The annual fiscal cost of leakage in the distribution of food grain to more than 800 million beneficiaries under the free rations scheme is estimated at Rs 69,000 crore, according to ICRIER study.

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Key issue Highlighted in the ICRIER Study

• Excessive Coverage and Economic Burden
  • Current Coverage under the NFSA and PMGKAY: It extends to 57% of the population (813.5 million people out of a population of about 1.43 billion in 2024).
  • Criticism: Critics argue that providing free food to over 800 million people is economically unsustainable.
• Leakages in PDS 
  • A significant issue in the PDS is the leakage of food grains, which prevents them from reaching intended beneficiaries.
  • Extent of Leakages: Approximately 28% of the rice and wheat distributed under the PDS does not reach beneficiaries, resulting in a loss of 19.69 million metric tonnes (MMT) of grains annually (2022-23). 
    • This translates to a financial loss of ₹69,108 crore per year.
  • State Variations: States such as Arunachal Pradesh, Nagaland, and Gujarat have reported some of the highest rates of leakages.
  • Improvements and Challenges: The introduction of Point-of-Sale (PoS) machines at Fair Price Shops has reduced leakages from 46% in 2011-12 to 28% in 2022-23. 
• Nutritional Security Deficiency
  • The current cereal-focused food subsidy system does not adequately address India’s nutritional challenges.
  • Malnutrition Indicators: According to the National Family Health Survey (NFHS) 2019-21:
    • 35.5% of children under five are stunted.
    • 19.3% are wasted.
    • 32.1% are underweight.
  • Cereal-Focused Subsidy: The existing subsidy prioritises cereals, with limited focus on nutrient-rich foods such as pulses, vegetables, and fruits, which are crucial for overcoming malnutrition.
• Fiscal Impact:
  • The food subsidy expense for FY23 was Rs. 2.72 lakh crore, reduced to Rs. 2.12 lakh crore in FY24 (RE).
  • Savings from reduced leakages could be redirected toward agricultural investment and rural development.

More Issues with PDS in India

• Ghost Beneficiaries and Fraud: Despite the introduction of Aadhaar linkage, duplicate and ineligible beneficiaries remain a challenge. 
  • Between 2013-2021, 47 million bogus ration cards were cancelled.
• Targeting Errors: Errors in identifying beneficiaries result in the exclusion of eligible households and the inclusion of non-poor families.
• Storage Losses: The lack of adequate infrastructure leads to 10% of foodgrains being wasted annually due to spoilage.
• Corruption: Corruption at the level of Fair Price Shops (FPSs) leads to practices like under-weighing and overcharging, which reduce the effectiveness of PDS.

About Public Distribution System (PDS)

• The Public Distribution System (PDS) was initially designed to manage food scarcity by distributing essential foodgrains at affordable prices. 
• Over time, it has evolved into a critical component of India’s food security strategy, supplementing household needs for foodgrains but not meeting the entire requirement.

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Management of PDS

• PDS operates under the joint responsibility of the Central and State/UT Governments:
  • Central Government: Handles procurement, storage, transportation, and bulk allocation of foodgrains through the Food Corporation of India (FCI).
  • State Governments: Oversee distribution, identification of eligible families, issuance of ration cards, and supervision of Fair Price Shops (FPSs).
• The system primarily distributes wheat, rice, sugar, and kerosene, though some states include additional items like pulses, edible oils, and salt.

History of Public Distribution

• Public Distribution in the 1960s
• • PDS emerged during the interwar period but gained prominence in the 1960s amid food shortages. 
  • Initially focused on urban areas, its reach expanded to tribal and poverty-stricken regions post-Green Revolution.

• Revamped Public Distribution System (RPDS)
  • Launched in 1992, RPDS aimed to improve PDS accessibility in remote and poverty-stricken areas.
  • Covered 1,775 blocks, focusing on regions under Drought Prone Area Programme (DPAP), Integrated Tribal Development Projects (ITDP), and Desert Development Programme (DDP).
  • Provided additional ration cards, Fair Price Shops, and storage facilities while distributing essential commodities like tea, pulses, and soap.
• Targeted Public Distribution System (TPDS)
  • Introduced in 1997, TPDS shifted focus to the poor. States identified beneficiaries based on poverty estimates, targeting Below Poverty Line (BPL) families.
  • Initially, 72 lakh tonnes of foodgrains were allocated for 6 crore poor families annually.
  • Key developments:
    • In 2000, foodgrain allocation for Below Poverty Line (BPL) families increased from 10 kg to 20 kg per month at 50% of the economic cost.
    • The allocation for Above Poverty Line (APL) families was retained at economic cost, but the Central Issue Prices (CIP) for BPL and Antyodaya Anna Yojana (AAY) beneficiaries were kept subsidized.
    • The number of BPL families increased to 652 lakh in 2000, based on updated population projections.

Relevance and Need for PDS in India

• Food Security and Poverty Alleviation
  • PDS ensures food access for India’s vulnerable populations, particularly as 129 million Indians live in extreme poverty (World Bank, 2024).
  • Acts as a safety net during crises like the COVID-19 pandemic, where schemes like Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) provided free foodgrains to 800 million people.
• Price Stabilization and Market Regulation
  • PDS mitigates price volatility by maintaining buffer stocks and controlling market fluctuations.
  • For instance, in 2022-23, FCI released 34.82 lakh tonnes of wheat to stabilize market prices.
• Agricultural Support
  • Provides assured markets and Minimum Support Prices (MSP), supporting farm incomes and rural livelihoods.
• Nutritional Security
  • Some states now distribute fortified rice, pulses, and millets to combat malnutrition. 
  • For example, Tamil Nadu provides fortified rice, while Odisha promotes millet distribution through its Millets Mission.
• Social Equity and Regional Balance
• • PDS supports marginalized communities, particularly in remote and tribal regions. 
  • Initiatives like One Nation One Ration Card (ONORC) enhance portability for migrant workers.

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Reforms proposed by ICRIER

• Targeted Free Food Coverage: Free food benefits should be restricted to the poorest 15% of the population. 
  • Beneficiaries above the extreme poverty line should pay at least 50% of the MSP for grains, thereby reducing subsidy costs and making the system more sustainable.
• Plugging Leakages in PDS: To address leakages, the use of PoS machines should be expanded across all Fair Price Shops. 
  • Additionally, implementing DBT will ensure that food subsidies are transferred directly into beneficiaries’ accounts, reducing corruption and inefficiency.
  • States like Bihar and West Bengal have achieved significant reductions in PDS leakage over the past decade. 
    • In Bihar, leakage dropped sharply from 68.7% in 2011-12 to just 19.2% in 2022-23. West Bengal saw a decrease from 69.4% to 9% over the same period.
• Nutrition-Oriented PDS: Reforms should focus on making the PDS more nutrition-oriented:
  • Conversion of Fair Price Shops: Selected Fair Price Shops should be converted into “Nutrition Hubs” offering a diverse range of food items, including eggs, pulses, millets, and fruits, alongside cereals.
  • Digital Food Coupons: Beneficiaries should receive digital food coupons that can be redeemed at these Nutrition Hubs, promoting dietary diversity.

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Way Forward

• Digital Transformation: The system can be improved through end-to-end digitalization using technologies like blockchain and IoT for real-time monitoring and AI-based analytics to detect pilferage.
• Modernized Infrastructure: The government should invest in temperature-controlled silos and automated quality control systems to reduce storage losses.
• Strengthening ONORC: Improved interstate coordination and real-time tracking of migrant populations can ensure better portability of ration cards.
• Nutritional Security Focus: The inclusion of millets, pulses, and fortified foods in the PDS can address India’s nutritional challenges. E-Rupee vouchers for nutrition can also be introduced for vulnerable groups.
• Crisis Preparedness: Emergency mobile PDS units should be established to cater to populations affected by natural disasters or pandemics.
• Investment of Savings into Agriculture and Nutrition: Savings from subsidy rationalisation should be redirected towards:
• • Agricultural R&D: Investments should focus on developing high-yield, climate-resilient, and nutrient-rich crop varieties.
  • Climate-Resilient Farming Practices: Emphasis should be placed on sustainable agricultural practices to mitigate the effects of climate change.
  • Farmer Skill Enhancement Programs: Skilling programs for farmers should be prioritised to improve agricultural efficiency and income.

Conclusion

A restructured PDS with targeted free food, DBT for leakages, and diversified nutrition options is critical for addressing poverty and malnutrition effectively. Food subsidy savings must focus on investments that offer long-term returns and improve overall food and nutritional security.

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