GS - III Economy

Public Distribution
System
Schemes, Issues & Reforms

Adil Baig AM
 GS III : Public Distribution System

Agenda – Public Distribution System

 PDS – Definition, Objective
 Structure, Supply Chain
 Evolution
 One Nation One Ration Card
 Problems in PDS
 Reforms Done
 Shanta Kumar Committee Recommendations
 Way Forward
 GS III : Public Distribution System

Public Distribution System

 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.
 A number of state governments have set up Civil Supplies or Essential Commodities Corporations to
buy such additional items directly from the manufacturers and use the existing structure of PDS to
arrange for the sale at lower than market rates.
 GS III : Public Distribution System

PDS - Objectives
 The Public distribution System primarily evolved as a system of management of scarcity
through distribution of food grains at affordable prices.
● 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.
 GS III : Public Distribution System

PDS – Supply Chain

 GS III : Public Distribution System

PDS - Evolution
India’s Public Distribution System (PDS) is the largest distribution network of its kind in the
world.
 It was introduced around World War II as a war-time rationing measure
 Prior to the 1960s, distribution through PDS was generally dependent on imports of food grains.
 Following this, the government set up the Agriculture Prices Commission (later renamed to
CACP) and the Food Corporation of India to improve domestic procurement and storage of
food grains for PDS.
 By the 1970s, PDS had evolved into a universal scheme for the distribution of subsidised food.
 In 1992, a Revamped PDS (RPDS) was launched in 1775 blocks throughout the country. This was done
to strengthen & streamline the PDS and to improve its reach to poor families especially in the far-flung,
hilly, remote and inaccessible areas. RPDS covered areas where special programmes like Drought
Prone Area Program (DPAP), Integrated tribal development program (ITDP), Desert Development
Program (DDP) were under operation and in certain Designated Hill Areas (DHA).
 In 1997, Targeted PDS (TPDS) was launched with special focus on the poor families – 50% of Economic
cost for BPL, 33% of Economic Cost for AAY
 GS III : Public Distribution System

PDS - Evolution
 In December 2000, the government launched Antyodaya Anna Yojana (AAY) to benefit the
poorest of the poor people.
 25kg per month per household (increased to 35kg in 2002) was provided at the highly
subsidised rate of Rs 2 per kg of wheat and Rs 3 per kg of rice.
 The scheme aimed to reach one crore Antyodaya households.
 In 2013, National Food Security Act (NFSA) was enacted. It introduced individual entitlement of
5 kg per person per month foodgrains to around 82 crore of population
 2013 – Aadhar linked Direct Benefit Transfer – PoS machines
 2021 - Under this ‘One Nation, One Ration Card’ system, beneficiary will be able to buy
subsidized food grains from any FPS across the country using their existing/same ration card that
is Aadhaar linked
 GS III : Public Distribution System

One Nation One Ration Card

 Partha Mukhopadhyay Working Group on Migration recommended for portability of Public
Distribution System and its benefits in 2017.
 The new system will identify beneficiary through biometric authentication on electronic Point of Sale
(ePoS) devices installed at FPS.
 Under this, a migrant will be allowed to buy maximum of 50% of family quota. This is to ensure that the
individual, after shifting to another place does not buy the entire family quota in one go.
 Once 100 per cent of Aadhaar seeding and 100 per cent installation of ePoS devices is achieved, national
portability of ration cards will become a reality. Currently, it is enabled in 25 States and UTs.
Benefits of ONORC
 Provide intra-state as well as inter-state portability of ration cards benefitting inter/intra state
migrants to avail benefits.
 SDG: This will help achieve the target set under Sustainable Developmental Goals (SDG) 2 of
ending hunger by 2030.
 Inter-state portability at IMPDS portal
 Intra state at Annavitran Portal
 Helps to remove bogus ration card holders through an integrated online system.
 It can control rising food subsidy bill by preventing leakages etc.
 GS III : Public Distribution System

One Nation One Ration Card

Challenges in implementation of ONORC
 Technological glitches - lack of e-POS machines, Aadhar Authentication errors, Internet
connectivity
 Huge gap in Migrant Data – difficulty in stock arrangements
 Different entitlement patterns in various states
 Financial burden on states with huge migrant population
 GS III : Public Distribution System

PDS - Problems
 Identification of beneficiaries large inclusion and exclusion errors. This implies that entitled
beneficiaries are not getting food grains while those that are ineligible are getting undue benefits.
 According to the estimation of an expert group set up in 2009, PDS suffers from nearly 61% error
of exclusion and 25% inclusion of beneficiaries, i.e. the misclassification of the poor as non-poor
and vice versa.
 DBT – Aadhar authentication errors – Lack of internet connectivity
 Leakage of food grains: (Transportation leakages + Black Marketing by FPS owners)
 Late irregular arrival of food grains
 Issue with procurement: Open-ended Procurement i.e., all incoming grains accepted even if
buffer stock is filled, creates a shortage in the open market & Rise of prices
 Burden of Food Subsidy – Burgeoning procurement and storage costs
 Issues with storage: A performance audit by the CAG has revealed a serious shortfall in the
government’s storage capacity, leading to rotting of food and wastage
 Monoculture of Rice, wheat, Water use inefficiency, Salinization, environmental stress, including
rapid groundwater depletion, deteriorating soil and water conditions from overuse of fertilisers.
 GS III : Public Distribution System

PDS – Reforms done in the past

 Digitization of ration cards: This allows for online entry and verification of beneficiary data.
 States of Andhra Pradesh, Gujarat, Tamil Nadu, Madhya Pradesh etc have undertaken this exercise
on a large scale.
 Aadhar integration – De-duplication of ghost beneficiaries, Leakage, DBT – 56% of digitised
cards linked (Smart cards)
 Computerisation of allocation, stock balance, arrival – Andhra Pradesh Model
 GPS based tracking of transportation trucks and food grains – Tamil Nadu, Madhya Pradesh
 SMS Alert system – Stock balance, arrival of goods, bill – Tamil Nadu Model
 Web based grievance redressal – Chhattisgarh
 GS III : Public Distribution System

PDS – Shanta Kumar Committee Recommendations 2015

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.
 GS III : Public Distribution System

PDS – Shanta Kumar Committee Recommendations 2015

On PDS And NFSA Related Issues:
 GoI should defer implementation of NFSA in states that have not done end to end
computerization; have not put the list of beneficiaries online for anyone to verify, and have not
 set up vigilance committees to check pilferage from PDS.
 The current coverage of 67% Population under NFSA is a huge fiscal burden. It should be brought
down to 40%.
 Gradual introduction 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.
• Cash transfers can be indexed with overall price level to protect the amount of real income
transfers.
• Cash can be given in the name of lady of the house.
• Cash can be routed through Prime Minister's Jan-Dhan Yojana (PMJDY) and dovetailing
Aadhaar and Unique Identification (UID) number.
 GS III : Public Distribution System

PDS – Shanta Kumar Committee Recommendations 2015

 On Labour Related Issues:
 Increase mechanisation to reduce the number of manual labour requirements and
offices.
 At top level, hire executives from private sector
 daily wage contractual labour or outsourcing should be done wherever possible
 On direct subsidy to farmers: Farmers be given direct cash subsidy (of about Rs 7000/ha)
and fertilizer sector can then be deregulated.
 This will plug diversion of urea to non-agricultural uses, as well as to neighbouring
countries.
 This will also help raise the efficiency of fertilizer use.
 This may also help those who take loans from money lenders at exorbitant interest rates
to buy fertilizers or other inputs, thus relieving some distress in the agrarian sector.
 GS III : Public Distribution System

PDS – Reforms Needed

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.
• 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.