Public Distribution System (PDS) Must Be Reformed to Fix Leakage and Invest in Farming

1. The Public Distribution System (PDS) has been a key pillar of food security in India.
2. However, it faces significant issues like leakages, mis-targeting, and inefficiency, which reduce its effectiveness in addressing poverty and nutritional security.
3. These issues divert resources that could otherwise be used for agriculture development and nutritional improvement.
   1. PDS (started in the 1960s) is a government-run initiative offering subsidized food (rice, wheat, sugar, kerosene, cooking oil) to underprivileged populations.

Coverage of Free Food Subsidies

1. 57% of the population currently benefits from free food under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY).
   1. The Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) is a scheme that provides free food grains to the poor in India:
   2. The scheme was announced in March 2020 in response to the economic disruptions caused by the COVID-19 pandemic.
   3. The scheme provides 5 kg of free food grains per month to eligible households, in addition to the subsidized ration provided under the National Food Security Act (NFSA).
2. This extensive coverage raises questions about the efficiency of subsidies.
3. Rs 2.7 lakh crore is allocated as food subsidies for FY 2023, a huge portion of which could be used for more impactful investments such as agricultural research, skill development, and rural infrastructure.
   Key Issue:
   1. Is it necessary to extend free food to 57% of the population, especially when poverty levels have declined significantly?
   2. The NITI Aayog report (2024) states that 248 million people have come out of poverty between 2013-2023, leading to a decline in the Multidimensional Poverty Index (MDPI) from 29.17% to 11.28%.
4. Proposal:
   1. Target only the poorest 15% of the population for free food.
   2. Those above the extreme poverty line (Antyodaya) should pay at least half of the Minimum Support Price (MSP), as was done under the Targeted PDS initiated by Atal Bihari Vajpayee in 1997-98.
   3. This would reduce the subsidy burden and free up funds for agricultural investment.

Leakage in the PDS

1. One of the most significant issues with the PDS is the leakage of food grains.
2. According to the latest data from the Household Consumption Expenditure Survey (HCES) (2022-2023), about 28% of the allocated grains under PDS never reach the intended beneficiaries.

Key Findings:

1. 28% leakage means 19.69 million metric tonnes (MMT) of rice and wheat (worth approximately Rs 69,108 crore) fail to reach the intended beneficiaries annually.
   Data on PDS Leakages:

   1. The economic cost of the grains is calculated based on what the Food Corporation of India (FCI) spends on acquiring and storing grains.
   2. Leakages are a major waste of public funds and contribute to inefficiencies in food distribution.

2. Past Reports on Leakages:

   1. A 2015 report by the High-Powered Committee on Grain Management under Shanta Kumar estimated PDS leakages to be around 46%, based on the HCES 2011-12.
   2. This figure has reduced, but the current leakage rate of 28% is still high.

3. Technological Interventions:

   1. The government introduced Point-of-Sale (PoS) machines at Fair Price Shops (FPS) in 2016 to reduce leakages by integrating biometric authentication and real-time transaction tracking.
      • Point-of-Sale (PoS) machines, also known as Electronic Point of Sale (ePoS) devices, are used at Fair Price Shops (FPS) to electronically record the distribution of subsidized food grains to beneficiaries
   2. Currently, 90% of FPS nationwide have PoS machines, which have helped bring down leakages from 46% to 28%.

4. State-wise Variations:

   1. Arunachal Pradesh, Nagaland, and Gujarat report the highest leakages, although the national average stands at 28%.
5. Proposal:
   1. Direct cash transfers to beneficiaries could eliminate these leakages, as the food subsidy would go directly to the bank accounts of the poor, ensuring that the money is used for food without intermediary losses.

Nutritional Security: Beyond Free Rice and Wheat

1. While the PDS offers rice and wheat, it does not address the issue of nutritional security, which is particularly critical for children under the age of 5.
2. The National Family Health Survey (2019-21) shows that 35.5% of children are stunted, 19.3% are wasted, and 32.1% are underweight.
3. These indicators suggest that hidden hunger (micronutrient deficiencies) is a major issue in India.
4. Proposal:
   1. Transform Fair Price Shops into nutrition hubs: FPS could offer a diversified range of food, including eggs, pulses, millets, fruits, and vegetables, alongside cereals.
   2. Digital food coupons could be issued to beneficiaries to redeem these at nutrition hubs, providing a variety of healthy options and addressing the diversity of nutritional needs.

Proposed Reforms for the Public Distribution System (PDS)

1. Narrow the coverage to focus primarily on the extremely poor.
2. This would reduce the food subsidy burden and direct resources toward investing in agriculture and rural development.
3. Charge those above the poverty line at least half the MSP, as was done under Targeted PDS in 1997-98.
4. This would also encourage self-sufficiency in food distribution.
5. Given the persistent leakages in PDS, direct cash transfers could be a better alternative to ensure that the poor receive their entitlement directly.
6. This would eliminate middlemen and inefficiencies, and ensure that subsidies are spent in the best interest of the beneficiaries.
7. PDS outlets should be converted into nutrition hubs offering a wider array of nutritious food options like pulses, millets, eggs, fruits, and vegetables.
8. Implementing a digital food coupon system will allow beneficiaries to redeem these coupons for a variety of foods, improving overall nutritional diversity and tackling hidden hunger.
9. The savings from streamlining the PDS can be reinvested in developing climate-resilient agricultural systems, improving irrigation and post-harvest infrastructure, and providing skills training to farmers.
10. Rural infrastructure improvements, such as rural roads, storage facilities, and market linkages, will boost agricultural productivity and create job opportunities in rural areas.

What is Public Distribution System (PDS) in India PDS is a government-run initiative offering subsidized food (rice, wheat, sugar, kerosene, cooking oil) to underprivileged populations. Started: In the 1960s, in response to food shortages and rising prices. Function: Distributes essential commodities through a network of Fair Price Shops (FPS). Evolution of PDS: Initial Phase: WWII: Introduced as a rationing strategy during the war. Pre-1960s: Relied on food grain imports. 1960s Expansion: Food Corporation of India (FCI) and Agricultural Prices Commission were established to improve domestic procurement and storage. 1970s: Became a universal scheme for subsidized food distribution. 1992: Revamped Public Distribution System (RPDS) aimed to reach remote, rural, and hilly areas. 1997: Targeted Public Distribution System (TPDS): Segregated population into BPL (Below Poverty Line) and APL (Above Poverty Line) categories. 2000: Antyodaya Anna Yojana (AAY): Provided heavily subsidized food (wheat at Rs 2/kg, rice at Rs 3/kg) for the poorest families. Reached 1 crore families initially, later expanded to 1.5 crore. 2013: National Food Security Act (NFSA): Ensured 5 kg of food grains per person/month for 82 crore people. How PDS Works: Commodity Distribution: Central government allocates food grains (rice, wheat, sugar, kerosene) to state governments. States may include additional goods like pulses, salt, and other necessities, particularly in remote areas. State Responsibilities: State governments handle local distribution via FPSs and may use Civil Supplies Companies to purchase extra commodities directly from producers and sell them at lower prices. Role of FCI: Established: 1965 under the Food Corporation Act. Functions: Procure, store, and transport food grains to PDS. Ensure price support for farmers and uniform prices for consumers. Maintain strategic reserves to stabilize markets. Steps Taken to Improve Public Distribution System (PDS) 1. End-to-End Computerization of PDS Objective: To improve the efficiency, transparency, and accountability of the PDS. Key Features: Address Issues: Focused on reducing food grain leakages, preventing diversion, and eliminating fake ration cards. Implementation: The Department of Food and Public Distribution introduced computerization of PDS operations, enabling better monitoring and tracking of food grains from procurement to distribution. 2. Integrated Management of Public Distribution System (IM-PDS) Goal: Implement nationwide portability of ration cards under National Food Security Act (NFSA), allowing beneficiaries to access food grains anywhere in India. One Nation, One Ration Card (ONORC): Features: Migrant workers and beneficiaries can now use their existing ration cards at any ePoS-enabled Fair Price Shop (FPS) across the country. Authentication: Beneficiaries authenticate via biometric/Aadhaar to obtain entitled food grains. 3. Integration of PDS with Aadhaar Objective: To ensure that food grains reach the legitimate beneficiaries. Impact: Aadhaar Seeding: Facilitated biometric verification, ensuring targeted delivery and eliminating fake beneficiaries. Accuracy: Improved identification of eligible households, reducing fraud and ensuring that food grains are distributed correctly. 4. Ration Card Deletion Digitization Impact: 2.33 Crore Cards: Cancelled/deleted due to various factors such as duplication, migration, deaths, changes in economic status, and during the NFSA implementation. Objective: Cleaned up the system, ensuring that only valid, eligible beneficiaries receive subsidized food. 5. Promotion of Self-Help Groups Objective: To enhance community involvement in managing PDS operations. Impact: Encouraged the formation of self-help groups (SHGs) to handle local-level PDS tasks, improving efficiency and fostering community participation.

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