Functioning of Public Distribution System 

• Public Distribution System (PDS) is a programme managed by the government with the objective of ensuring access to food for all. The PDS does not provide the entire requirement of foodgrains to a household but is only supplemental. The system operates through a three-stage process.
• In the first stage, the Food Corporation of India procures foodgrains from farmers at a procurement price. The procurement exercise is carried out with the purpose of providing farmers with a minimum support price and protecting them against unexpected price fluctuations in the market. The procured foodgrains are also used for the maintenance of buffer stocks in times of need and to stabilize the open market prices.
• In the second stage, the procured foodgrains are allotted to the various states according to the number of poor in these states and the level of production of foodgrains in the state. This is used as a balance of availability of food between surplus and deficit states.
• In the third stage, the foodgrains are distributed at subsidized prices to the population in the various states through a chain of fair-price shops under PDS. The foodgrains are also used for distribution through other public programmes like food-for-work and mid-day meal scheme for children in schools.
• Though PDS started as a universal food distribution programme, it faced the problems of extensive leakages and inability to reach the really vulnerable groups. In 1997, the scheme was restructured to supply the foodgrains at differential prices to households Below the Poverty Line (BPL) and those Above the Poverty Line (APL). This has been known as the Targeted Public Distribution System (TPDS). But the failure of the system has been grossly highlighted whenever starvation deaths are reported at the same time when FCI warehouses are overflowing with surplus foodgrains.
• The system is found to be so corrupt and inefficient that some studies have estimated that out of every rupee spent, only 20 paise reaches the poor. In many states the surveys to identify the poor are not carried out at times, while in others several families don’t even receive identification cards even after surveys. Instances of massive manipulation and harassment by bureaucrats are often reported. It is in this regard that the UIDAI is expected to play a constructive role.
• The failures of the PDS system are symptomatic of what ails the government anti-poverty programmes the most. The major drawback has been centralized planning and lack of local level participation leading to mismatched priorities and bureaucratic control characterized by lack of transparency and accountability

ADDRESSING THE PITFALLS IN PDS

In the context of an inefficient and leaky PDS it needs to be emphasized that significant gains in efficiency can be achieved by replacing the public distribution system by cash transfers. The argument against such transfers, that the beneficiaries might spend the money on something other than grains, seems spurious. This is because such an outcome is also readily achievable under in-kind transfers by selling the grain in the open market. The advantage of cash transfers is that they would greatly minimize the leakage along the distribution chain and also eliminate the huge wastage that characterizes the PDS. It is ironic that many activists insist on in-kind transfers while simultaneously advocating the rural employment guarantee scheme, which, after all, pays the participants in cash.

Once the issues of transfer of purchasing power and the right basket of consumption are separated, the focus of policy can shift to ensuring that consumers make the right consumption choices. This would require two sets of measures. One set would inform and then ‘nudge’ the public in several ways towards a more nourishing diet. The second set, which is more likely to produce results, would aim at getting wholesalers and retailers to fortify various foods with necessary nutrients. The Food Safety and Standards Authority of India can play an important role in the implementation of this set of measures.

Of course, even though demand can be shifted towards dairy products, fruits, vegetables, fish and meat, policy must also be directed to ensure increased availability of these items. The availability of products needed to promote good nutrition depends on both domestic production and imports. It is surprising, however, that discussions on food security, which focus on enhancing the availability of various food items over time, rarely mention imports. This omission has often resulted in India failing to fully exploit the benefits of imports. For example, in the past few years, the key component of ‘food inflation’ has been milk. Clearly, easing the imports through a reduced tariff on powdered milk could have greatly alleviated the shortage of this critical item. But the government did not take advantage of this channel.

As for domestic production, there is, in fact, a critical need for raising productivity on the farm as well as along the supply chain, for nearly every agricultural commodity. Per-hectare yields in India are lower than in most of the comparable countries in most crops. Likewise, vast volumes of fruits and vegetables perish in transit as the produce makes its way from the farm to the final consumer.

A key element in improving productivity is to reform the laws with respect to sales and rentals of agricultural land. Over the years, land-holdings have shrunk in size, with the result that today more than 80 per cent of the land-holdings are less than two hectares and more than 60 per cent holdings less than one hectare. Only 6.5 per cent of the holdings are four hectares or larger. Ease of sales and rentals will help in the consolidation of holdings. Flexible rental laws, that allow the owner and the tiller to negotiate and sign formal agreements, will provide better security to the tiller and provide incentive for making productivity enhancing investments in land.

Improvements in the supply chain also require the development of contract farming, infrastructure and organized retail. Contract farming can establish a direct link between the farmer and the processor of the produce, thereby cutting all intermediaries and minimizing waste. It can also ensure a good price to the farmer. Infrastructure development includes the provision of uninterrupted supply of electricity at reasonable prices and road and railway transport. The former allows the development of cold storage while the latter rapid movement of produce from the producer to the consumer. Moreover, organized retail has the capacity to develop efficient supply chains.

Finally, agricultural productivity increases today depend additionally on a new Green Revolution. The old Green Revolution was based on the new seeds invented under the leadership of Dr Norman Borlaug and spread in India under the scientific leadership of Dr Swaminathan. Today, they depend on the adoption and absorption of the GM (genetically modified) and BT (Bacillus Thuringiensis or natural insecticide) seeds and agricultural crops like cotton and brinjal. Some NGOs have objected to these as Frankenstein foods, though scientific evidence does not support such fears. We cannot afford to forego the new Second Green Revolution in this way. Else, we will have also replaced the highly improbable Frankenstein by the certain Grim Reaper as scarcity overtakes plenitude in the production of food grains and crops!