11th March 2021 – Editorials/Opinions Analyses

Content

1. A case for a revamped, need-based PDS

Editorial: A case for a revamped, need-based PDS

Context:

• The Economic Survey, tabled in Parliament in January, rightly flagged the issue of a growing food subsidy bill, which, in the words of the government, “is becoming unmanageably large.”

Relevance:

• GS Paper 3: PDS (objectives, functioning, limitations, revamping, issues of buffer stocks & food security)

Mains Questions:

1. A revamped, need-based PDS is required not just for cutting down the subsidy bill but also for reducing the scope for leakages. Discuss. 15 Marks

Dimensions of the Article:

• What is PDS?
• Objectives of PDS
• Issues with PDS
• Measures taken by the Government
• Reforms required for revamping India’s PDS
• Way Forward

What is PDS?

The Public distribution system (PDS) is a food security system established under the Ministry of Consumer Affairs, Food, and Public Distribution. It includes within its fold a government sponsored chain of approximately 5.35 lakh fair price shops entrusted with the work of distributing basic food and non-food commodities to the needy sections of the society at very cheap prices. The responsibility of operating PDS is jointly shared by the Central and the State Governments.

• The Central Government, through Food Corporation of India (FCI), undertakes procurement, storage, transportation and bulk allocation of food grains to the State Governments.
• Operational responsibilities like allocation within the State, identification of eligible families, issue of Ration Cards and supervision of the functioning of Fair Price Shops (FPSs) etc., lies with the State Governments.

Objectives of PDS

The Public distribution System primarily evolved as a system of management of scarcity through distribution of food grains at affordable prices. However, it seeks to achieve other objectives like:

• to provide essential consumer goods at cheap and subsidized prices to the consumers.
• to insulate them from the impact of rising prices of these commodities.
• to maintain the minimum nutritional status of our population.
• to put an indirect check on the open market prices of various items.

Issues with PDS

1. Limited benefits to poor from PDS: Both Rural and Urban poor have not benefited much from PDS and their dependence on the open market has been much higher than on PDS.
2. Urban Bias: For quite a longer period of time, PDS remained limited mostly to urban areas. Although, there has been expansion of PDS in rural areas now, but its effectiveness in terms of timely and adequate availability remains under question.
3. The burden of food subsidy: After inclusion of NFSA-2013, the burden of food subsidy has become huge. Also, APL category people have little to no incentives to buy from PDS, so there has been increasing stock with FCI. Other than that the procurement prices have been rising continuously due to rich farmers’ lobby and issue prices are getting lower due to populist policies. All of this together are making the PDS unsustainable.
4. Loss of Food Grain: An estimated 61,824 tonnes of foodgrains have been damaged between 2011-12 & 2016-17. Various reasons for the damage of food grains, including pest attacks, leakages in godowns, procurement of poor quality stocks, exposure to rains, floods, and negligence on the part of the persons concerned in taking precautionary measures etc.
5. Inefficiencies in the operations of FCI: The economic cost of FCI food grains operation has been rising on account of increase in procurement prices and other costs (distribution cost, carrying cost, etc.) and also due to inefficiencies caused by highly centralized and bureaucratic mode of operations.
6. PDS results in Price increases: Due to large procurement of food grains every year by Government, the net quantities available in open market reduce. This leads to increase in Price. This dual market system i.e. PDS and Open market operates to the disadvantages of poor, especially those who are excluded from the food security system.
7. Challenges in Delivery Mechanism: These include challenges like card issue, Quantity and Quality Issues i.e. (35 kg/family vs 5 kg/PHH); Measurement issues; Timeliness of supply; Record maintenance; Seasonality etc.

Measures taken by the Government

• Digitization of ration cards: This allows for online entry and verification of beneficiary data. Besides, online storing of monthly entitlement of beneficiaries, number of dependants, offtake of food grains by beneficiaries from FPS, etc. States of Andhra Pradesh, Gujarat, Tamil Nadu, Madhya Pradesh etc have undertaken this exercise on a large scale.
• Linking with Aadhar: 56% of the digitized cards have been seeded with unique identification Student Notes: number Aadhaar. This leads to better identification and hence improved targeting.
• Computerization of FPS allocation: This makes declaration of stock balance, issuance of web-based truck challans, etc very convenient. Furthermore, it allows for quick and efficient tracking of transactions. Several states have also installed ePOS (electronic point of sale) devices at the fair price shops to track the sale of foodgrains to actual cardholders on a real time basis.
• Use of Global Positioning System (GPS) technology: States like Chhattisgarh and Tamil Nadu use GPS technology to track movement of trucks carrying food grains from state depots to FPS. This checks leakages to a great extent.
• DBT: Three UTs-Chandigarh, Puducherry and Dadra and Nagar Haveli have implemented DBT on a pilot basis.

Reforms required for revamping India’s PDS

Procurement Side Reforms

• States which have gained sufficient experience (Andhra Pradesh, Chhattisgarh, Punjab, Haryana and MP) should be encouraged to procure for PDS directly from the farmers.
• FCI should focus on states which suffer from distress sale at prices much below MSP, and which are dominated by small holdings, like Eastern Uttar Pradesh, Bihar, West Bengal, Assam etc.
• Private sector should be encouraged to shoulder the responsibility of procuring, storage and distribution of PDS commodities.
• Negotiable warehouse receipt system (NWRs) should be taken up on priority and scaled up quickly.
• GoI should widen its procurement basket so as to incorporate adequate nutrient mix. It will prevent skewed incentive to wheat and rice only and promote crop diversification.
• A transparent liquidation policy is the need of hour, which should automatically kick-in when FCI is faced with surplus stocks than buffer norms.

Supply Side Reforms

• End to end computerization: Mapping of FPS and the registered customers at each FPS will help to identify exact requirements at each FPS. Timely and adequate allotment of goods at Fair Price Shops (FPS) in adequate quantities.
• Monthly declaration of sales by FPS to prevent piling up of excess inventories.
• Truck dispatch information & stock availability at FPS through SMS to registered users.
• GPS based tracking of trucks carrying PDS goods.
• FPS should be operated through Gram Panchayats, Cooperatives, Self Help Groups etc.

Consumer Side Reforms

• Proper identification of beneficiaries and creating a web database with allotted quantity of each goods as per entitlement.
• Computerized entry via AADHAAR authentication at Point of Sale (POS).
• Pilot testing of cash transfers in PDS, starting with large cities with more than 1 million population; extending it to grain surplus states, and then giving option to deficit states to opt for cash or physical grain distribution.
• Toll Free Number for complaint registration.

Way Forward

Yet, diversion of food grains and other chronic problems do exist. It is nobody’s case that the PDS should be dismantled or in-kind provision of food subsidy be discontinued. A revamped, need-based PDS is required not just for cutting down the subsidy bill but also for reducing the scope for leakages. Political will should not be found wanting.