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Public Distribution System

Introduction


The public distribution system (PDS) is an Indian food security system that is administered by the Ministry of Consumer Affairs, Food, and Public Distribution. PDS developed as a mechanism for addressing the issue of food security by distributing food grains at affordable prices. The PDS is jointly administered by the Central and State Governments.


The Central Government buys food grains at MSP through the Food Corporation of India (FCI) and has assumed the responsibility for procurement, storage, transportation and bulk allocation of food grains to the State Governments. State governments are responsible for operational tasks such as distribution within the State, identification of eligible households, issuance of Ration Cards, and monitoring of the operation of Fair Price Shops (FPSs), among others, co-ordinating the entire supply process from FCI godowns to beneficiaries, and monitoring PDS activities. Fair pricing shops (FPSs) that operate under the PDS are critical nodes because beneficiaries buy subsidised PDS commodities via the FPS.


The FCI purchases food grains from farmers at the minimum support price (MSP) and issues food grain at a uniform central issue price (CIP) to all states.


Targeted Public Distribution System


The PDS in its original form was extensively criticised for failing to serve the below-poverty-line (BPL) population, having an urban bias, having little coverage in states with the biggest concentrations of rural poor, and lacking transparent and accountable delivery systems.


In 1997, the Government of India restructured the almost universal PDS and introduced the Targeted Public Distribution System (TPDS) to target a specific set of beneficiaries.


The aim was to provide food grains to a targeted population below the poverty line (BPL). BPL households were identified by the Government of India's Ministry of Rural Development's BPL census. Grains were sold at half the economic cost to this group, while those above the poverty line (APL) received food grains at the economic cost.



National Food Security Act, 2013


The National Food Security Act, which was notified in 2013, marks a watershed moment in the history of India's food security policy. It is a shift from a welfare-based to a rights-based approach. The legislation confers a legal right on beneficiaries to obtain entitled quantities of food grains at highly subsidised prices. It also extended legal rights to women and children and other unprivileged groups including the destitute, homeless, disaster- and emergency-affected people living in starvation for free meals or meals at an affordable price.


When compared to the TPDS, the NFSA provides much more coverage. The overall population coverage is 67 percent. At the national level, it is 75% in rural regions and 50% in urban areas.


To bring transparency and accountability to the distribution mechanism, Vigilance Committees (VCs) have been in existence at the state level since the inception of the rationing system.


One Nation One Ration


This system allows all NFSA beneficiaries, particularly migrant beneficiaries, to claim either full or part foodgrains from any Fair Price Shop (FPS) in the country through existing ration card with biometric/Aadhaar authentication in a seamless manner. Additionally, the method enables their family members at home, if any, to claim any remaining foodgrains on the same ration card.


The plan enables the nation-wide portability of ration cards through the implementation of an IT-driven system that includes the installation of ePoS devices at FPSs, seeding of Aadhaar numbers of beneficiaries with their ration cards, and operationalization of biometrically authenticated ePoS transactions in the States/UTs.



Identification errors in PDS


A government program's success is contingent upon effective beneficiary targeting. Identification of poor households for the TDPS is challenging. Misclassification or omission of disadvantaged families might lead to targeting mistakes. These are called inclusion and exclusion errors.


The state of poverty is dynamic. As a result, it is difficult to choose the criteria by which a family may be classified as impoverished or poor. There are several factors that the government looks at when determining which homes should get assistance. States developed their standards to classify the poor, based on local economic situations. In 2013, the PDS mechanism transitioned from broad entitlement under the TPDS to food as a legal right under the NFSA. The poor have been re-identified in accordance with state-specific criteria.



Other setbacks

  • Problem with procurement of grains

  • Storage infrastructure is inefficient and insufficient (wastage and rotting )

  • Expensive operational cost

  • Black Marketing and hoarding

  • leakages-Deliberate Manipulation of prices to earn an unfair profit( diversion)

  • corruption


Reforms


Major improvements in the food grain marketing system are necessary to rationalise food subsidies.


By integrating Aadhar with TPDS, we can improve beneficiary identification and solve the issue of inclusion and exclusion errors . According to research conducted by India's Unique Identification Authority, linking Aadhaar with TPDS will help remove duplicate and ghost (false) beneficiaries and improve beneficiary identification accuracy.


The National Food Security Act, 2013, establishes modifications to the TPDS, including cash transfers to supply food entitlements.


Direct Benefit Transfer (DBT) intends to:


  • Reduce the operational cost

  • provide greater autonomy to beneficiaries to choose their consumption basket

  • enhance dietary diversity- it would help in addressing malnutrition

  • reduce leakages

  • facilitate better targeting

  • promote financial inclusion




Reformed Role of FCI


The FCI can maintain a minimum level of buffer stock and then undertake open market operations within a prescribed price band. It can release stocks in the open market when there are shortages and prices increase. It can also purchase food grains from the open market when there is excess supply and prices are depressed. Its purpose, however, should not be to acquire everything supplied by farmers, but rather to maintain an optimal amount of buffer stock.


The FCI may potentially participate in the worldwide market for food grains by importing during times of scarcity and exporting during times of surplus. Additionally, the private sector and farmers must be permitted to participate in the export of food grains by removing all export limitations on wheat and rice.


The FCI will continue to be critical in ensuring the buffer stock is maintained to protect the food economy from fluctuations in the food grain supply. However, its monopoly in food procurement must be ended by allowing State procurement agencies to be set up in all states. Private trade restrictions must be removed to allow competitive forces to operate freely, hence lowering intermediation costs.


  • Allow competitive grain procurement

  • Allow private trading

  • Single Market -All restrictions on the interstate movement of food grains should be removed.

  • Announce a policy renouncing the use of export restrictions on agricultural commodities. Domestic shortages should be met by imports, not by imposing export controls.


Alternatives


1. Food stamps


The Federation of India Chambers of Commerce and Industry (FICCI) has said that the existing system of supplying subsidised food commodities via the public distribution system (PDS) should be dismantled due to leakages at various levels.


It said that food stamps should be implemented throughout the nation since the PDS has failed to assist low-income households. The PDS is skewed toward cities and is not transparent. It lacks responsible delivery systems, and its coverage is minimal in areas with the biggest proportions of rural poor.


Food stamps are secure pieces of paper that are provided for the purchase of a fairly broad range of specific foods. Food stamps are often used by consumers to purchase any number of meals they choose at market prices from any retailer that is convenient for them.


Contracts and penalties bind the retailers to abide by the rules of use. They are not permitted to provide anything other than what is specified, nor are they permitted to encash or return change from food stamp purchases.


State governments might issue a subsidy entitlement card (SEC) instead of ration cards under the food stamp system. The SEC should show, among other things, the number of members in a poor family and their age and indicate their entitlement level for food stamps. A food stamp system allows for less room for corruption. Under the existing system, FPS owners declare on paper that they have sold a specific amount of food to the needy at subsidised costs but, in reality, they make tremendous profits by selling the food at market prices. Under the food stamp system, such diversion of food resources is less likely. The retailer can claim food subsidy only if he acquires food stamps by selling food to the poor at subsidised prices.


Two possible issues with the food stamp system must be considered while planning the system. Food stamps have a high likelihood of being counterfeited. Second, payment of subsidies to participating retailers may provide logistical challenges. These problems are, however, minuscule compared to the problem of physically procuring, storing, transporting and delivering foodgrains to FPS across the country by the FCI and the state food corporations/agencies.


It can be introduced in phases. This should be introduced cautiously and experimentally in places with adequate market infrastructure. In remote and inaccessible places, the traditional FPS system may have to be continued.


2. Food Credit Card


A food credit card system might be a better alternative to the current FPS system and perhaps even a food stamp system. The customers could use food credit/debit cards to buy subsidised food grains from the market and the retailers can claim the subsidy from the Government.


Though the initial cost of issuing a food credit card and establishing a leakage-proof system is expected to be greater than that of the present ration card, the system's operating expenses may be cheaper since the credit/debit card may be used in existing retail outlets that accept such cards. Furthermore, the cost would be offset by eliminating leakage at all levels of the present food procurement, storage, and distribution system (including the FCI).


Conclusion


The PDS in India is possibly the world's biggest distribution network of its kind, with a network of more than 4.62 lakh fair price shops (FPS) providing commodities worth more than Rs 30,000 crore yearly to over 160 million households. This huge network can play a more meaningful role only if it ensures the availability of food to poor households.


In India, a significant number of the poor depends on the Public Distribution System to alleviate hunger. The PDS ideally assures the provision of essential food grain to the needy segment of society that lacks the purchasing power to buy the required food grain at market rates.

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