PDS and Leakage
Context:
In a recent article, it was argued that a portion of India’s food subsidy—Rs 2.7 lakh crore in FY 2023—could be better invested in areas like agricultural R&D, skill development, and rural infrastructure, which could yield more sustainable returns than food subsidies.
More on News:
- In response, Milind Murugkar contended that food subsidies should be seen as investments rather than waste.
Issues with the Later Views:
- Reducing Poverty: As Murugkar suggests, if the aim is to support household incomes, is it necessary to cover nearly 57% of the population with free food under current schemes?
- If we do so, it challenges the government’s claims of reducing poverty by 248 million people.
- Leakages: Approximately 28% of the allocated food doesn’t reach its intended recipients due to leakages.
- In light of these losses, direct cash transfers to beneficiaries’ does not account to be a more effective way to ensure resources reach those in need.
- Nutrition: Free rice and wheat alone can’t address the broader issue of nutritional security, especially for children under five, which remains a pressing concern.
Public Distribution System (PDS)
The Public Distribution System (PDS) is a crucial food security initiative established by the Government of India, aimed at providing essential commodities to the economically disadvantaged sections of society at subsidised rates. This program operates under the Ministry of Consumer Affairs, Food and Public Distribution and has evolved significantly since its inception. The PDS was initially introduced during World War II to manage food scarcity. It was expanded in the 1960s to address food shortages more effectively, especially during the Green Revolution. In 1997, the PDS was revamped into the Targeted Public Distribution System (TPDS), focusing on identifying and assisting families below the poverty line (BPL) while also catering to those above the poverty line (APL).
The PDS operates through a network of Fair Price Shops (FPS), which distribute staple food items such as wheat, rice, sugar, and kerosene. As of 2011, there were approximately 505,879 FPS across India. Under the current system, BPL households are entitled to receive 35 kg of food grains per month at subsidised prices, while APL households can access 15 kg. In 2013, the National Food Security Act (NFSA) was enacted, transforming PDS into a legal entitlement. This act expanded coverage to 67% of the population and shifted from household-based targeting to per-capita entitlements.
Some Data:
- According to World Bank (2022) data, 12.9% of Indians live on less than $2.15 a day (PPP), highlighting a severe level of poverty.
- The NITI Aayog (2024) reports that India lifted 248 million people out of poverty over the last nine years, with the multidimensional poverty index (MDPI) declining from 29.17% to 11.28% between 2013-14 and 2022-23.
- There are no objections to the government offering free food to the 15% of the population that falls into extreme poverty.
- However, with the current 57% coverage under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), should those above the extreme poverty line not pay at least half of the minimum support price (MSP), as was done under the Targeted PDS initiated in 1997-98?
- This approach could help control food subsidy costs and free up resources for investments that promote climate-resilient agriculture.
Leakage in PDS:
- Discrepancy: An analysis of the Household Consumption Expenditure Survey (HCES) from August 2022 to July 2023 reveals a significant discrepancy: 28% of the rice and wheat allocated through the PDS—about 19.69 million metric tonnes—fails to reach intended beneficiaries, amounting to an annual loss of around Rs 69,108 crore.
- This inefficiency represents one of the largest recurring losses, often justified under the pretence of assisting the poor.
- The government has long been aware of these PDS leakages.
- The 2015 report by the High-Powered Committee on grain management, led by Shanta Kumar, noted that leakage rates were around 46%, based on 2011-12 data.
- In 2016, the introduction of Point-of-Sale (PoS) machines at Fair Price Shops (FPS) helped reduce these leakages to 28% by using biometric verification and real-time tracking.
- While nearly 90% of FPS outlets now use PoS machines, leakages remain significant.
- State Wise: Leakage rates vary by state; Arunachal Pradesh, Nagaland, and Gujarat show the highest levels, though the national average stands at 28%.
- This points to the need for reforms in the PDS.
Nutritional Security:
- Declined Spending: On the issue of nutritional security, HCES data shows that spending on pulses and vegetables declined in 2022-23 compared to 2011-12.
- Hunger: The National Family Health Survey (2019-21) reported that 35.5% of children under five are stunted, 19.3% are wasted, and 32.1% are underweight.
Reforms:
- Nutritional Hubs: To address these nutritional gaps, a portion of the FPS network could be transformed into “nutrition hubs” offering a range of nutritious foods like eggs, pulses, millets, and fruits, in addition to cereals.
- Digitisation: A digital food coupon system could allow beneficiaries to access more varied and nutritious options through these hubs.
- In summary, the PDS system requires reform. Extending free food to 57% of the population needs re-evaluation, and those above the poverty line should contribute at least half of the MSP.
