Public Distribution System

  • Public distribution system (PDS) is an Indian food security system.
  • Ever Since the independence in 1947, one of the aims of Government of India has been to provide Food Security to all the citizens of India.
  • Keeping this objective in mind, Public distribution system (PDS) was started by Ministry of Consumer Affairs, Food and Civil Supplies.
  • Food Corporation of India, a Government-owned corporation, procures and maintains the PDS.
  • India’s Public Distribution System (PDS) with a network of 4.78 Lakh Fair Price Shops (FPS) is perhaps the largest retail system of its type in the world.

OBJECTIVES

Since 1951 public distribution of food grains has been retained as deliberate social policy by India with the objectives of:

  1. Providing food grains and other essential items to vulnerable sections of the society at reasonable (subsidized) prices
  2. To put an indirect check on the open market prices of various items and
  3. To attempt socialization in the matter of distribution of essential commodities

The main objective of PDS, at least when it started and was universal, was to ensure that the poor in our country, who lack purchasing power to buy enough food to quench their hunger, are able to purchase at least rice and wheat through ration shops at cheap prices.

It was also meant to protect the public at large from higher prices of rice, wheat and coarse cereals or pulses (in some states) by supplying these at lower-than-market prices to any consumer having a ration card.

The scheme was universal when it started, but was then targeted in 1993 because of our fiscal situation in 1991 and the promises we made to World Bank in return for obtaining funds from it, and because of the idea that the system should only be meant for the poor and not for the rich who have the capacity to pay higher prices.

The second objective was something which came up as the outcome of the Green Revolution: increased productivity of food crops (rice and wheat). Such increased productivity meant that while demand had not increased greatly, supply had increased sharply thanks to introduction of fertilizers, high-yielding varieties of seeds and other scientific practices within our rural hinterland, particularly in North and West India.

Increase in production would have led to a fall in prices of crops with not much increase in demand, which would have been catastrophic for our farmers. Hence, the government had also introduced the policy of Minimum Support Price at which rice and wheat would be procured from our farmers by the Food Corporation of India (FCI), which started in 1965.

The idea behind all this was that grains procured through FCI would be distributed through ration shops for the general public at subsidized rates, while buffer stocks would be maintained for ensuring enough availability at times of drought and floods for the affected populations. And thus, national food security would be ensured. Also, the food could be used for Mid-Day Meal Schemes and Integrated Child Development Scheme (ICDS).

Thus a combination of food security and security of incomes for farmers would be ensured through PDS.

FUNCTIONING

Functioning of PDS encompasses following:

  1. Procurement of Food Grains.
  2. Identification of poor and needy.
  3. Issue of ration cards to poor people.
  4. Transportation of food grains to all Fair price shops.
  5. Selling Food grains to all the needy people.

PDS is an important constituent of the strategy for poverty eradication and is intended to serve as a safety net for the poor whose number is more than 33 Crores and are nutritionally at risk. PDS is operated under the joint responsibility of the Central and the State Governments. The Central Government has taken the responsibility for procurement, storage, transportation and bulk allocation of food grains, etc.

The operational details of the PDS differ from state to state. Though the policy of setting up of FPSs owes its initiation to national food policy, its implementation remains the direct responsibility of the state governments. In order to operate the PDS effectively, the Central

Government issues guidelines from time to time to the states regarding the operational details of the PDS. The operational responsibilities including allocation within the State, identification of families below poverty line, issue of ration cards, supervision and monitoring the functioning of FPSs rest with the State Governments. The Food and Civil Supplies Department of the State Government is mainly entrusted with the task of monitoring PDS in the state.

PRESENT PDS SYSTEM

The TPDS system today supports over 40 Crore Indians below the poverty line with monthly supply of subsidized food grains. The system also provides gainful employment for 4.78 Lakh Fair Price Shops Owners, their employees and hired labour who work at the FCI and state warehousing godowns.

PDS also has become a cornerstone of government development policy and is tied to implementation of most rural development programs. PDS is also a key driver of public sentiment and is an important and very visible metric of government performance. One of the main problems with this system is the inefficiency in the targeting of beneficiaries and the resulting leakage of subsidies. Several opportunities to manipulate the system exist with widespread collusion across the supply chain.

The Planning Commission had the following to say on the PDS system in its 2005 report.

“For every Rs 4 spent on the PDS, only Rs 1 reaches the poor”

“57% of the PDS food grain does not reach the intended people ”

LIMITATIONS

The public distribution system is not free from its limitations.

PDS Leakages

The TPDS currently suffers from a number of issues that make it difficult for it to meet its objective of ensuring that the allotted quota of specified food articles reaches the intended underprivileged/needy segments of society:

  • A large number of families living below the poverty line have not been enrolled and therefore do not have access to ration cards
  • A number of bogus ration cards which do not correspond to real families, exist in the BPL & AAY categories. Food drawn on the basis of these bogus cards is a significant leakage from the system, as it does not reach the intended beneficiaries. Additionally, these extra cards inflate the number of BPL and AAY cards in circulation and further reduce the amount of food available to every rightful beneficiary family.
  • A number of instances where benefits are being availed in the names of rightfully entitled families without their knowledge. This shadow ownership is possible due to inefficiencies in ration card issuance and distribution
  • Errors in categorization of families that lead to BPL families getting APL cards and vice versa.
  • A significant portion of benefits provided to the APL category under the TPDS, are not availed by the intended beneficiaries and are instead diverted out of the system.
  • In summary, targeting is not serving its real purpose, as the beneficiaries do not get food grains in accordance with their entitlements.

Scale and Quality of Issue

  • The scale of issue and the quality of food grains delivered to the beneficiary is rarely in conformity with the policy. Many FPS are open only for a few days in a month and beneficiaries who do not visit the FPS on these days are denied their right.
  • The FPS also use multiple excuses to both charge higher rates and deliver reduced quantity of food grains.
  • There are also significant differences in the manner in which the Centre and States arrive at the number of BPL families.
  • This mismatch usually means lower allotments for each family as states arrive at higher numbers of BPL families.As this problem may not go away even after reduction of duplicates, a standard way of doing this must be arrived at for each state to resolve this issue.

System Transparency and Accountability

  • The most serious flaw plaguing the system at present is the lack of transparency and accountability in its functioning.
  • The system lacks transparency and accountability at all levels making monitoring the system extremely difficult.

Grievance Redressal Mechanisms

  • There are numerous entities like Vigilance Committee, Anti-Hoarding Cells constituted to ensure smooth functioning of the PDS system.
  • Their impact is virtually non-existent on the ground and as a result, malpractices abound to the great discomfiture of the common man.

Apart from the challenges described, transportation of food grains and appointment of dealers of Fair Price Shops have also become difficult issues. Viability of the FPS is already a major concern and this would get amplified once PDS leakages are brought under control.

Though government has taken several measures to improve PDS like decentralised procurements, introduction of UIDAI etc. but still these measures are not completely adopted. More measures like universalization of PDS are need of the hour. PDS can provide food security only when it covers wide range of food grains. With introduction of Food Security Ordinance, we can expect PDS will also get it much due push and will be able to fulfill the long cherished goal of Food security.

Download Summary of National Food Security Act from here.

PDS REFORMS

  • Doorstep delivery of foodgrains;
  • ICT applications and end-to-end computerisation;
  • Leveraging “aadhaar” (UID) for unique identification of entitled beneficiaries;
  • Full transparency of records;
  • Preference to public institutions or bodies in licensing of fair price shops;
  • Management of fair price shops by women or their collectives;
  • Diversification of commodities distributed under the PDS;
  • Full transparency of records; and “introducing schemes such as cash transfer, food coupons or other schemes to the targeted beneficiaries in lieu of their foodgrain entitlements” as prescribed by the central government.

Alternative Mechanisms suggested by Govt for PDS:

Direct Cash Transfer

Pros

  • Gives subsidy directly to the beneficiary
  • Plugs leakages
  • Reduces administration costs for Govt

Cons

  • No guarantee that it be used for food (issuing in the name of women can solve the issue partially)
  • No protect against inflation
  • Delays in payment would make poor go in for borrowing, as food is an urgent requirement–therefore setting in a vicious cycle of poverty
  • Lack of proper banking infrastructure (this can be covered by post-offices in villages)
  • Many do not have bank accounts
  • Going to banks for collecting money would mean a loss of one work day for many poor in remote villages (setting mobile or micro banks in all hamlets would help)

Food Stamps

Pros

  • Same as DCT
  • Has better guarantee of being used for buying food than DC

Cons

  • Counterfeits (Use of high technology might save it)
  • Unwillingness of vendors accept them for that means extra work to them to goto banks and collect or for fear of delays in payments
    No protection against inflation
  • Likes of moneylenders can take the coupons from poor by force (as interest payment or something and make money)

ISSUES OF BUFFER STOCKS

Buffer stock schemes seek to stabilize the market price of agricultural products by buying up supplies of the product when harvests are plentiful and selling stocks of the product onto the market when supplies are low.

Advantages of a successful buffer-stock scheme

  • Stable prices help maintain farmers’ incomes and improve the incentive to grow legal crops
  • Stability enables capital investment in agriculture needed to lift agricultural productivity
  • Farming has positive externalities it helps to sustain rural communities
  • Stable prices prevent excess prices for consumers – helping consumer welfare

Problems with buffer stock schemes

In theory buffer stock schemes should be profit making, since they buy up stocks of the product when the price is low and sell them onto the market when the price is high. However, they do not often work well in practice.

Clearly, perishable items cannot be stored for long periods of time and can therefore be immediately ruled out of buffer stock schemes. Other problems are:

  • Cost of buying excess supply can cause a buffer stock scheme to run out of cash
  • A guaranteed minimum price might cause over-production and rising surpluses which has economic and environmental costs
  • Setting up a buffer stock scheme also requires a significant amount of start up capital, since money is needed to buy up the product when prices are low.
  • There are also high administrative and storage costs to be considered.
  • Excessive buying by government led to inflation
  • Absence of better storage facility and related infrastructure results in rotting of food grains.
  • Inefficient management led to wastage and leakages.

The success of a buffer stock scheme however ultimately depends on the ability of those managing a scheme to correctly estimate the average price of the product over a period of time. This estimate is the scheme’s target price and obviously determines the maximum and minimum price boundaries.

But if the target price is significantly above the correct average price then the organization will buy more produce than it is selling and it will eventually run out of money. The price of the product will then crash as the excess stocks built up by the organization are dumped onto the market.

Conversely if the target price is too low then the organization will often find the price rising above the boundary, it will end up selling more than it is buying and will eventually run out of stocks

Conclusion

Overall, decentralised system of PDS can be a solution for food security in India but to achieve this mammoth task in India, we need to reform PDS system along with reforms in FCI, infrastructural development and utilisation of technology for checking corruption and leakages.

 

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