Public Distribution System: Analysing

Policy Gaps due to the Coverage and

Leakages of the System

Pratap Ingale 2015B3A80554G

Samaksh Gulati 2015B3A40498G

 Abstract
The Public Distribution System has been one of the most important part of Government’s
policy instrument for ensuring household level food security since our freedom in 1947. Due to
improper coverage and unnecessary leakages, the Targeted Public Distribution System(TPDS)
couldn’t reach its desired goal of fulfilling the needs of entitled beneficiaries. The National Food
Security Act(NFSA) implemented in 2013 tried to overcome this issue by making some policy
changes, but got caught in similar trap.
 Introduction
United Nations’ Committee on World Food Security defines Food Security as the
condition in which all people, at all times, have physical, social and economic access to
sufficient safe and nutritious food that meets their dietary needs and food preferences for an
active and healthy life. With a considerable population under poverty, attaining food security is
very essential for India. Food Security is a multidimensional concept with the 3 dimensions
being – 1) Food Availability, 2) Food Accessibility and 3) Food Affordability.

Post Green Revolution, due to good monsoon years and a policy of ensuring relative
returns on production has ensured that the problem faced by country is not shortage of food
grains but managing surplus and the delivery system to the beneficiaries. The Public Distribution
System(PDS) is the world’s largest food distribution network and is operated under joint
responsibility of Central and State Government. Since its inception from the post-Independence
period, the policy didn’t see many changes till 1992. Till 1992, all the citizens were beneficiaries
of this system. In 1992, the Government introduced the Revamped Public Distribution System
(RPDS) which changed its prime focus towards people living in hilly, remote and tribal regions.
This policy neglected the poor people living in urban areas. In 1997, the Government introduced
Targeted Public Distribution System (TPDS) by identifying the beneficiaries as households
above the poverty line (APL) and below the poverty line (BPL). This PDS was focus on
providing the BPL category. However, there were several issues regarding improper coverage
and leakages. The National Food Security Act (NFSA) launched in 2013 addressed these issues
by making several policy changes, but couldn’t overcome them.
 OVERVIEW
Before we start analysing the major gaps in the policy, it is important to understand the
policy implemented over the years and the changes it went through.
India realized that they needed a strong food policy after the Bengal famine of 1943 that
killed around 3 million people due to starvation, malaria and other diseases aggravated due to
malnourishment. The first step in the direction of Food Security means to be self-sufficient in
food production. With the Green Revolution in 1960s, India moved away from dependence on
food aid to becoming a food exporter. The next step of achieving Food Security is availability.
The Government set up Public Distribution system under the Ministry of Consumer Affairs to
distribute subsidized food and non-food items to India’s poor. The Central Government looks
after procurement, storage, transportation and bulk allocation, while the State Government looks
after the distribution of the same to the consumers through a network of Fair Price Shops (FPS).
The process of PDS begins by procuring such large amount of food grains to meet the
nations requirement. In 1965, the government set up Food Corporation of India (FCI) and
Commission for Agricultural Costs and Prices (CACP). The CACP helps government by
suggesting the Minimum Support Prices (MSP) for procurement of food grains, while the FCI
help with maintaining operational and buffer stock and distribution of food grains through the
PDS. The Government along with FCI and CACP runs the PDS all over India.
Till 1991, the PDS was catering to the need of every household. Providing subsidized
food to such a large population was increasing burden on the government. In 1992, the
expenditure on food subsidy amounted to Rs2,800 crores which constituted 39% of that year’s
budget deficit. People felt that the existing PDS was urban biased, pro-rich and regionally biased.
(“Revamping PDS: Some Issues and Implications” by S Geetha (1993)). There was a need to
reduce the coverage of PDS to the people who actually needed the subsidy. To overcome these
issues, the government launched the Revamped PDS (RPDS) in 1992. It identified 1775 blocks
and addition 671 falling in drought prone areas, hilly and tribal areas. The RPDS covered nearly
16 crore people living in these areas, but failed to cater to the poor population living in urban and
rural areas.
To overcome the problems in RPDS, the government launched Targeted PDS (TPDS).
Under this scheme, the identification of poor households was done on the basis of Sate-wise
poverty estimates. The households were divided into 3 categories- namely above poverty line
(APL), below poverty line (BPL) and Antyodaya Anna Yojana (AAY). AAY includes the
poorest of the poor (poorest 10% of BPL category). The TPDS was aimed to provide food grains
to the BPL and AAY category. Identification of BPL families was done using the BPL census
conducted by the Ministry of Rural Development, Government of India. The major issue here
was misclassification of poor as non-poor and vice versa. Another issue was the wastage and
leakages in food grain management occurring due to improper storage of grains and corruption.
In coming years, the stock of food grains procured was well over prescribed by the legislature.
Hence, the issue isn’t the procurement, but proper storage of the food grains procured as reserve.
The Government launched the National Food Security Act (NFSA) in 2013, which was
the most important reform for Food Security in India. The NFSA tried to overcome the issues
associated with the previous PDS by making some important policy changes. This Act provides
subsidized food to 75% of rural population and 50% of Urban Population. The TPDS, the
Integrated Child Development Scheme (ICDS), the Mid Day Meal (MDM) program and the
Indira Gandhi Matritva Yojana(IGMSY) are some of the programs associated with the NFSA.
Despite of the policy changes in NFSA, the problem of improper coverage and leakages
still exists in the Public Distribution System. We now examine the gaps in the polices governing
the PDS.
 The Coverage Problem
Since the beginning, PDS has transformed from a universal program to a targeted
program to distribute subsidized food to India’s poor. Under the TPDS, the beneficiaries were
classified into 3 main categories – 1) Households below the poverty line(BPL), 2) Households
above the poverty line(APL) and 3) Antyodaya Anna Yojana(AAY). However, this targeting
mechanism had very large inclusion and exclusion errors. “Report of the Expert Group to advice
Ministry of Rural Development on the methodology for conducting the Below Poverty Line(BPL)
Census for 11th Five-year plan by Dr. NC Saxena” (Aug 2009) showed that 61% of the eligible
population was excluded from the BPL list and 25% of non-poor households were included in
BPL list. For a highly populous country like India, these percentages translate into a huge
number of people. According to the “11th Five Year Plan, Planning Commission” (2007-12) this
discrepancy occurs due to 2 main reasons- 1) The method used for allocation of food grain by the
Central Government to the State Governments. Though the Center allocates according to official
poverty ratio criterion, food-insecure households may be much higher than the official poverty
ratios. 2) The BPL criterion used to identify the poor households differs from State to State.
Some of the south Indian states do not follow official poverty ratio criterion to issue ration cards,
while in few northern states like Andhra Pradesh, more than 70% households have ration cards.
This shows the regional disparities existing in beneficiary identification in India. Moreover,
according to the “Evaluation Study on Role of Public Distribution System in shaping Household
and Nutritional Security India by NITI Aayog (Dec 2016)” poverty levels have been falling
since 2004-05 to 2011-12 according to the new method suggested by the Tendulkar Committee.
There is over classification of poor households under TPDS in 2011-12 due to misclassification
of the households who aren’t poor but are still identified as poor by the government.

The National Food Security Act(NFSA) was introduced in 2013, with an aim to provide
subsidized food grains to about 2/3rds of India’s population overcoming the previous challenges.
The NFSA modified the beneficiary classification to only 2 categories- 1) AAY and 2) Priority
Households(PHH). According to the “National Food Security Act, 2013” document Priority
Household consists of both- households above and below poverty line covering up to 75% of
rural and 50% urban population. According to “Implementing National Food Security Act in
India: issues and challenges by Ajinkya Tanksale (April 2015)” Two major issues need to be
discussed for identification of beneficiaries to be covered under the scheme. First, the
Government has not set any specific guidelines or scientific method of identification of priority
households. Second, it is not clear that on what basis the rural and urban population is covered
under the NFSA.

According to the “Tendulkar Committee Report for 2011-12”, 22% of India’s population
is below poverty line. Considering this, 67% coverage of NFSA is not only unnecessary but also
highly inefficient. According to “Food Grains Bulletin by Department of Food and Public
Distribution (Aug 2014)” there are 81.34 crore beneficiaries of the National Food Security Act.
However, the number of ration cards registered under the existing TPDS are already 119.5 crore.
This shows that there are several number of fake ration cards which need to weeded out. This
also tells us that there is change in welfare of many of the beneficiaries involved. Out of the
81.34 crore beneficiaries of NFSA, 11.9 crore are poorest of the poor(AAY). The remaining 69.4
crore beneficiaries consists both of BPL and APL members. Due to such massive inclusion, the
entitlement per person drastically drops. The entitlement meant for 22% of the poor population is
now distributed among the 57% entitled under NFSA.

Under such massive coverage, to meet this huge food grain commitment, the government
needs to procure and maintain a large amount of food grains. According to “The National Food
Security Act 2013-Challenges, Buffer Stocking and the Way Forward by Shweta Saini (March
2015)” the government needs 71MMTs of food grains to satisfy the huge demand. This means
that the government buys, distributes and sells a considerable portion of the total food grain
production. This distorts the market mechanism and reduces the business and bargaining power
of the industries in this sector.

The NFSA being the corner stone of the largest Public Distribution System in the world
has a major flaw when it comes to Food Security. “The National Food Security Act, 2013”
document says- The Central Government, or as the case may be the State Government, shall not
be liable for any claim by persons belonging to the Priority households or General households
or other groups entitled under this Act for loss, damage or compensation; whatsoever, arising
out of failure of supply of food grains or meals when such failure of supply is due, either directly
or indirectly, to force majeure conditions, such as war, flood, drought , fire, cyclone, earthquake
or any act of God. This statement simply violates the definition of Food Security as stated by
World Food Program which defines food security as availability and adequate access at all times
to sufficient, safe and nutritious food to maintain a healthy and active life.

The Leakage Problem

The Eleventh Five Year Plan of the Planning Commission demonstrates that leakages in
PDS have multiplied. The leakage of rice increased from 19% under the Universal PDS in 1993-
94 to 40% under the Targeted PDS in 2004-05 (NSS Data). In the event of wheat, it went up
from 41% of every 1993-94 to 73% out of 2004-05. Interestingly, States like Tamil Nadu,
Andhra Pradesh, Kerala and Chhattisgarh that have bigger scope than the TPDS show low
leakages. (National Food Security Act 2013, Page 89).
At an All-India level, 47 % of the procured grain did not reach the planned PDS
recipients in 2011. The proportion offer of aggregate leakages expanded with states where more
noteworthy percent of India's poor lived (five states: Maharashtra, West Bengal, Uttar Pradesh,
Bihar, MP which are home to near 60% of India's poor represented near half of the aggregate
grain leakages in the nation in the year 2011-12: (Himanshu and Sen, 2011). Another
examination by Khera (2011) assessed extent of grain redirected from TPDS from the years
1999-2000 and 2007-08. It characterized redirection as grains off-taken by the states however not
conveyed to the PDS recipients. It found that while just 24% grain leaked in 1999, by 2004-05
the diversion had dramatically increased to 54%. Khera (2011) additionally refers to the
aftereffects of another examination done by IHDS utilizing some degree distinctive
informational collection, yet arriving at a conclusion that in 2004-05, around 50 percent of grains
were wasted from PDS.
'Leakage' is characterized as the distinction between the supply of grains (off-take) that is
provided by the Central government to the States and Union Territories (states/UTs) as detailed
by family units through NSSO (68th round). Thus, an exact thought of this can be made by
evaluating precisely what amount has been the off-take of grains by states/UTs from local offices
on one hand, and how much family units got out from PDS framework according to NSSO
utilization overview on the other.
APL quotas and leakages are found to be significantly related to each other,1% increase
in the share of the APL quota in total offtake implies half a percent increase in the leakage. The
biggest source of continuing of leakages through PDS policies is the APL quota. Comparing
leakages of 2004-05 to 2011-12 after amendments in the 12th five-year plan of the TPDS, there
was 12% reduction in diversification which could be accounted mostly due to the BPL quota.
Since the aggregate offtake from the focal pool is separated between APL, BPL and AAY share
and Drèze and Khera (2015) 68th NSS round to separately estimate leakages for both quotas in
2011/2012 and find that the leakage is 67 percent for the APL quota and 30 percent for the BPL
quota. (Leakage and Corruption in India’s Public Distribution System, Daniel Overbeck,
December 16)
This prompts that the APL quota is more inclined to corruption which can be caused by
various issues. Among the states there is no uniform strategy to distinguish the individuals who
are qualified to hold an APL card which prompts the way that in West Bengal 30 percent of the
APL populace were dishonestly barred from the program (Bhattacharyya and Runa, 2008). As
the APL share fills in as a passing designation just for excess amount of food grains
(Government of India, 2001a) the share shifted a considerable measure from year to year thus did
the privileges for APL families (Drèze and Khera, 2015). Thus there are no particular privileges
for APL families, and no unmistakable allotment standards (Drèze and Khera, 2011). This
absence of clear qualifications is a conceivable motivation behind why the PDS works better for
the BPL family units than the APL families (Khera, 2011a). West Bengal for instance individuals
in APL family units rarely purchase any grains from ration shops.
 Conclusion
The Public Distribution System in India is the largest Poverty Elevation program in the
world. Since its inception in 1960s, it was successful in providing Food Security to the people of
India. Though there have been many improvements in procurement, storage and distribution of
food grains, it hasn’t been successful in correctly identifying the target population. There should
be proper guidelines in the policy document stating the identification procedure for the
beneficiaries of the system. This will ensure that the food grains reach the needy and not to the
non-poor, saving the governments’ subsidy expenditure. The problem of leakage still exists due
to improper storage and corruption. There should be proper guidelines mentioning the
specifications of the warehouses meant for food grain storage.
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