How to break the ration shop monopoly

Why in the News

One Nation One Ration Card (ONORC), introduced in 2019 so migrant workers could draw subsidised grain away from home, is used mostly to switch ration shops near home. Its main gain is bargaining power over the shop dealer, not long-distance mobility, according to Bihar’s transaction records.

What is ONORC, and what was it meant to fix?

1. What it is: ONORC lets a beneficiary draw subsidised grain at any ration shop in India, much like keeping a mobile number in any city. The shop checks identity through Aadhaar, India’s biometric ID.
2. PDS scale: About six in ten Indians draw subsidised cereals each month from 5 lakh fair price shops (FPS), the ration shops of the Public Distribution System (PDS).
3. Old gap: Until 2019 the entitlement was tied to the address on the card, so a worker in a Punjab field or Surat mill could not draw grain there.
4. Two elements: Portability lets a beneficiary collect the quota at any FPS in India. Divisibility lets the entitlement be split across draws, part at home and part where the migrant stays.
5. The takeaway: ONORC serves mainly as a way to shop around locally rather than to move across States, which changes the dealer’s power.

What does Bihar’s data show?

1. Dataset: The study uses 891 million transactions from Bihar’s online PDS portal since April 2022, together with inter-State data. Bihar is India’s poorest State and its largest source of migrants.
2. Nearby use: 55% of ONORC use is at another shop in the same block, against 38% at the assigned shop, the one the card is tied to.
3. Two types: Type 1 portability is use at a nearby shop, which dissatisfaction with price, quantity or quality at the assigned shop would drive. Type 2 is use by long-distance migrants, and it is far smaller: only 1% of use is in other States.
4. Trend: Portable transactions have risen about six percentage points a year, evenly across Bihar but most in type 1.
5. Divisibility: Divisibility is used sparingly. Low awareness and dealer incentives are among the suspected reasons.

Why does the freedom to switch discipline the dealer?

1. Old monopoly: Before ONORC the dealer was a monopolist. A household tied to one shop had no bargaining power when cheated on price, quantity, quality or service. This mostly hurt households with little social power, such as female-headed and lower-caste ones.
2. Exit threat: A cardholder can now threaten to leave. That hurts the dealer, because commission depends on the volume of grain disbursed. A cardholder who switches keeps the dealer in check, so beneficiaries can get better outcomes.
3. Welfare gain: ONORC made the dealer-client relationship negotiable. The authors say this shift in bargaining power may be the largest welfare change the PDS has seen in decades.

Challenges

1. Authentication failures: Elderly and manual workers with worn fingerprints, and shops with weak networks, can be denied grain when Aadhaar checks fail.
2. Thin dealer margin: A fixed commission per quintal gives dealers a thin margin and a reason to short-weigh or divert grain.
3. Outdated coverage: Coverage is pegged to the 2011 Census, so experts estimate over 100 million eligible people lack ration cards.

Way Forward

1. Awareness drive: States should publicise portability and divisibility at every FPS so cardholders use the choice they hold.
2. Fallback authentication: Offer iris scanners and one time password overrides where fingerprints fail.
3. Fair margin: The Centre and States should review dealer commission so that income does not rest only on volume.
4. Updated coverage: Revise coverage with the latest Census so excluded households get cards.

Conclusion

ONORC has proved less a migrants’ scheme than a tool that gives every cardholder a choice of dealer. The test ahead is whether other States show the same pattern and whether dealer incentives are reformed to keep that choice meaningful.

Public Distribution System and the National Food Security Act, 2013

1. Entitlement: The Act gives a legal entitlement to subsidised foodgrain to up to 75% of the rural and 50% of the urban population.
2. Categories: Antyodaya Anna Yojana households (the poorest) get 35 kg a family a month, and Priority Households get 5 kg a person a month.
3. Division of work: The Centre procures, stores and allocates grain in bulk, and States identify beneficiaries, issue cards and run the shops.

Matching Previous Year Question

“[2021, GS3, 15 marks] What are the salient features of the National Food Security Act, 2013? How has the Food Security Bill helped in eliminating hunger and malnutrition in India?”