SC students Source: ORG 1999 belonging to families below poverty line, with a monthly income of Rs.2000 or less (Annex Table 23 The ORG study covered 50 blocks in 25 districts distributed over the 10 states involving a survey of 67,648 households and 397 schools. - 41 - Box 3.1: Mid-Day Meal Food Distribution In a Sample Primary School The teacher had 2.5 mt of rice to be distributed among 150 students in the school. Grains were distributed by calling the students of each class. The teacher started giving the grains by measuring it with a bowl that could hold 3 kgs of rice. The teacher filled it up first and then approximately took some rice out as there were more students to cater too than the amnount of rice available. As the distribution continued, the quantity of grains taken out of the student's share increased. The last 30 students received only half a bowl of rice that weighed about 700 grams. There were other students who were present for 80% or more days in the previous month who did not get their share. The teacher assured them of their allocation once the new stocks came in.... Source ORG, 1999 A3.13b). Notably, there is no significant difference in the proportion of enrolled boys and girls receiving the foodgrains or cooked meals (Annex Table 3.12). Effectiveness of Program Implementation 3.42 With the rapid progress achieved in expanding the Mid-Day Meals Program throughout the country, some critical implementation problems, however, are emerging. The complex logistical arrangements and multi-agency, multi-level coordination required to implement the program, are causing problems for the effective delivery of the foodgrains. Inadequate infrastructure at the school level and weak monitoring further contribute to problems of leakages of foodgrains. These issues are discussed in detail in the following sections. 3.43 Irregular distribution of foodgrains is a problem in many states. The ORG study found sharp differences across States in reliability in the distribution of foodgrains. In Karnataka, ORG found more than two-thirds of the households with primary schools children reporting receiving their foodgrain allocation regularly every month. At the other extreme are Rajasthan, Uttar Pradesh and West Bengal, with less than 5% households reporting receiving the foodgrain every month (Table 3.7). With the exception of Karnataka, students in the other states generally receive foodgrain once every 2-4 months. Strikingly, this feedback of poor reliability from beneficiaries is in marked contrast to records maintained at the school. For example, school records for UP and Rajasthan indicate that during the school year about 60% to 70% of enrolled students each month generally receive the foodgrains (Annex Table A3.14). Orissa and Gujarat had greater success in providing cooked meals regularly. 3.44 The quantity offoodgrain received by students in some states is below officially designated quantities. On average, only 66% of the students receiving foodgrains under the Mid-Day Meals Program reported getting 3 (or more) kgs of foodgrains. About 12% reported receiving 2-3 kg, 16% reported receiving 1-2 kgs and 6% reported receiving less than 1 kg (Annex Table A3.15). In Madhya Pradesh, despite the fact that students are issued coupons enabling them to collect the foodgrains from the Fair Price Shops, about 46% of the households reported receiving less than 3 kgs of grain. In the States where foodgrains are distributed in school, one reason students received less than the designated amount was because when the foodgrain supply was short, teachers (60%) distributed the limited grain equally among those present. Other teachers (38%) distributed the 3 kgs up to the extent possible, making the remaining students who did not receive the foodgrain wait to receive their share till the next time the supply was replenished (Box 3.1). 3.45 This poor distribution performance is in large part due to the complicated system of delivery at the state level. The existing foodgrain logistical system involves many departments and agencies at the same level and a tedious process of lifting and transport reimbursement (See Annex C). The transportation cost from district FCI depots to the school is borne by the lifting agencies in the states and later reimbursed by the MHRD according to the norm. In most states, weak coordination between FCI and MHRD results in delays of both FCI releases of foodgrains to schools or to the Fair Price Shop (Karnataka, Madhya Pradesh, UP) and in reimbursement of costs of grains and transportation, which in turn lead to delays in the distribution of the grain. The foodgrains are transported to a central point and the subsequent transportation arrangement is left to the teachers, which adds to the logistical problems. - 42 - 3.46 Inadequate infrastructure and weak monitoring and evaluation mechanisms contribute to losses, leakages and unhygienic practices. Teachers in the ORG study reported "storage losses" of as much as 30%. Fair price shops in Karnataka and Madhya Pradesh reported "storage losses" of 32% and 42% respectively. In a large number of schools, foodgrains are stored inside the classrooms, thus taking away space for teaching. When storage in school is unavailable, the grain was also stored at the headmaster's houses, the Panchayat house and in other locations (Annex Table A3.17). In Orissa and Gujarat, the ORG study found that only about 30% of teachers report having a separate shed or kitchen to cook the students' meals. In the schools where a kitchen was not available, the teachers reported cooking in the school premises (e.g. the school playground) or at the headmaster's house. The existing systems do not provide adequate mechanisms for addressing complaints reported by functionaries lifting grain from FCI, the block functionaries or school authorities. Moreover, weak monitoring of the program results not only in misreporting of student beneficiaries, but also in malpractices, including illegal diversion of the grain. The PROBE(1999) study report of problems of inspectors themselves demanding "inducements" in the form of grain. 3.47 In Gujarat and Orissa, school children helped in preparing the meals, taking time away from schooling and other activities. The ORG study found that 42% of children in Orissa and 27% in Gujarat helped in the meal preparation. The children helped in fetching firewood (66%), cleaning the grains (37%) and cooking (16%) (Annex Table A3.19 and A3.20). Impact of the Mid-Day Meals Program 3.48 The impact of the Mid-Day Meals Program can be analyzed in terms of its two stated objectives: a) enhancing the nutritional status of children and b) improving the status of elementary education in terms of enrollment, retention and attendance. However, no systematic nationwide study has been undertaken to analyze the impact of the Mid-Day Meals Program based on these standards. The presence of other school incentives (free text books, free uniforms, and scholarships) also increases the difficulty of isolating the impact of the Mid-Day Meals program on the educational parameters. The recently available evaluations are summarized below. 3.49 Impact on nutritional status. The findings of micro-studies of school feeding programs on the nutritional impact of cooked meals are mixed. There has been no systematic nation-wide assessment of the impact of the Mid-Day meal Program on the nutritional status of children. A village level household study of the school feeding program in Tamil Nadu suggests that energy intake increased for the average household with two children in elementary school and one child in high school participating in the program (Babu and Hallam 1989). A related study conducted by National Institute of Nutrition in 1993 on the Mid-day Meal program in Andhra Pradesh indicated that, while the extent of energy deficiency in the diets of school children is about 750 kcal per day (while deficits of protein are negligible viz; 3 to 5 gm per child per day), the meal supplied under the scheme, however, provided just around 300 kcal Table 3.8:Changes in School Enrolment, Attendance Between Pre- which is less than 50% of the observed gap in And Post-NPNSPE Program Period dietary energy. The program is therefore more in State Enrolment Attendance Retention Assam + the nature of a supplement rather than providing a Gujarat + + complete meal. Consequently, as expected, the Haryana + + gains as assessed through body measurements, Jammu Kamataka + 4- were not significant. It does not account for Madhya Prades potential re-allocation of food that could occur Orissa + within the household as studies in other countries IRajasthan also indicate. Uttar Pradesh + West Bengal +_ 3.50 Impact on Enrollment. The ORG study '+' ('- ') indicates a positive (negative) mean difference between post- and pre-program is significantly greater than zero (at 5 % (1999) finds a comparatively higher growth in level of significance) enrollment during 1996-97, the year in which Source:ORG, 1999 - 43 - the scheme was introduced, compared to the earlier years (Table 3.6). This has been sustained over the next two years. The growth rates were comparatively higher for girls (9%) as compared to boys (6%) and for the SC and ST categories too from pre-NPNSPE to post- NPNSPE periods. State wise comparisons indicate higher growth rates in enrollment in UP, West Bengal, Assam and Haryana in 1996-97. While it is very difficult to isolate the impact of the NPNSPE on enrollment, since several other incentive schemes and projects are being simultaneously implemented, the study reports that 79% of the community members interviewed believed the mid day meal scheme contributed to higher enrolments. Interestingly, the ORG study also presents a counter situation wherein of all the households surveyed, about 29% of households in Kamataka, 16% each in Gujarat and West Bengal, and 8% in Haryana, had both out-of school and school-going children in the same household. This indicates that the provision of mid-day meal is not always an adequate incentive for households to send all children to school since three fourths of these households were primarily engaged in farm or farm-related activities. The economic benefits of engaging the children in on-farm activities were evidently higher in comparison to sending them to school. A recent study covering four states (Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh) by Dreze and Kingdon (1999) suggests a positive impact of mid-day meals on girl children enrollment. 3.51 Impact on Attendance. The ORG study suggests that NPNSPE had a limited impact on attendance. Improving attendance is central to the scheme, since it is supposed to cover only children who have a school attendance of 80 percent or more in the previous month. A precondition for ensuring this impact would logically be that the community/parents/children are aware of this criterion and therefore perceive the meal provision as an incentive. The ORG study (1999) found improvement in attendance rate between the pre- and post-program years only in the two states providing cooked meals and two states providing foodgrains. Earlier studies of the Tamil Nadu Mid- day Meal program also showed similar positive effects of the program on attendance (Devadas 1972, Hariss 1991). While in states where cooked meal is provided, it may still be an incentive for regular attendance, but in the states where grains are provided, it is appears to be taken for granted as a right. The ORG study indicates that only 20% of parents were aware of the 80% attendance criterion and could relate the provision of foodgrains or cooked meal to it. A majority believed that all children in primary classes were eligible. The low level of awareness could be attributed to the fact that teachers themselves did not, in most cases, apply this criterion. 3.52 The program, however, appears to reduce drop out rates. The ORG study compared the pre and post program trends in dropouts in the sample states and found state -wise variations. In Karnataka and Orissa though the drop out rates continued to remain high, there was an improvement of almost 6% in the post-program period. An improvement in retention of girls was also observed. Marginal improvements were observed in other states, such as West Bengal and Uttar Pradesh. In Rajasthan, Jammu, Gujarat and Haryana, there was no improvement as a result of the scheme. Earlier evaluations of the Mid-Day Meals Program in Tamil Nadu (Rajan and Jayakumar 1992, Harriss 1991), indicate that the program reduced the drop out rate in primary schools. F. Integrated Child Development Services: Did it Meet its Program Objectives 3.53 The ICDS program expanded rapidly in the 1990s, benefiting from the increased emphasis on nutrition during the last decade. By March 1998, the ICDS program included 4,200 projects in 25 states and 7 Union Territories, operating about 592,571 Anganwadi Centers. Its coverage is more extensive in rural areas; with a total of 3,177 projects in rural areas compared to 750 in tribal areas and 273 in urban areas. So far, six states account for over 50% of operational Anganwadi Centers in the country: Uttar Pradesh (13%), Tamil Nadu (9%), Maharashtra (8%), West Bengal (8%), Bihar (7%) and Madhya Pradesh (7%) (Annex Table A3.28). The rapid expansion of the program during the last decade, however, diverted attention away from several institutional, managerial and infrastructural weaknesses, which if not addressed could seriously undermine the effectiveness of the program. These are elaborated below. - 44 - Supplementary Food: How Much do Beneficiaries Receive? 3.54 Official estimates show a more than tripling in number of supplementary nutrition beneficiaries from 6.9 million to 24 million between 1985 and 1998. By 1998, the official number beneficiaries included 20.2 million children and 3.8 million pregnant and nursing mothers. The number of pre-school education beneficiaries is also reported to have increased by 380 percent from 3 million to 11.5 million during the same period. 3.55 Official numbers are likely overestimated, due to weaknesses in existing ICDS monitoring systems. A study undertaken by the Foundation for Research in Health Systems (FRHS) in 1996 of ICDS implementation in 7 states (Andhra Pradesh, Bihar, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, and West Bengal) found problems of non-availability of records and if available, a widespread tendency to over-report the number of beneficiaries as well as the frequency of provision of food and other services by the Anganwadi worker. The AWW is required to maintain four registers: a Children's Survey Register, Growth Monitoring Register, Pregnant Mother's Register, and Nursing Mother's Register. The study found about 93% of the AWCs had a Children's Register; 85% had a Growth Monitoring Register and Nursing Mother Register. Only 60%, however, had a Pregnant Mother Register. Moreover, when beneficiaries are registered, over-reporting of receipt of food by children and pregnant and nursing mothers is widespread (Table 3.9). Such over-reporting by the AWW ranged from about 21% in Bihar to 44% in Orissa. Information on the receipt of food by pregnant mothers matched those of the AWWs on average about 70% of the time, but going as low as 25% in Orissa. Informnation on the receipt of food by nursing mothers was on average higher at about 80%. Table 3.9: Consistency between An anwadi Worker Records and Responses from Beneficiaries Records i AP | Bihar I MP I Orissa | Rajasthan UP WB Total A. Mother's response matches with AWW r ster ( __o) 1. Sex of the child 89 89 95 69 82 87 95 87 2. Date of birth of the child 44 56 66 23 25 56 7 36 3. Receipt of food by children 72 74 73 60 71 60 66 69 from AWW in past 7 days B. Overreporting by AWW of 26 21 40 44 25 41 38 33 Food Receipt by Childrenl/ C. Women's receipt of food from AWC in past 7 days matches with AWW register (%) I. Pregnant women | 68 | 81 | 25 | 60 1 77 64 79 69 2. Nursing mothers | 87 1 84 60 81 | 87 69 78 79 D. Home based record matches with AWW re ister (%) 1. UIP/Imm. Card available2/ [ 42 32 18 49 17 I 25 64 35 2. UIP matches with AWW 26 20 1 9 23 19 17 16 20 registers for imununization l l Note: I /Food reported as not received by mothers but reported as received by the AWW. 2/ UIP-Universal Inmnunization Program. Source: CARE-india, Integrated Nutrition and Health Program, Baseline Survey Report Consolidated for 7 States, April 1997. Report prepared by Foundation of Research in Health Systems, Ahmedabad 3.56 The pressure on staff to meet designated targets and weak monitoring lead to problems of over-reporting of food distributdon and beneficiary participation. Since the current monitoring system for the ICDS relies on monthly progress reports prepared by AWW, with no formal mechanism to confirm with the "beneficiaries" on the accuracy of these reports, this opens opportunities for over-reporting to meet program targets. In some cases, it provides the means for covering the diversion of the food to other uses. A recent study of CARE-Assisted ICDS Centers in Bihar (Srinivas 1997) found diversion of food occurring at the Block and AWC levels for commercial sale (including as cattle feed) or for personal use by ICDS functionaries 03ox 3.2). The lack of storage facilities at AWCs, a problems already identified in previous evaluations of the program (i.e. NIPCCD 1992), persists, so that food stocks are at times stored at the AWW's residence, which makes diversion easier. Persistent problems of unreliability of food delivery may also be a major factor in the non-receipt by beneficiaries. Both the FRHS and the Bihar study report logistical problems contributing to inadequate food inventories at the AWCs. - 45 - 3.57 Children under 2 are not being reached effectively for supplementary feeding under ICDS. The prevention of, and rehabilitation from, malnutrition of children under 2 years is absolutely critical as it sets the foundation for the child's longer term physical and mental growth trajectory. The FRHS study finds, however, that this is where the program encountered major problems. In AP, Bihar and Orissa, 69% of the children were eligible for supplementary food, but only 38% received them in Orissa, 50% in Bihar and 57% in AP (Table 3.10). In MP, while 52% were eligible, only about 24% received the supplementary food. This is in contrast to program targets of 60% coverage. Even fewer children received food for more than 3 days per week. In most cases, the food is taken home and shared with other family members. The FRHS study as well as World Bank evaluations of ICDS projects in Andhra Pradesh, Orissa and Tamil Nadu also show extremely poor coverage for Vitamin A supplementation of children under three (Annex Table A3.31). With the exception of Tamil Nadu with coverage of almost 50%, coverage is less than 15% in the other states, compared to program targets of 60% in the CARE-supported projects and 80% in World Bank-supported projects. Table 3.10:Percentage of Children (6 -23 months Receiving Supplementary Food Receipt/Consumption of Supplemental Food AP I Bihar Orissa MP Rajasthan I UP WB Total N= 1086 | 1071 1020 1001 1051 1081 1095 7405 Eligible Children 690/o 52% 40 54% A. Received food at AWC in last I weeks 57% 50%/o 1 38% 24% 37% 32% 43% 40%/o B. Received food for >3 days in a week 46% 37% 25% 17% 32% 20% 34% 300/o C. Child alone consumed food received I10% 12% 9% 13% 6% 4% ICP 0/o D. Shared ration with other family members 1 46% 37% 29% 11% 300/o 17% 39% 30% Source: CARE-India, Integrated Nutrition and Health Program, Baseline Survey Report Consolidated for 7 States, April 1997. Report prepared by Foundation of Research in Health Systems, Ahmedabad. 3.59 The FRHS study indicates that the supplementary food is neither reaching pregnant women nor nursing mothers. In MP, Rajasthan, and UP, less than one third of pregnant women and nursing mothers received supplementary food. In general, the food rations were also shared with other family members, reducing the impact of the additional food. The FRHS study and World Bank evaluations of ICDS projects similarly find insignificant progress in the distribution of iron and folic tablets, reaching less than 20 percent of the target group, relative to the 70% goal (Annex Table A3.29b). 3.60 Weak growth monitoring in A WC limits the program's effectiveness in targeting the more nutritionaly vulnerable children, those under 2. The small proportion of children under 2 that are weighed either at the AWC or at home limits the ability of the AWW to identify the malnourished and take preventive or corrective actions. The FRHS 7 State study as well as Bank evaluations of ICDS implementation in Andhra Pradesh and Orissa show that growth monitoring and promotion is Box 3.2: ICDS in Bihar: Some Findings on Program Implementation A review of CARE assisted ICDS projects in Bihar was undertaken in September 1997. The review covered 186 Anganwadi Centers in 12 blocks. The study's major findings are summarized below. * Transportation of food commodities from the port to the block and subsequently to the anganwadi center has been delayed, irregular and inadequate resulting in the loss of feeding days. * The Govemment of Bihar incur delays in clearing the transports bills, reimbursing the AWW for the transportation of the food from the Block to the AWC and for fuel and condiments, paying the AWW and helper salaries leading to instances where the AWW sells the food to cover transportation costs. * Most of the AWW are semi-literate and obtain assistance from their husbands in running the center, collection of stocks and maintaining records. * Stocks in most cases are kept in the residence of the AWW. Storing the commodity in the AWW residences opens opportunities for personal use and sale of the food. * Daily food requirements are carried to the center by the AWW, based on estimates of consumption for the day. There is little correlation between the total volume of rations required and the previous days attendance, the beneficiaries present during the day, or the amount actually transported to the AWC. AWWs usually mark the attendance of most of the enrolled beneficiaries, regardless of the number actually present. Marking of unbroken attendance is prevalent in most centers * Members of the community allege the sale of food at the block and AWC levels. They allege collusion between Block officials and the AWW where the Block officials overstate the amount delivered to the AWC, selling the balance in the market. At the AWC, the AWW saves supplies by cutting rations or not feeding at all, selling the "savings" in the market. The food is usually purchased by cattle feed vendors, reportedly at Rs 100 per bag. Source: S.L. Srinivas, 1997. - 46 - very poorly implemented, contributing to a large number of children whose growth is faltering (Annex Table A3.40). Adoption of Desired Nutrition and Health Enhancing Caring Behavior 3.61 Progress in promoting desired child caring behavior varies across States, but in general is still below program targets. Of the 7 States covered by the FRHS study, Andhra Pradesh appears to have made the most progress in promoting the desired child feeding and health promoting behaviors among mothers, in many cases exceeding the program goals (Table 3.11). In most states, while there appears improved breast-feeding behavior among mothers, there remains weak compliance with Vitamin A supplementation. However, problems with irregular availability of Vitamin A supplies are likely compounding the problem. In most states, however, adoption of desired health-related practices such as immunization of the child and the management of common childhood illnesses (diarrhea and acute respiratory infections) remains quite weak. In most cases less than 50% of mothers are following the desired behavior. Table 3.11: Some Indicators of Adoption of Desired Child Caring Behaviors Indicators AP I Bihar I MP I Orissa |Rajasthan UP WB Total INHP Goal" 1. Children under I year: Exclusively breastfed for the first four 61% | r 36% 60% 5% j 2% 29% 60% months 2. Children 6-9 months old received 60% 58% 46% 26% ] 40% 56% 70% 46% 70% breast nilk and solid/mushy food l __ 3. Children under 6-23 months 57% 5O0/. 24% 38% 37% 32% 43% 40% 65% Received supplemental food A __l_ __ _._ 4. Children receiving vitamin A supplementation (a) 6-12 months age I dose 12% 1% l 1% 10% 3% 3% 11% 6% 60% (b) 13-18 months age 2 doses 5% 0% 0% 1% 1% 1% 4% 2% 60% (c) 19-24 months age 3 doses 3% 0% 1% 1% I 0% 1% 4% 2% 60% 5. Children between 12-23 months: Fully immunized 46 15 23 39 26 27 37 30 855 6. Management of Diarrhea . _l|_l__ (d) Use ORS 27 _ 10 15 14 10 7 13 1 4 70 (e)Soughtmedicalcare 87 51 56 56 l 61 70 61 |63 | 70 I/** INHP Goal tobe achievedbythe end of 5th year i.e. 2001 (CARE-India, INHP document, December 1995) Source: CARE-India, Integrated Nutrition and Health Program, Baseline Survey Report Consolidated for 7 States, April 1997. Report prepared by Foundation of Research in Health Systems, Ahmedabad. Inherent Weaknesses Undermine Program Implementation 3.62 Recent reviews of ICDS implementation show a large gap between design and field performance. The bias towards rapid expansion of the program contributed to a diversion of attention away from ensuring the delivery of high quality of services. A number of critical problems have been identified in various reviews (Planning Commission 1999, Khullar 1998,World Bank 1999b, World Bank 1998g, 1998f, Comptroller and Auditor General of India 2000). They relate to operations, management and infrastructure that are seriously undercutting the effectiveness of the Boxes 3.3: Reasons for Lack of Improvement in program (Box 3.3). These are elaborated below. Nutritional Status in ICDS areas * Inadequate coverage of children below three years of 3.63 Frontline A WW are unable to effectively age who are at greatest risk of malnutrition; deliver key ICDS services, because of inadequate * lrregularity of food deliveries to anganwadis and hence irregular feeding and inadequate rations; training. The FRHS 7 state study found highly . Poor nutrition education (of mothers and communities) variable levels of qualifications of AWW across to improve feeding practices at home; States. For example, from 10% (AP, Bihar) to 70% . Inadequate training of workers in nutrition, growth monitor-ing, and communication; (West Bengal) of the AWWs could not record the . Poor supeNision weight of the child correctly (Annex Table 3.33). . Poor co-ordination and linkage with health workers And if the child is weighed, in all states on average, . Lack of community ownership and participation only about 60% could assign the correct nutritional Source: Planning Commission, Ninth Five Year Plan (1997- grade correctly; in Rajasthan, UP and West Bengal, it 2002) - 47 - went as low as one third. The study also found that on average, only 47% the AWW discussed the nutritional grade with the mother. As this information and close interaction with mothers are the foundation for any preventive or corrective nutritional intervention, poor training of AWWs seriously jeopardizes the success of the program. Caste and other social-related problems further restrict interactions. 3.64 The preoccupation with food distribution, which percolates from the State Government to A WW, reduces attention and priority attached to inter-personal communications and counseling, which are vital to care-related determinants of child nutrition. The Anganwadi worker is suppose to run the center, feed and weigh the children, carry out pre-school activities, maintain records and growth charts, carry out surveys, and visit homes. However, food distribution takes up most of the AWWs time. The AWWs time is further diverted by the need to maintain as many as 16 registers and prepare and submit monthly reports to the Child Development Project Officer, who heads the project (Khullar 1998). One impact of the emphasis on food is the neglect of activities to promote better caring behavior. The FRHS study found on average, only about 23% of mothers received nutrition advice from the AWW (Annex Table A3.32). While the home visit could have been an effective forum of this counseling, on average only one-third of mothers received a home visit from the AWW. Since growth monitoring is also only weakly performed, this further limits the AWW's scope for providing more targeted child specific advice to the mothers. The question that has been posed often is: Could one AWW actually fulfill all these tasks alone? 3.65 Problems of inadequate equipment, supporting infrastructure, and poor supply management further circumscribe what the A WW could do. Availability of weighing scales, storage facilities, and reliability of deliveries of food and other supplies (IIFA and Oral Rehydration Solution (ORS) packets, and the medicines) have been identified as problems that further cripple AWW activities (Annex Table A3.37). Limited coordination with other government schemes -e.g. establishment of wells or deliveries of foodgrains-that could complement the ICDS program, further impede effectiveness. 3.66 Weak monitoring and evaluation hampers proper correction of operational problems and opens opportunities for misappropriation of resources. The centralized nature of monitoring further impeded quick feedback. The Department of Women and Child Development at the Central level is responsible for overall monitoring, collection and analysis of periodic reports. Based on this, program strategies are supposed to be refined and timely interventions made. The DWCD is also supposed to compile computerized quarterly monitoring reports received from the Child Development Project Officers in each State. A State level performance report is supposed to be prepared comparing performance in each State with the national performance. These reports are supposed to be sent to the State Nodal departments for necessary corrective action. In practice, however, these reports are hardly ever seen at the project or AWC level. A review commissioned by the Comptroller and Auditor General of India, conducted in 2000, found that only 41% of the projects were submitting the monthly monitoring reports. 3.67 Weak supervision at the project level and the lack of a mechanism to cross check data on reports prepared, however, permits inaccuracies to pass through the system. Each State government has a Management Information System cell, which is supposed to ensure the systematic flow of information and feedback between the AWC and the project, between the ICDS project and the State Government, and between the State Government and the GOI. This is achieved through the monthly progress report and monthly monitoring report. Anganwadi workers compile standardized monthly and bi-annual reports based on registered information. These reports are forwarded through supervisors to the Child Development Project Officer, who in turn forwards the reports to the State and Central ICDS cells. The Monthly Progress Reports (MPR) summarize the performance of key indicators pertaining to major scheme components. The existing reporting system, however, has many serious drawbacks. Poor quality of reporting and weak supervision do not allow for checks on - 48 - mis-reporting of information from lower levels. Other problems include lack of timely and effective feedback from higher to lower levels, the large amount of paperwork required at all levels, the focus on process indicators rather than outcome indicators, the failure to establish a link between expenditures and outcomes or between actual and expected achievements within the MPR format. As noted earlier, the poor monitoring system creates opportunities for leakages of food stocks. 3.68 Weaknesses in the monitoring and evaluation of the ICDS further hamper the accurate assessment of the impact of the ICDS on the nutritional status of its target groups at the broad scale. Limited data make it difficult to isolate the impact of the ICDS program from the impact of other on-going programs (e.g. Mid- Day Meals Scheme, food-for-work, TPDS) and secular trends in the area. 3.69 The recently approved Women and Child Development Project (1998) takes some steps towards addressing the problems of poor quality of ICDS services in 5 states-Kerala, Maharahstra, Rajasthan, Tamil Nadu and Uttar Pradesh. The project focuses on improved worker training and fostering greater community participation in program implementation to improve its effectiveness. 3.70 The Government of India recently implemented a number of initiatives to help improve the performance of the ICDS. GOI introduced in July 2000 a new initiative to strengthen pre-school education by providing additional resources (Rs500) to each AWC center to purchase pre-school teaching kits. State govemments could prepare two types of kits, one for the 0-3 year age group and one for the 3-6 year age group. Each AWC would be provided one or the other kit in alternate years. To motivate the AWW, special national and state awards were introduced beginning 2000/02 to recognize and reward outstanding performance. The reward consists of a citation and a cash award (Rs25,000 each at the national level and Rs2500 each at the state le . Nati ona Table 3.12. Percentage of Children byNutritional Status in ICDS and Non- S2.500 each at the state level). National ICDS Areas awards will be given to 20 AWWs andc 0-3 ears 3- years 1,275 awards will be given at the State Nutritional Status* ICDS Non-ICDS ICDS Non-ICDS level. lNormal 35.5 31.1 35.9 29.0 eve. Mild j35.2 36.4 38.8 40.6 Assessing the Nutritional Impact of Severate 22.4 23.7 41. . ICDS Note: * Based on NCHS standards, calculated using National Evaluation of ICDS, NIPCCD, 1992 3.70 Recent evaluations indicate that Source: Radhakrishna et al., 1998 the ICDS contributed only to slight Table3.13. mpactoflCDSonNutritionalStatusofChildren (1-5years) improvements in nutritional status 1975-79 1988-90 E 1988-90 (Planning Commission 1999). Recent (Estimated distribution evaluation studies of Bank-assisted ICDS Nutritional Status* in the absence of ICDS) Normal 5.9 9.9 8.2 projects in Andhra Pradesh and Orissa and Mild 31.6 376 38.1 an integrated nutrition project Tamil Nadu Moderate 47.5 43.8 44.5 appear to indicate improving trends in child Severe 15.0 8.7 9.2 Note: * Based on NCHS standards, calculated using National Evaluation nutritional status in the project areas. The of ICDS, NIPCCD, 1992 study found a reduction in severe Source: Radhakrishna et al., 1998 malnutrition, but minimal impact in reducing moderate malnutrition (Annex Table A3.42). The projects also contributed to a reduction in infant mortality rate and the incidence of low birth weights. At the same time, however, the study noted that the overall paucity of relevant, reliable, and timely data made it difficult to draw a definitive judgement on project outcomes. Nonetheless, given the progress they have made on the process indicators, the study observes that it is likely the project could have made more than a small contribution to the achievement of its nutritional objectives. A study by the National Institute of Public Cooperation and Child Development (NIPCCD, 1992) also found that the nutritional status of children in ICDS areas were only slightly better than in non-ICDS areas. The percentage of severely - 49 - malnourished children under three in ICDS areas is lower by 1.8 percentage points than the non- ICDS areas and for children 3-6 years old, by 1.5 percentage points lower (Table 3.12). The number of moderately malnourished is 2.5 and 3.4 percentage points lower for the two subgroups. Given that ICDS areas covered only about 30% of the population in 1991, Radhakrishna et al. (1998) estimates that the ICDS program reduced the percentage of severely malnourished by only 0.50 points and the percentage of moderately malnourished by 0.70 points. Between 1975-79 and 1988-90, the contribution of ICDS to the decline in the percentage of severely malnourished is only about 8% (Radhakrishna et al. 1998). They also estimate that the percentage of severely malnourished children declined by 6.3 percentage points during this period, although in the absence of ICDS, it would still have declined by 5.8 percentage points. G. Lack of Convergence of Programs 3.71 The lack of coordination and cooperation among the various food-based transfer programs undercut signifcant potential synergies among them. There is little coordination between the ICDS and the NPNSPE although both are providing food/meals or child education, albeit the former to pre-schoolers and the latter to primary school students. Yet closer coordination of activities could potentially enhance each other, and enable sharing staff and staff costs. While there has been greater effort to foster closer linkage between the GOI's family welfare health promotion programs and ICDS, as they share several common objectives (identification of pregnant women and high risk pregnancies, provision of antenatal and post natal care, and anemia prophylaxis), there is a lot of room for greater coordination at the field level. Neither is there coordination between the TPDS and the NPNSPE, although they are both involved in moving grain. With these programs being universalized, with overlapping target groups and area of operations, greater coordination would be critical, to take advantage of the considerable complementarities, but also as a means to cut costs. 3.72 Clearly, there is great room for improving each program's effectiveness on the ground In view of the large numbers of food and nutritionally insecure in the country, there is no room for delay nor complacency. Change is needed and urgently. The following chapter explores some of these options for improvement. 0 Chapter 4 Food-Based Transfer Programs: Meeting the Challenge of Improving Household Food and Nutrition Security A. Food and Nutrition Security Goals and Challenges 4.1 The reorientation and adjustment of the Government's strategy, particularly the food- based transfer programs, are urgently needed to more effectively contribute to eliminating food and nutrition insecurity in India. Despite India's success in improving food security at the national level, India enters the 21th century with as many as 300 million poor who continue to suffer from chronic energy deficiency and malnutrition, the most vulnerable of whom are poor women and children. In response to the problem, and reinforced by the growing consensus of the more devastating longer-term inter-generational social and economic costs of malnutrition (Box 4.1), food- based transfer programs that directly mitigate household caloric and nutritional gaps have been universalized. A review of implementation of these programs, however, reveals that they only weakly achieved their intended objectives, despite the increasing fiscal costs. Widespread implementation problems, exacerbated by poor monitoring and evaluation of the operations, lead to unreliable delivery, leakages of food and overall poor quality of services. 4.2 In developing a long-term strategy for food and nutrition security, and what role these programs should play, it is critical to assess their design and implementation mechanisms relative to the current household constraints and risks they are intended to address. Are current food- based transfer mechanisms for redressing food and nutrition insecurity still relevant given the changing scenario in the 21th century? Given the govermnent's limited fiscal resources, are these programs the most efficient and effective means for achieving the program's desired outcomes? 4.3 Effectively ensuring household food and nutrition security in India would also pose a complex and politically delicate challenge of balancing short-term and long-term goals. As elaborated in Chapter 1, the causes of food and nutrition insecurity are multiple, its intensity chronic or transitory, with needs varying according to its scope (national, regional, community, household, or individual). It is broadly recognized that India made remarkable progress in ensuring food security at the national level, primarily through investments and policies that led to rapid agricultural productivity growth and a reduction in poverty levels over the last half century. These successes, however, leave no room for complacency. At the current annual population growth rate of 1.7%, India's population would reach 1.4 billion in 2020. Its foodgrain (rice and wheat) requirements alone are expected to increase to as much as 227 million mt by the same year (Kumar 1998). Other Box 4.1: Intergenerational Cycle of Malnutrition Malnutrition is transmitted across generations. Small women give birth to small babies who are more likely to become small children, small adolescents and ultimately, small adults. While smallness may be genetically inherited, the majority of small individuals in most poor developing countries are small because they suffered or are suffering from malnutrition. Malnutrition that occurs in childhood, adolescence and pregnancy has an additional impact on the birth weight of the newbom. A low birth weight baby who has suffered intra-uterine growth retardation as a fetus is effectively bom malnourished and is at higher risk of dying in the neonatal period or later infancy. If the baby survives, catching up on growth later is unlikely and the baby will likely experience a variety of development deficits. By age five, the child is likely to be stunted-a condition which will probably persist through adolescence and adulthood. The adolescent growth spurt offers a chance to compensate for earlier growth failure, although such potential is limited. The stunted child is likely to become a stunted adolescent and later a stunted adult. Stunted pregnant women are more likely to give birth to low birth weight babies. A child has food, healtb and care need which must all be fulfilled to grow well. Most active growth faltering occurs between the ages of 6-24 months, when the child is no longer protected by exclusively breastfeeding. In fact the most critical period is 6-8 months. At this time, the child is becoming more exposed to disease and infection through food or water contamination and is dependent on the mother or caregiver for frequent complementary feeding throughout the day. Growth failure is most preventable and most reversible at this age. From about two years of age, the child is more likely to grow nomally for a child of that age, but will be unable to recover the growth "lost: in the first two years. That fact that growth falters so early in life; growth failure cannot usually be significantly corrected later; and that the consequences of malnutrition are most serious ate early ages, suggest that priority should be to prevent malnutrition from occurring among these 6-24 month old children. This preventive emphasis would help tum the vicious cycle into a virtuous cycle. Source: Stuart Gillespie, 1999, Supplementary Feeding for Women and Young Children. - 52 - studies predict similar rapid increases in demand (Mohanty, Alexandratos and Bruinsma 1998, BhalIa and Hazell 1997). The package of actions needed to sustain the needed long term agricultural productivity growth and the overall income-enhancing, poverty-reducing economic growth, that would permit achievement of more permanent food and nutrition security for all of India's households, is beyond the scope of this study (Table 4.1).'. What is clear, however, is that these "long-term growth oriented" programs require considerable immediate public investments in key sectors to ensure future needs are met. Given the existing tight fiscal situation, this would require a delicate balance in the allocation of scarce Govermnent fiscal resources between the "short term safety nets" such as food-based transfer programs and these growth promoting programs. Table 4.1 :Fostering Household Food and Nutrition Security: Short and Long Term Measures Mechanisms to Address Food and Nutrition Security Needs in Objective Short-Term Medium-Long Term I Improve Nutrition and Utilization of Food Nutrition Education Targeted Health Safety Nets (Public and Private Investments ii Health Services, Water & Sanitation) 2. Improve Access to Targeted Food Safety Nets Food via _ _._ _ Increase in Incomes or Household Food Employment Safety Nets Production Poverty AUeviation Programs ( Public and Private Investiients: Health, Education, Water & Sanitation, Infrastructure and Services, Agricultural R&D and Teehnology Transfer Enabling Policy Environrtsent: Macro-economic policies Health, Education, Exterial Trade, Credit, Land Policies Competition Policy for Efficient Food Markets 4.4 How can food-based transfer programs more effectively serve as a lifejacket for the food and nutritionaly insecure without becoming a straight jacket for overall development? In the short term, a key ste would require: (i) allowing States geater flexibility in adopting or reorienting programs to better suit their specific needs, while placing the highest priority to ensuring better targeting and improving efficiency and cost effectiveness of these programs in reaching their intended beneficiaries and (ii) promoting the efficient functioning of food markets on which both poor and non-poor consumers depend on for the majority of their food needs, to reduce the sizeable physical losses and marketing costs. hicreased decentralization of implementation, including greater community and local government (Panchayat Raj Institution) involvement, could play a critical role in ensuring more effective village level implementation. Stronger coordination among the food based transfer programs, and between them and other poverty alleviation programs, would also bring about significant synergies in their impact. To effectively address medium to long-tenn needs, careful assessment, to begin immediately, is critical, as this would serve as the benchmark for charting required program adjustments and help determine whether the full package of existing programs would be needed at all or whether some programs should be phased out. This chapter outlines a possible agenda for reform. B. Targeted Public Distribution System 4.5 Improving cost effectiveness of the TPDS requires active measures to contain leakages. The GOI Department of Public Distribution has outlined some critical, immediate steps to take to l See India Towards Rural Development and Poverty Reduction (1999), Rural and Urban Water Supply and Sanitation (1998); India Achievements and Challenges in Reducing Poverty (1997), India New Directions in Health Sector Development at the State Level: An Operational Perspective for more detailed discussions. - 53 - ensure transparency and accountability in the TPDS to help contain leakages. State commitment to their implementation is needed. These immediate measures include (i) fostering accountability through greater involvement of communities through the Vigilance Conmmittees of the panchayati raj or local government institutions (PRIs); (ii) promoting greater transparency through public postings at the Fair Price Shop (FPS) and Gram Panchayat offices of official TPDS entitlements, the list of BPL beneficiaries, and sales and stock positions. The Gram Panchayats should be encouraged to proceed with the establishment of Vigilance Committees to keep watch on the functioning of the Fair Price Shops and public sector officials involved in implementing the TPDS. This committee should be given the authority to inspect the records of the FPS, the periodicity to be prescribed by the State govemment. The conmnittee would then report their findings to the Gram Sabha for action (e.g. suspension or cancellation of the FPS license). The Gram Panchayats would also serve as conduit for complaints by consumers pertaining to the FPS or other related government agencies for action by the appropriate authorities. Enabling Panchayat Raj Institutions to take a greater role in monitoring and overseeing the operations of the TPDS at the commnunity levels demands stronger State commitment. 4.6 Adopting greater flexibility in State program implementation and where strong State interest exists, one or two States could pilot alternative distribution mechanisms, such as food stamps or coupons. Piloting could initially begin in a few big communities or cities where a broad- based private foodgrain retailing system operates. This offers a possible cost saving option by eliminating the need for public sector physical handling of grains. Food coupons are "secured paper or notes", which like money, permit the purchase of a list of food items in limited quantities at a discounted price. Food stamps are "secured paper or notes" which could be used to buy a number of specific foods at market prices. A food stamp scheme, complemented by other safety nets (e.g. food for work programs), would offer the poor continued access to subsidized grain. Such a monetized income transfer from the government, rather than a price subsidy, would also permit unfettered private-sector participation in foodgrain markets and pare down the fiscal costs of supporting public- sector handling of foodgrains. Annex E describes the experiences in implementing food stamp programs in Jamaica, Sri Lanka, Honduras, Mexico, United States, Venezuela, and Colombia. Some key lessons that could be drawn for their experience include: (i) establishing transparent procedures for beneficiary selection and exit; (ii) building an appropriate regulatory framework and institutional capacity to implement the program; (iii) developing "secure" food stamps to prevent fraud, (iv) instituting clear administrative procedures for stamp distribution and redemption; and, (v) integrating monitoring and evaluation systems to facilitate program adjustment as needed. 4.7 To insure that foodgrain prices do not rise so high as to harm households now above the poverty line, appropriatelv timed open market sales guided by the refined "price-band" rules could and should prevent prices from going too high. In addition, savings won from more cost-effective FCI operations would be passed on to the states through lower economic costs of grain for all food- based safety nets. C. Reforming Foodgrain Policies for Food and Nutrition Securityz Integrated Foodgrain Policy Reform 4.8 Due to the close inter-dependence of foodgrain markets and the government's price stabilization program, the public food distribution and procurement and price support operations, it is critical that foodgrain policy reforms follow an integrated approach. Striking a new balance between government intervention with private competition that would bring about greater efficiency in foodgrain markets is crucial for food security, particularly for the poor who are the least capable of bearing the additional costs imposed by inefficient markets. 2 For more detailed discussion, refer to World Bank, 1999, "India Foodgrain Marketing Policies: Reformring to Meet Food Security Needs," Report No. 18329-lN, Washington, D.C.: World Bank. - 54 - 4.9 To boost confidence and encourage the private sector to make the much needed efficiency enhancing investments in the marketing system, the GOI's food price stabilization program must set the kind of clear, transparent and consistent rules for its interventions. First, a revised program would maintain a "price band" - the width between the ceiling and floor price - which permits reasonable marketing margins for profitable private sector operations (Figure 4.1). The Commission of Agricultural Cost and Prices could potentially assume an important role in the formulation of such bands. A govemment competition policy would also be critical to ensure fair trading practices by the private sector. Second, new policies would have to clearly outline the nature and scope of policy and regulatory instruments and the rules governing when they are to be triggered by price movements outside the desired price band. Third, interventions should rely as much as possible on market mechanisms; not only open-market sales at market prices but also more liberalized trade, such as public tenders of imports to the private sector. Fourth, to be GATT consistent, price bands would need to be consistent with the long-run trend in international reference prices, shifting from non- tariff instruments to tariffs. The minimum support price, the lower bound of the price band, would need to be more closely linked to international prices rather than being based largely on estimated "average cost of production" as it is today. 4.10 To insure that the new rules work in a stable and consistent manner, stringent limits Figure 4.1: How a Price Band Operates.... should govern the use of market-distorting Price, Rs/kg A i controls. Central and State storage, credit and movement restrictions should go into effect only "ceiling Prce" in extreme emergency conditions, that is when price floors or ceilings are breached. As much as No Private Storage, Credit Price margin the private sector, government would need up-to- Movement Controls Marketing date, high quality market information to manage Competition Policy Cost its programs effectively. The design of an Minimu m ................................. ........ altemative optimal price stabilization/buffer stock Support Prce management scheme that achieves a better u balance between public and private sector Quantity, kg objectives is complex and requires careful formulation to effectively integrate economic, fiscal, social and political concerns. The challenge calls for additional analysis. 4.11 To conform to the openness of its selling activities, FCI could gradually phase out the rice levy and procure its supplies in the future through open, competitive public tenders. No longer obliged to set aside large portions of their output for the levy - nor guaranteed a buyer - millers would see their profitability rise and receive a strong stimulus to undertake cost-reducing and efficiency-enhancing modernization investments that could help contain the public costs of market- based purchases. Ending the levy would eliminate the bias against modern and more efficient rice mills and the official and unofficial administrative costs involved in enforcing the levy. The resultant lower risks and costs associated with milling would translate into lower marketing margins with consequent benefits for both farmers and consumers. In addition, promoting the use of negotiable warehouse receipts would enable farmers improved access to working capital, without having to build their own storage facilities, and also hold their grain back from market to take advantage of expected higher prices. 4.12 Although foodgrain marketing reform entails a reconfigured government presence in markets, fostering investments in key infrastructure and services would be critical to improved market performance. India's grain markets need more efficient power generation and improved markets, roads, highways, railways and ports than the country now possesses. Specifically but not exclusively for grain and other agricultural produce, the infrastructure must be modernized. In addition, port and customs procedures should be significantly streamlined and the railways should - 55 - provide equal priority to FCI and private sector grain in rail transport. The flow of high quality and timely market information is also the lifeblood of an efficient marketing system and price stabilization program. Improved information collection, analysis and dissemination, including the increased use of more advanced data collection approaches such as remote sensing and geographic information systems could justify setting up electronic linkages between central and state-level units and among regulated markets. Improving FCI Operational Efficiency 4.13 The dependence of all foodgrain based transfer programs on FCI, makes its increased operational efficiency imperative. As the costs of all food-based transfer programs are dependent of FCI's economic cost, its rising trend has serious and broader spillover fiscal implications as well. Based on 1996/97 expenditures, operational improvements that reduce FCI's costs by a mere 10 percent can generate considerable savings, estimated at Rs 4.9 billion per year ($139 million). Combining efforts to improve the efficiency of FCI with measures to enhance private sector participation and efficiency is a win-win situation for the poor. Doing so permits the poor to benefit from greater efficiency in both the public and private foodgrain marketing channels. 4.14 FCI efficiency could improve by subcontracting various marketing functions to the private sector. FCI retains the responsibility of financing and overall coordination of foodgrain operations, while delegating actual performance of foodgrain operations to the private sector. This could include concessional arrangements and management contracts with the private sector, wherein the private owners themselves takes responsibility for investing and operating on behalf of FCI modem grain handling systems (e.g. bulk handling, storage and transport facilities). This approach separates the functions of financing from the performance of publicly provided services. At the same time, FCI would have to reform its management policies to strengthen incentives to improve efficiency. But to insure both those changes, FCI would have to work under hard budget constraints. Exploring new private-sector partnerships dovetails with the interest of the Department of Public Distribution in public-private joint ventures. And such subcontracting would take advantage of higher private sector efficiency in conducting activities that are largely a private good, but still aim at the public goal of ensuring access to foodgrains by the poor at acceptable fiscal cost. Reversing long-established FCI philosophy and practices would require a determined effort, but pressure for genuine efficiency is mounting, and greater efficiency is attainable. D. Employment Schemes 4.15 More effective targeting is critical if employment schemes are to serve as an effective income-based safety net for the poor. Of vital importance is a reorientation of wage setting rules for the program (Box 4.2) to strengthen the self-targeting towards the poor. This could include testing other wage setting mechanisms such a piece rates or setting special poverty program rates that would not exceed market wages. There is also a need to build strong local community mechanisms that would serve as a "check" on implementation effectiveness of these programs. As implementation by design is devolved to PRIs, the challenge for these programs lies more in capacity building of PRIs not only to develop community development plans that create durable community, social and economic assets for sustained employment and incomes for the poor and backward classes, but also Box 4.2: Key Elements in the Design of Employment Programs * Integration of program with mainstream public planning * Participatory planning and implementation * Clear coordination of "development-oriented" and "relief oriented" actions * Targeting of poverty's causes (i.e. infrastructure deficiency-roads,water; resource constraints-land quality, irrigation) in regions where causes are concentrated, but focusing on high retumn investments within those regions * Timing work activities towards slack periods enhances income stabilization benefits. * Piece-rate wages and provision of support services (day care) encourages women's participation. * Self-target the poor by setting appropriate wage rate: high enough to ensure income security, but no higher than the market wage Source: J. von Braun, 1995, "Employment for Poverty Reduction and Food Security", IFPRI, Washington, D.C.; K. Subbarao, 1997, "Public Works as an Ant-Poverty Program: An Overview of Cross-Country Experience," AJAE, Volume 79, pp. 678-683. - 56 - to foster strong local community mechanisms that would ensure transparency and accountability in the implementation of these programs E. National Program of Nutritional Support to Primary Education 4.16 The shift to foodgrain rations undermines the nutritional objective of the NPNSPE. It is undermined because: (i) it no longer ensures food consumption of the targeted children, since the foodgrain ration eventually gets shared with rest of whole household and (ii) as food is shared at home, it does not ensure mitigation of hunger in class (which partly undermines the educational impact because hunger increases difficulty in concentrating and performing complex tasks). To achieve its nutritional aims, greater effort is required to assist States to implement a school feeding program. 4.17 Providing an early snack or meal has several advantages. It ensures consumption exclusively by the child as well as facilitate concentration and leaming, if hunger in school is a problem. It provides greater incentive for attending school daily, since it is directly linked to daily attendance compared to the monthly rations. It can very effectively serve as the practical component of health education which is a part of the primary curriculum by providing a forum for nutrition education, development of healthy habits, as well as development of pro-social behavior in children like sharing, waiting for one's turn etc. which will lead to more sustained benefits. Provisions will be less dependent on a wide distribution network which has been seen to cause delays and interruptions (Table 4.2). In addition, the shift in pricing of foodgrains to their economic cost also reduces the possible cost advantages it may have over providing cooked meals. 4.18 The possible logistical drawbacks of cooked meals could be overcome with greater community involvement. Valuable lessons could be drawn from the Tamil Nadu Integrated Nutrition Program for preschool children (TINP) in its effective implementation, through community involvement at the local level. This also reinforces the need for effective communication strategies for the community, which would ensure ownership of the program, and help them understand the priority of making the child food secure and of its significance for school participation. Table 4.2: The Logistics of Different chool Feeding Program Modes Model Infrastructure Staff Rqts Meal options Issues !High 0 All meals consumed under supervision. 1. On-site meal (wide range of Help can be given to ill children reparation High High commodities * Recipients may be given less food at home possible) High organizational requirements __Quality control of meals possible problem Off-.site . * All meals consumed under supervision. 2. Off-site e Help can be given to ill children repared meal: L Recipients may be given less food at home rivate sector/local Low Low Medium Requires good supervision to ensure quality vendor articipation * Difficulty reaching inaccessible areas Potential monotony in rations . No guarantee that only recipient eats the ration, usually Take-home food Medium Medium No Meal shared with family, sold, given to animals or wasted n bulk MMImpact on learning dependent on impact on attendance G Caregiver spends less time and effort attending feeding site. No guarantee that only recipient eats the ration, usually o. orke ash Low Medium No Meal shared with family, sold, given to animals or wasted coupons or cash Low hfetium No Meal Impact on learning dependent on impact on attendance .________________ ___________ I . _ ._* Caregiver spends less time and effort attending feeding site. Source: adapted from Stuart Gillespie, 1999 4.20 Subject to close supervision by the community, a pilot could also be tested involving subcontracting mealpreparation to a private mealprovider, such as a local women's group, a local food vendor, or other interested private parties. This would eliminate the burden on teachers in preparing meals, while potentially offering a cost effective means to providing meals to school - 57 - children. This approach has been applied in Peru and the Dominican Republic, where the meal consisted of a snack or breakfast. Utilizing private enterprises to prepare and deliver the snack foods to schools facilitates providing the ration early in the day as well as ensures a consistent and high quality ration, while taking minimal time away from leaming. 4.21 Improved targeting of the NPNSPE, supported by a stronger community awareness and nutrition and health education campaigns, would help enhance its nutritional and educational impact. Selection of program areas could follow regional targeting, i.e. areas with lowest primary education enrollment and retention, high poverty and malnutrition rates, etc. 4.22 NPNSPE as a supplementary feeding program needs to be viewed from a more holistic, developmental approach to early childhood development. Due to the strong interdependence between nutrition, health and education, there is a need for greater convergence and coordination between programs such as the ICDS, School Health Programs and the NPNSPE, in terms of planning and implementation. The pilot program of integrating pre-school and primary school education in Uttar Pradesh offers one model of a mechanism to enhance the effectiveness of both the ICDS and the primary school education program (Box 4.3). Not only does this pilot promote greater coordination between pre-school and primary school activities, but it also aims to improve the effectiveness of the AWW by providing support for a community based worker, that could in tum free up more time for the AWW to devote greater attention to previously neglected nutrition advisory activities. Another area of significant complementarity for the school feeding program is periodic deworming of children within a larger program of school health. This convergence becomes logistically more feasible given the current trends towards the decentralized Panchayti Raj system in many states. Box 4.3: Integrating Early Childhood Development: A Joint District Primary Education and Integrated Childhood Development Services Initiative in UP The Departments of Education and the Women and Child Development is undertaking an innovative joint initiative to integrate and strengthen early childhood development efforts through greater coordination in the operations of Early Childhood Care and Education (ECE) centers in Uttar Pradesh. These centers aim to enhance school readiness in children and increase girl child enrolment by offering altemative sibling care during school hours. Early child development activities, which is mainly undertaken as part of the Integrated Child Services program, would be strengthened through the convergence between primary schools and the Anganwadi Centers (AWCs) in terms of location, timing, provision of education toys and skills enhancement of the ICDS workers. As part of the Bank assisted UP Third District Primary Education Project (DPEP), a total of 4,765 ICDS centers would be strengthened and about 1,859 rooms would be established near primary schools. The ECE center would be operating to coincide with the primary school timings and the Anganwadi Workers (AWWs) and helpers operating the centers would be paid an additional honoraria of Rs. 250 and Rs. 150 per month to compensate them for the extended hours. In some areas, the Siksha Mitras (para-teachers) from the associated primary schools would be trained for early childhood education and school readiness and will work with the 3-6 year olds of the AWC and class I together. This is possible as multi-grade teaching is prevalent in most primary schools in UP. In areas unserved by the ICDS, the new ECE centers would be opened through grants to qualified NGOs. The initiative is also introducing joint monitoring through the inclusion of an education project and ICDS project representative in the respective project review committees. To minimize the additional burden on the AWWs and facilitate synchronization of timings, on a pilot basis, opportunities are being explored for appointing a separate community based worker to enable the AWW to better service hamlet households and households with under 3's , who are not frequenting the AWCs. Th expenditure on the extra worker will be met through cost sharing between the project and local community, on a declining basis. This two worker model help strengthen the emphasis on home based outreach and adolescent's health and communications for caring and feeding practices and better. Consistent with U.P.'s overall new policy to decentralize administration to Panchayats, the ICDS/DPEP would be directly supervised and monitored through a village people's committee. The same committee will also monitor health/social welfare programs in the village. Training these committees in monitoring output/outcomes indicators will be critical to improving health/nutrition/education convergence in the state. Source: Meera Priyadashi, "DPEP-ICDS Convergence", draft concept note; World Bank 1999, Uttar Pradesh Third District Primary Education Project Appraisal Document - 58 - F. Integrated Child Development Services Program3 4.23 ICDS needs to improve its quality, effectiveness and efficiency to achieve a greater impact on malnutrition. Reaching young children at risk and women most likely to have low birth weight babies, is key to increasing the impact and cost effectiveness of ICDS. Given the extent of the problems identified in recent evaluations, the case for reform is strong. The priority actions in ICDS are: * Ensuring attention to 6-24 month-old children and pregnant women; * Enhancing quality and impact through better training, supervision, and community ownership; and, * Reducing AWW overload and improving coverage of hamlets either by hiring a second worker or separating the pre-school education component from the rest of the program. 4.24 Expansion of coverage should be frozen until the quality and impact of the program is satisfactory, which should be achievable within 3-5 years if sincere efforts are made. The area targeting approach has ensured that the most needy blocks are covered. Available resources should be used instead to improve the coverage of villages and hamlets within these blocks, and the quality of services. Rigorous criteria such as coverage with growth monitoring, deliveries by trained attendants, and improved nutritional status and birthweights should be used to determine whether program quality has improved sufficiently. 4.25 Reducing the number of assigned tasks of the A WW is critical to improving the quality of services of the ICDS. The main reason why ICDS is not covering the under-twos and pregnant women is that the AWW cannot reach these target groups, mainly through home visits, while she is burdened with child feeding, pre-school education, record keeping, and other duties. No major program in the world has succeeded in imparting pre-school education through a single worker. TlNP reduced severe and to some extent moderate malnutrition by devoting a worker only to 6-36 month old children and pregnant and lactating mothers. Although no one solution is likely applicable to all situations, three options show high feasibility: (i) hiring a second worker for pre-school education, selected and financed by the village panchayat; (ii) hiring a village level health worker, financed by the community or the health system or (iii) training adolescent girls, women, youth, dais, teachers and others to assist the AWW. It would be imperative to adopt one of them or make some changes in order to achieve ICDS's objectives of preventing malnutrition in young children and reducing the number of low birthweight babies. Caste and other social related factors should also be factored in the selection and hiring of AWWs. 4.26- Where village panchayats are strong, the second worker is likely to be the best option. Given the poor experience in India with the Community Health Worker program, the second option would be viable only where the health system can properly train and support such workers. The third option, with responsibility and accountability resting on no single individual, requires a high level of community cohesion and collaboration and would therefore only work in select locations. Another altemative is to separate the services to 3-6 year old children from those for the 6 months to 3 yr olds and pregnant and lactating women. The demand for pre-school education and for feeding 3-6 yr old children could be met by a second worker in ICDS or devolving these services to the Department of Education or to local authorities. The District Primary Education Program (DPEP) already delivers pre-school education services in some districts; and the feeding of 3-6 yr olds could become part of the Mid-Day Meals Program. An example of increasing coordination between the two programs in UP is described in Box 4.3. 3 See World Bank, 1998, "Wasting Away, The Crisis of Malnutrition in India", Report No. 18667-IN, Washington, D.C.: World Bank for detailed discussion. - 59 - 4.27 Improved training of A WW is critical to enhancing quality. The AWW could bring about behavioral change among her target clients only if she is better and properly trained and supported for that role. A positive development is that the DWCD and the states are engaged in a multi-state effort to enhance the training of AWWs, with partial support from the Bank assisted project (1998) on Women and Child Development. Strengthening support to supervision is another critical requirement. Annapurna Scheme 4.28 Before undertaking a nationwide launch of this proposed program, it would be essential to examine the cost effectiveness of this approach relative to other programs, such as old age pension schemes. Moreover, in view of the recent shift to increase BPL foodgrain allocations from 10 to 20 kgs, the objective of providing access to an 10 kg by the aged under the Scheme has been partially achieved. The changing structure of the TPDS, therefore also affects the relevance of the program. Improved Monitoring and Evaluation Systems a Must 4.29 Improved monitoring and evaluation systems are urgently neededfor each of the programs. As discussed earlier, inaccuracies of existing performance indicators (e.g. beneficiary participation, staff performance) and the scope for fraudulent practices and leakages that existing monitoring systems condone calls for immediate action. Internal monitoring and evaluation (M&E) systems are critical not only as a benchmark for performance, but also for long-term strategic planning and advocacy. A thorough refinement of existing M&E systems is imperative also for improved cost effectiveness. The M&E system should aim to keep track not only of inputs, processes and outputs for overall general management, but also of periodic indicators of outcomes of the program. However, the focus needs to be reoriented towards collecting only relevant and manageable amounts of high quality data that would also permit quick, timely and practical feedback to enable prompt solutions to emerging field level problems. G. Decentralization and Community Ownership for Greater Effectiveness 4.30 Increased decentralized management and greater community ownership of these programs would enhance effectiveness and sustainability of impacts. ICDS and NPNSPE in particular remain highly centralized with the GOI Department of Women and Child Development and Department of Education. These two programs need to devolve greater responsibility to the States, thus enabling them to adopt appropriate approaches to address state specific problems and needs, and to take full charge of program management. The emergence and increasing institutional capacity of panchayati raj institutions at the state level further offers a major avenue not only for more vigilant field level monitoring and supervision of these programs in the short term, as discussed earlier, but more importantly, in the longer term, of eventually assuming responsibility for program implementation to ensure they effectively address and satisfy community needs. This would require continued commitment from the State government not only to devolve authority and control over financial resources to PRIs, but also commitment toward strengthening their local capacity for governance. 4.31 Building community ownership demands greater effort towards community awareness and information campaigns. Reviews of the various programs continue to indicate a lack of or weak understanding of the rationale for these programs, which in turn lead to weak beneficiary participation. The TNIP experience highlights the importance of community awareness in generating community commitment to the State's nutrition program. Unfortunately, this aspect of program design is often undervalued during implementation. 4.32 Decentralized management could also be achieved through greater partnerships with the private sector, including NGOs, private enterprises, local community groups and autonomous societies at the district or block levels. Subject to direct supervision by PRIs, this option could be piloted in areas, where sufficient local private capacity and interest exists. An ongoing example is - 60 - the ICDS-NPNSPE pilot in UP where in non-ICDS areas, new early childhood education centers are operated through grants to qualified NGOs. For the NPNSPE, as noted earlier, possible subcontracting arrangements with private individuals or autonomous local societies (e.g. women's groups) could be piloted to supply meals for school children. There are successful local precedents for decentralizing to district level societies for education (DPEP) and health (Blindness, Leprosy, and Tuberculosis Programs). H. Building Synergies Through Greater Inter-Program Coordination 4.33 Strongerfood and nutrition security impacts are achievable through greater coordination among the food-based transfer programs and between these programs and other poverty alleviation programs. In view of their mutually reinforcing objectives, there are several areas where greater synergies could be attained. In the quest towards better targeting towards the poor, whether by the JGSY, EAS, NPNSPE, the TPDS or other government poverty alleviation programs, more coordinated effort and bundling of resources used for identifying the poor, using household and community indicators, could contribute not only to greater consistency in channeling benefits to those who need it the most, but also offer opportunities for generating savings by eliminating overlapping efforts. The PRIs could serve as an ideal fulcrum for such a joint effort for identifying and targeting the poor. 4.34 Increased coordination could have a mutually reinforcing effect on program effectiveness. Poor infrastructure contributes to poor operations of the ICDS and the NPNSPE in many states. Improved coordination with the JGSY and EAS, which focus on building needed community assets, could help address these gaps. These employment schemes could help fill the gap in critical infrastructure needs of the other programs, such as drinking water facilities for the ICDS centers and schools and the construction of primary school buildings and anganwadi centers. Increased coordination and cooperation between the ICDS and Health programs could substantially increase the impact of mutually reinforcing nutrition and health interventions. Although some progress in teamwork between the AWW and the Auxiliary Nurse Midwife has been achieved in promoting immunization, this partnership has been less successful in identifying pregnancies early, detecting women at risk, providing antenatal care nor conveying vital health and nutrition messages to women. 4.35 Finally, there are important synergies in closer inter-agency coordination in monitoring and evaluation of the food security and nutritional impacts of the various programs. With universalization of program coverage, overlaps among the various food-based transfer programs and other poverty oriented programs are inevitable. It also raises the complexity of isolating the contribution of individual programs and therefore its impacts. Using the NSSO surveys as a common foundation for these evaluations could be explored. Coordinating efforts for impact evaluation initiatives among food-based transfer programs and other poverty alleviation programs, therefore, brings with it several advantages. In taking to account of all programs operating in a vicinity, it permits more accurate estimation and isolation of the impact of individual programs. In establishing a common baseline, it permits more objective comparisons of relative impacts and cost effectiveness, and offers a basis for developing ways to build greater synergies. It opens opportunities for generating cost savings by pooling M&E efforts and resources. Finally, this common baseline is a vital input to the longer term strategic planning and policy formulation for the broad package of initiatives for food and nutrition security in the country. I. Long Run Agenda 4.36 In the long term, careful assessments of the food and nutrition situation would be essential to permit adjustment to changing needs and to determine whether the full package of existing programs would be needed. An issue therefore for the long run is where future priorities should lie. Another related issue is what role should supplementary feeding play in the long term? For example, a recent study of five states shows that between 63 to 81% of malnourished children came from food secure households (Chirmulay et al 1997). If malnutrition is largely associated with - 61 - health or care factors-as is likely in food secure households-then supplementary feeding would be less appropriate in the long term than communications for behavior change. Supplementary feeding may have a role in the short term, though it will be vital that it is linked to efforts to improve the capacity and practice of adequate care to the targeted individual through behavior change interventions. This has important long run implications in the design and priorities of existing programs, such as phasing out the supplementary feeding component of ICDS or the NPNSPE. A precondition to a future strategy that addresses these issues, however, is a thorough and accurate understanding not only the performance of these programs, but more importantly, the joint outcomes of these food-based safety nets and all the other poverty oriented programs taken together-that is the overall level of food security and nutritional status of households. For this, as noted above, greater attention and resources in monitoring and evaluation would be vital. 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