Public Distribution System (India)
The Public Distribution System is a food security system that was established by the Government of India under the Ministry of Consumer Affairs, Food and Public Distribution to distribute food and non-food items to India's poor at subsidised rates. Major commodities distributed include staple food grains, such as wheat, rice, sugar and essential fuels like kerosene, through a network of fair price shops established in several states across the country. Food Corporation of India, a government-owned corporation, procures and maintains the PDS.
As of June 2022, India has the largest stock of grain in the world besides China, the government spends billion. Food is procured from the net food surplus states, mainly from the smaller but richer states of Haryana and Punjab, which provide 70-90% of wheat & 28-44% of rice of India's PDS, which is then redistributed to other net negative producer states which produce less than they consume. Distribution of food grains to poor people throughout the country is managed by state governments. As of 2011 there were 505,879 fair price shops across India. Under the 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, redeemable with a card. However, there are concerns about the efficiency of the distribution process.
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 enough to meet the consumption needs of the poor. In the 1980s and 1990s, the PDS was criticised for its urban bias and its failure to serve the poorer sections of the population effectively. The Targeted PDS is expensive and until the early 2000s there was a lot of corruption.
Evolution of the PDS
1950-1997: Gradual expansion
The origins of the PDS go back to the system of food rationing introduced by the British during the Second World War. It was subsequently dismantled but had to be reintroduced at the time of independence owing to severely inflationary pressures. In the initial years after independence, the system initially was largely an urban phenomenon relying largely on food imports and was used mainly as a price stabilizing tool. The setting up of the Foodgrains Prices Committee in 1964 strengthened the position of the PDS. The government committed itself to announce a minimum support price to promote agriculture and the stocks procured were to be used towards meeting the needs of the PDS. If procurement fell short, the government was to resort to imports and other measures such as monopoly procurement, and levy on farmers. In the subsequent decades, the coverage and reach of the PDS expanded considerably on the back of various state-led schemes and the increased need for foodgrains to implement various regional and poverty programmes. The total number of ration shops increased from around 50,000 in 1960 to around 3,50,000 by 1990-91 and the quantity of foodgrains distributed increased from about 5 million tonnes in 1960–61 to about 16 million tonnes in 1990–91. In June 1992, the 'revamped' PDS scheme was launched with the aim of covering 1750 blocks in hilly, remote, and inaccessible areas with the per kg. issue price to states set to 50 paise below the central issue price. By this time, the urban bias that was a characteristic of the PDS in the early post-independence years had largely disappeared. Nonetheless, the overall coverage of PDS was quite limited and patchy till this point. As per data from the National Sample Surveys, only 27% of rural and 29% of urban households purchased grains from the PDS in 1993–94. This was despite the fact that all through this while the PDS was in principle a universal scheme such that every Indian was entitled to a ration card and purchase grains from the PDS. Some observers attributed the limited access to the steadily rising prices at which grains were sold from the PDS while others blamed poor administration, corruption, and lack of political will. There was evidence of corruption from the PDS as well as lack of progressiveness of benefits. This led to some calls for replacing the PDS with direct income transfers. Further, in the wake of the structural adjustment policies that came with the 1991 economic reforms, 'targeting' gained prominence as a way of enhancing coverage among the poor while reducing fiscal expenditures.1997-2013: Targeted PDS
In 1997, the PDS was officially converted from a universal to a targeted scheme. Households were to be divided into two categories – below poverty line and above poverty line. BPL households were entitled to 10 kg per month, later revised to 35 kg, at 50% of the central government's procurement cost. Till 2000–01, APL households were entitled to purchase 15 kg of grains at 75% of the procurement cost, after which they had to pay the full economic cost. In 2000, the Antyodaya category was added which covered 1 crore 'poorest of the poor' households that were entitled to 25 kg of grains per month from the PDS irrespective of family size at Rs. 3/kg for rice and Rs. 2/kg for wheat. The targeted approach to the PDS brought with it two implementational challenges: estimating the number of poor to be covered by the BPL category and identifying the poor in accordance with the coverage targets determined. It was decided that the coverage of BPL households would be based on the state-wise poverty head count ratios estimated from the 1993-94 NSS consumption expenditure survey. This made the highly contentious 'poverty line' extremely salient in welfare policy. In order to identify eligible households, the government initially used results of a survey conducted in 1992–03 to identify beneficiaries of the Integrated Rural Development Programme. Subsequently, the government conducted a BPL Census in 2002 which scored households on 13 different parameters covering assets, occupation, land ownership etc. and identified BPL households as those falling below a certain cut-off.Issues with targeting
While the shift from universal to targeted PDS was meant to enhance coverage among the poor and reduce corruption, a large body of work found that it effectively did the opposite. In 2004–05, in total only 34% of households possessed a BPL or AAY card with nearly half of households in the poorest 20% of the consumption distribution excluded. On the other hand, among the richest 40% of households, roughly 20%-25% possessed a ration card. A majority of the scheduled caste, scheduled tribe, and other backward class households were excluded from the PDS. In total, only 34% of households had a BPL or AAY card. The message from these numbers was clear - the targeting process based on poverty lines and the BPL census led to severe exclusion and inclusion errors. This message was further strengthened by numerous state-specific studies. In most states, the shift to the targeted PDS resulted in decline in per-capita PDS purchases between 1999-2000 and 2004–05. The states worst affected by the reform were Kerala and Tamil Nadu which historically had high PDS coverage and purchases prior to 1997–98. While the issue was partly related to poor design and implementation of the 2002 BPL Census, the very idea of defining the coverage base of PDS based on poverty lines continued to be fraught with various unresolved conceptual issues.Large-scale leakages
Along with a decline in coverage, the switch to a targeted PDS brought with it large-scale leakages. At the All-India level, the share of total allocated grains not reaching households increased from 24% in 1999–2000 to 39% in 2001–02 to 54% in 2004–05. The All-India figures mask considerable state-wide heterogeneity, with very low levels of leakages in states like Andhra Pradesh, Kerala and Tamil Nadu and very high leakages in states like Bihar, Jharkhand, Punjab, Rajasthan. This was likely due to a number of factors including lower overall coverage of the PDS, reduced consumer base of fair price shops, low levels of utilization and a shift in the PDS away from the places that it worked well. Two important dimensions of the leakage issue are worth noting. First, leakages were considerably higher for rice than wheat. Estimated leakages for rice were lower than for wheat in almost all states and per-capita wheat purchases remained low and leakages high during this period. Second, leakages from the APL allocation were more than twice as high than the leakages from the BPL allocation, possibly since the APL allocations fluctuated arbitrarily and hence APL households often did not know what they were entitled to. Indeed, there is some evidence to suggest that the APL quota of states was an important predictor of the overall level of leakages.Steady revival
From 2004-05 onwards, the PDS displayed a steady revival on various dimensions. Between 2004-05 and 2011–12, the share of rural households with a BPL or AAY ration card increased from 30% to 44%, coverage significantly improved among SC, ST, OBC households and many households in the poorest three consumption deciles moved from APL to BPL entitlements. The share of households actually purchasing grains from the PDS also increased significantly from 25% in 2004–05 to 50% in 2011–12. Further, PDS accounted for nearly 46% of total household rice purchases. This improvement in PDS utilization was matched by a reduction in leakages between 2004–05 and 2011–12. At the All-India level, between 2004–05 and 2011–12, leakages fell from 54% to 42% based on NSS estimates and from 49% to 32% based on the India Human Development Survey. While this improvement was modest, it showed that improvements in PDS functioning was certainly possible. The erstwhile poorly performing states of Bihar, Chhattisgarh, and Odisha saw significant improvements and states like Andhra Pradesh, Himachal Pradesh, and Tamil Nadu, where the PDS was already performing well, consolidated their positions further.These improvements were largely the outcome of various bold initiatives by many state governments. Tamil Nadu and Himachal Pradesh moved towards universalization of their PDS, Chhattisgarh did away with private PDS dealers and implemented a stronger monitoring system, and various other states supplemented the central subsidy to reduce issue prices and/or expand coverage. Starting 2009–10, Kerala decided to automatically include all SC, ST and fisherperson households as well as destitute persons; subsequently in 2010–11, all agricultural labourer households and traditional industrial worker households were automatically eligible for subsidized grains irrespective of APL/BPL status. Another likely factor contributing to the PDS revival was the significant rise in global food prices around this time which led to a rise in domestic food prices. This led to increase in the value of PDS subsidy for households which evidence suggests led to increases in PDS purchases in most states.