PUBLIC DISTRIBUTION SYSTEM

Introduction2.3.1 The Public Distribution System (PDS) is the key element of the Government's food security system in India. It is an instrument for ensuring availability of certain essential commodities at easily affordable prices especially for the poor. The Government, via the Food Corporation of India (FCI), procures and stocks foodgrains which are released every month for distribution through the PDS network across the country. In addition to sugar, edible oils and kerosene, foodgrains, mainly rice and wheat, are distributed to the public via a network of Fair Price Shops (FPS). The system of procurement is also used by the Government of India to provide minimum support prices to the farmers so as to stabilise farm output and income. To begin with, in the sixties efforts were made to procure rice and wheat not only for normal distribution through Fair Price Shops under the PDS but also to maintain buffer stocks, which were built in the years of good production to tide over the periods of lean production. In the eighties, given the increases in the foodgrains production and the resilience in the agricultural production scenario, the Government of India decided to operate a system whereby certain norms were fixed regarding the quantities to be held by the Food Corporation of India at different points of time during the year, thus merging the stocks meant for normal distribution and buffer stocks.2.3.2 The PDS, till recently, has been a general entitlement scheme to all consumers without any targetting. On an average, about 15-16 million tonnes of foodgrains are issued by the FCI to the States at a uniform Central Issue Price (CIP) which is much less than the economic cost incurred by the Central Government by way of procurement, storage, transport and distribution. The difference between the economic cost and the CIP, called the consumer subsidy, is borne by the Central Government through its annual non-Plan budget. In addition to this, as mentioned above, the FCI maintains a large buffer stocks of foodgrains, which entails a substantial carrying cost. The consumer subsidy and the carrying cost of the buffer stock together add up to the total food subsidy. One of the most important determinants of the changes in India's poverty level is the price of foodgrains which has a major impact on the real income, especially for the relatively poorer sections whose incomes are very largely spent on foodgrains. For example, at the all- India level the people spend on an average about 63% of their total expenditure on food in the rural areas and about 55% in the urban areas. Of the expenditure incurred on all food items the expenditure on foodgrains accounts for 45% in the rural areas and about 32% in the urban areas. The bottom 30-40% of the population spend over 70% of the total expenditure on food. Of their expenditure on food, the bottom 30-40% of the population spend about 50% on foodgrains in the rural areas and over 40% in the urban areas. Targetting Public Distribution System:Recommendations of the Working Groups(WG)The logic of a targeted PDS described above was enunciated in the Report of the Working Group on National Policy on Public Distribution System (June, 1996) set up in the Planning Commission in August, 1995. The Working Group after discussing various forms and experiences of targeting, such as, through wage employment programmes (JRY,EAS etc), area-based targeting (ITDP, RPDS), exclusion of non-poor and the system of food stamps prevalent in some countries, suggested a scheme of allocation of foodgrains out of the Central Pool to the States at two sets of prices, namely, a highly subsidised price for the allocations meant for the poor and near open market prices for the non-poor. The recommendations of the Working Group are given in Box.

Recommendations of the Working Group on National Policy on Public Distribution System The Central Government should adopt the Planning Commission's estimates of the

proportion of population below the poverty line (BPL) available for 1987-88 as the criteria for allocating a feasible annual level of foodgrains to States/UTs for a targeted PDS.

Based on the levels of procurement and allocations/offtake of foodgrains in the past, the Central Government should maintain an annual allocation level of 15 million tonnes.

Earmark about 80% of the annual allocation i,e around 12 million tonnes for distribution to the States/UTs on the basis of their share of BPL population . This will work out to an availability of 20 kgs per month per BPL household.

12 million tonnes of foodgrains meant for the BPL population should be issued to the States at highly subsidised prices and allocations to any State over and above this at near open market prices.

A ceiling limit should be imposed for each State based on the highest offtake of foodgrains in the past ten years. The States should be allowed full freedom to decide on the mode of distribution, pricing, identification of beneficiaries etc.

2.3.15 While the provision for food subsidy is made in the non-Plan budget of the Central Government, for strengthening the operational machinery of the PDS, the Planning commission provide funds under its plan programmes for the following schemes:

1. Construction of Godown2. Purchase of Mobile Vans/Trucks3. Training, Research and Monitoring.

2.3.16 The Godowns scheme is intended to assist the State Governments /UTs. for construction of small godowns of the capacity upto 2000 tonnes in interior areas where it is necessary to maintain adequate stocks to ensure regular supplies under PDS. Since 1983-84 this scheme was being implemented to supplement the resources of the State Governments. to augment the storage capacity in remote/inaccessible/hilly areas. Till 1991 the scheme was restricted to North Eastern States, Himachal Pradesh, Sikkim, J and K, Lakshadweep and Andaman and Nicobar Islands. With the launching of RPDS in January, 1992 the scheme was further extended to cover all the identified RPDS areas. In 1998, a decision was taken to extend the scheme to all such areas in the country where the need for such facilities may exist. Funds under the scheme are released for small godowns in places where Central agencies like CWC, FCI etc. do not operate. The present pattern of financial assistance is 50% loan and 50% subsidy. However, in the case of UTs without legislatures the entire assistance is in the form of subsidy only. The Mobile Vans scheme is intended to provide financial assistance to the State Governments /UT administrations for purchase of mobile vans/trucks for distributing essential commodities in rural/hilly/remote and other disadvantaged areas where static/regular Fair Price Shops are not found viable/feasible. Initially, an assistance of Rs.2.50 lakh was being provided for a delivery van/truck with 75% loan and 25% subsidy. With the liberalisation of the scheme during 1992-93 the subsidy component of the assistance was enhanced from 25% to 50% and the financial assistance per van/truck was also raised to Rs.4 lakh in the case of delivery van (for 4 tonner) and Rs.8 lakh for big truck ranging from 8-10 tonnes and above subject to the ceiling of actual cost whichever is lower. Under this scheme, vehicles can be used not only as mobile Fair Price Shops but also for effecting door delivery of PDS commodities to Fair Price Shops. The scheme is supplementary in nature as the running cost and its maintenance etc. are borne by the respective State Governments from their own budget.

Public distribution system (PDS) is an Indian food security system. Established by the Government of Indiaunder Ministry of Consumer Affairs, Food, and Public Distribution and managed jointly with state governments in India, it distributes subsidized food and non-food items to India's poor. This scheme was launched in India on June 1997. Major commodities distributed include staple food grains, such as wheat, rice, sugar, andkerosene, through a network of public distribution shops (also known as ration shops) established in several states across the country. Food Corporation of India, a Government-owned corporation, procures and maintains the PDS.

In coverage and public expenditure, it is considered to be the most important food security network. However, the food grains supplied by the ration shops are not enough to meet the consumption needs of the poor or are of inferior quality. The average level of consumption of PDS grains in India is only 1 kg per person / month. The PDS has been criticised for its urban bias and its failure to serve the poorer sections of the population effectively. The targeted PDS is costly and gives rise to much corruption in the process of extricating the poor from those who are less needy. Today, India has the largest stock of grain in the world besides China, the government spends Rs. 750 billion ($13.6 billion) per year, almost 1 percent of GDP, yet 21% remain undernourished.[1] Distribution of food grains to poor people throughout the country is managed by state governments.[2] As of date there are about 500,000 Fair Price Shops (FPS) across India.[3]

OverviewThe central and state governments shared the responsibility of regulating the PDS. While

the central government is responsible for procurement, storage, transportation, and bulk allocation of food grains, state governments hold the responsibility for distributing the same to the consumers through the established network of Fair Price Shops (FPSs). State governments are also responsible for operational responsibilities including allocation and identification of families below poverty line, issue of ration cards, supervision and monitoring the functioning of FPSs.

Under PDS scheme, each family below the poverty line is eligible for 35 kg of rice or wheat every month, while a household above the poverty line is entitled to 15 kg of foodgrain on a monthly basis.[4]

A below poverty line (BPL) card holder should be given 35 kg of food grain and the card holder above the poverty line should be given 15 kg of food grain as per the norms of PDS. However, there are concerns about the efficiency of the distribution process.Public distribution shop

A public distribution shop, also known as fair price shop (FPS)or Ration Shop. It is a part of India's public distribution system established by Government of India which distributes rations at a subsidized price to the poor. As of date there are about 4.99 lakh fair price shops across India.[5]Locally these are known as "ration shops" and chiefly sell wheat, rice, kerosene and sugar at a price lower than the market price. Other essential commodities may also be sold. These are also called fair price shops. To buy items one must have a ration card. These shops are operated throughout the country by joint assistance of central and state government. The item from these shops are much cheaper but are of average quality. Ration shops are now present in most localities, villages towns and cities. India has 478,000 shops constituting the largest distribution network in the world.The introduction of rationing in India dates back to the 1940s Bengal famine. This rationing system was revived in the wake of acute food shortage during the early 1960s, before the Green Revolution.Fallouts of PDS[edit]

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The public distribution system of India is not without its defects. With a coverage of around 40 crore below-poverty-line (BPL) families, a review of the PDS has discovered the following structural shortcomings and disturbances:[6]

1. Growing instances of the consumers receiving inferior quality food grains in ration shops.[7]

2. Deceitful dealers replace good supplies received from the F.C.I(Food Corporation of India) with inferior stock and sell FCI stock in the black market.

3. Illicit fair price shop owners have been found to create large number of bogus cards to sell food grains in the open market.

4. Many FPS dealers resort to malpractice, illegal diversions of commodities, holding and black marketing due to the minimum salary received by them.[8]

5. Numerous malpractices make safe and nutritious food inaccessible and unaffordable to many poor thus resulting in their food insecurity.[9]

6. Identification of households to be denoted status and distribution to granted PDS services has been highly irregular and diverse in various states. The recent development of Aadhar UIDAI cards has taken up the challenge of solving the problem of identification and distribution of PDs services along with Direct Cash Transfers.

7. Regional allocation and coverage of FPS are unsatisfactory and the core objective of price stabilization of essential commodities has not met.

8. There is no set criteria as to which family is BPL and which is APL .This non ambiguity gives massive scope for corruption and fallouts in PDS systems because those who are actually meant to be benefitted are not able to taste the fruits of PDS.

Several schemes have augmented the number of people aided by PDS, but the number is extremely low. Poor supervision of FPS and lack ofaccountability have spurred middlemen who consume a good proportion of the stock meant for the poor. There is also no clarity as to which families should be included in the BPL list and which excluded. This results in the genuinely poor being excluded whilst the ineligible get several cards. Awareness about the presence of the PDS and FPS to poverty-stricken societies, namely the rural poor has been dismal.

The stock assigned to a single family cannot be bought in installments. This is a decisive barrier to the efficient functioning and overall success of PDS in India. Many BPL families are not able to acquire ration cards either because they are seasonal migrant workers or because they live in unauthorized colonies. A lot of families also mortgage their ration cards for money. Lack of clarity in the planning and structuring of social safety and security programs in India has resulted in the creation of numerous cards for the poor. Limited information about the overall use of cards has discouraged BPL families from registering for new cards and increased illegal creation of cards by such families to ensure maximum benefit for the family members.[10]

To improve the current system of the PDS, the following suggestions are furnished for:1. Vigilance squad should be strengthened to detect corruption, which is an added

expenditure for taxpayers.2. Personnel-in-charge of the department should be chosen locally.

3. Margin of profit should be increased for honest business, in which case the market system is more apt anyway.

4. F.C.I. and other prominent agencies should provide quality food grains for distribution, which is a tall order for an agency that has no real incentive to do so.

5. Frequent checks & raids should be conducted to eliminate bogus and duplicate cards, which is again an added expenditure and not full proof.

6. The Civil Supplies Corporation should open more fair price shops in rural areas.7. The fair price dealers seldom display rate chart and quantity available in the block-boards

in front of the shop. This should be enforced.In aggregate, only about 42% of subsidised grains issued by the central pool reach the target

group, according to a Planning Commission study released in March 2008.Food stamps given to the needy and to the underprivileged by issue of coupons, vouchers,

electronic card transfer etc. they can purchase commodities at any shop or outlet. The state government would then pay back the grocery shops for the stamps said the finance minister in his budget.[11] But the United Progressive alliance, which came to power in 2004, decided on a common minimum programme (CMP) and on the agenda was food and nutrition security. Under that the government had plans to strengthen the food security program DS.[12]

However, finance minister Arun Jately in his budget speech went contrary to the idea proposed in the CMP and proposed the idea of the food stamp scheme.[13] He has proposed to try the scheme in few districts of India to see its viability. [14] In the CMP the government had proposed that if it is viable it would universalise the PDS; if food stamps are introduced it would be a targeted public distribution system. A group of about 40 economists have cautioned the NAC headed by Sonia Gandhi against the food security bill as it would put an additional burden on the ex-chequer. They instead have advised to go ahead and experiment with food stamps and other alternative methods and pointed out the flaws in PDS. This set of economists hail from institutes like Delhi School of Economics, Indian Statistical Institute, Jawaharlal Nehru University, Indira Gandhi Institute of Development Research, Centre for Development Studies, Harvard, MIT, Columbia, Princeton, London School of Economics, University of British Columbia, University of California and University of Warwick.[15] In a landmark judgment, Delhi High Court has ruled that fair price shops cannot be allotted to a below poverty line (BPL) card holder.

Operation Black

Aaj Tak news channel on 14 October 2013 performed a sting operation on PDS[17] named Operation Black. It shows how the distribution reaches to mills instead of fair price shops. Interestingly, all the documentation via computerisation is clean.

NDTV did a show which documented how the Government of Chhattisgarh's food department managed to fix its broken system so that the diversion of grain came down from about 50% in 2004-5 to about 10% in 2009-10.[18]

Research on the PDS suggests (as these two programmes show) that the situation varies quite a lot across the country.Distribution of food stampsOpportunities

1. It will reduce India's dependence on buffer stock for price stabilization and in turn reduce cost

2. It provides incentive must to deregulate the domestic market and thus will induce private entrepreneurs

3. There is an immense need to develop appropriate marketing infrastructure and institutions to deal with trade in agricultural commodities. ( Kaushik Basu 2007)

4. Appropriate policy changes are a must, for instance, in the post WTO period the international prices of wheat and rice came to their lowest levels. But in India due to high MSP’s the prices were relatively high. Thus as a result importing was cheaper than buying from the domestic market. As a result, the government levied 50% tariff on wheat and 80% percent tariff on rice which further resulted in one of the outlandish incidents in the Indian history that was accumulation of buffer stocks which were exported which, incidentally, came back for sale at high MSP’s for instance in 2002-03, the government sold 1.6 million tones to exporters but actual exports were only 0.682 million tones [19]

The government may have to set up a complete system for the same or would have to put this responsibility on post office, banks or such other institutions. In this process there could be leakages which are a matter of concern. Also there would be a burden which would come on the poor class who has to benefit from the same of going and collecting the food stamps.[14]