The Government has adopted a comprehensive food policy, which is so defined as to affect, the different aspects of the food situation - production, consumption and distribution.

Significant Achievements of The Food Policy

• Notable acceleration in output growth after independence and self-sufficiency in foodgrains production, and the consequent increase in physical access to food.
• Increase in economic access to food through administered price mechanism and public distribution system
• Linking poverty - alleviation programs with distribution of food
• Effective tackling of the problem of drought through various initiatives.
• Reduction in inter-regional and inter-seasonal prices of wheat and rice through centralized procurement and distribution; and
• Insulation of the domestic economy from very large price fluctuations in the world market by control on marketing.

Public Distribution System (PDS)

The origin of the Public Distribution System (PDS) in India could be traced back to the early forties. Soon after the outbreak of World War-II there was a considerable and rapid rise in the prices of foodgrains followed by the disaster of the Bengal Famine, 1943. Between 1939 and 1943, a number of Price Control Conferences were held to evolve measures to control the rising prices of essential commodities. The number of suggestions were made in these Conference, however, no serious attempt was made to evolve an organizational set-up and implement these recommendations, However, the Foodgrains Policy Committee^[1], 1943 suggested the Procurement and distribution (including rationing) of foodgrains by the government, Making price controls statutory, Evolving a suitable administrative arrangement defining the responsibilities of the Centre and the Provinces,  Setting up a Central Food Reserve, Embargo on the inter-province movement of grains by private trade, Suitable incentive prices for farmers to induce them to produce more.

These above defined points are the essential for the management of a food-shortage economy and they had held the ground in India till the mid-seventies. However, till the mid-sixties there had been no serious attempt to institutionalize the system of food management. Measures like stabilization of market prices through statutory controls, statutory rationing in cities and monopoly procurement, etc., were adopted only when the food situation in the country so warranted. But, they were either abandoned or made less effective as soon as the food supply position eased. In fact, a policy of decontrol was adopted in the early fifties when there were three consecutive years of bumper crop. It was only in the mid-sixties that the Government of India realised in the context of the disastrous drought and crop failure of 1965-66 and 1966-67, that India’s food problem was deep-rooted and required organised and systematic government intervention.

The following broad objectives were sought to be achieved through government intervention in foodgrains:

• To minimise temporal fluctuations in aggregate consumption, arising out of year-to-year variation in domestic production of foodgrains; ( Through maintenance of buffer stocks)
• To minimise spatial variations in consumption, arising out of variations in local availability (Fair price shops)
• To protect the poor from being affected by price and supply instabilities. (Administered price mechanism)

In order to meet these objectives, the Government has evolved an elaborate system of food supply management.

To run this system, Government resorts to levy purchases of a part of the marketable surplus with traders / millers and producers at procurement prices.  It is fixed somewhere between the minimum support price and the open market price.

The grain, thus procured, is used for distribution to the consumers through a network of ration/fair price shops and/or for building up buffer stocks. In addition to foodgrains, PDS is also being used for the distribution of edible oils, sugar, kerosene and cloth. PDS covers targeted beneficiaries only through close to 5 lakh fair price shops all over India.

Administrative set-up

PDS is operated under the joint responsibility of the Central and the State Governments.

The Central government, through FCI has following responsibilities:

• Procurement, storage, transportation of food grains
• Bulk allocation of food grains to the State Governments.

The state government's responsibility is operational. They are as follows:

• Identification of families below the poverty line
• Issue of Ration Cards
• Supervision of the functioning of FPS.

The PDS commodities viz. wheat, rice, sugar and kerosene, are allocated by the Central Government to the States/UTs for distribution. Additional items of mass consumption like Cloth, pulses, salt and tea, etc. are distributed by the state governments. Today, with the network of around 5 Lakh fair price shops PDS is virtually world’s largest system of its kind.

Food Corporation OfIndia

Food Corporation of India (FCI): The main agency providing foodgrains to the PDS is the Food Corporation of India (FCI) set up in 1965. The primary duty of FCI is to undertake the purchase, storage, movement, transport, distribution and sale of foodgrains and other foodstuffs. It ensures on the one hand that the farmers get remunerative prices for their produce, and on the other hand, the consumers get foodgrains from the central pool at uniform prices (known as issue prices) fixed by the Govt. of India. Presently these tasks are performed by number of state agencies.  The FCI has also been entered with the responsibility of maintaining buffer stocks of foodgrains on behalf of the Government. Thus the PDS in India grew as a part of the overall system of food management.

Problems

• Identification of BPS  many  undeserving inclusions and exclusions.
• Some states such as Bihar and UP were virtually out of the PDS network,
• Consumers get inferior food grains in ration shops. Because, the dealers replace good supplies received from the F.C.I. with inferior stock,
• Issue of the bogus cards in large numbers which are used to procure the grains from the PDS and sell them in open market,
• The dealers have little profit so indulge in malpractices.
• Regional allocation and coverage of FPS are unsatisfactory and the core objective of price stabilization of essential commodities has not met.
• Poor supervision of FPS and lack of accountability have spurred a number of middlemen who consume a good proportion of the stock meant for the poor[2].
• The stock assigned to a single family cannot be bought in installments. This is a decisive barrier to the efficient functioning and overall success of PDS in India.
• Many BPL families are not able to acquire ration cards either because they are seasonal migrant workers or because they live in unauthorized colonies.

Suggestions for improvement

To improve the current system of the PDS, the following suggestions are furnished for:

1.   Vigilance squad should be strengthened to detect corruption

2.   Personnel-in-charge of the department; should be chosen locally.

4.   Frequent checks & raids should be conducted to eliminate bogus and duplicate cards.

5.   The Civil supplies Corporation should open more Fair Price shops in rural areas.

6.   The Fair Price dealers seldom display rate chart and quantity available in the block-boards in front of the shop. This should be enforced.

7. End to end computerization of whole chain of procurement and distribution.

8.   Social Audit to establish accountability.

Buffer Stocks

The Central Govt. maintains food stock commensurate to the requirements of:

(i)  The prescribed minimum buffer stock for food security,

(ii) Operational stock for monthly releases of food-grains for supply through the PDS - each state is allocated a quota in the light of its past demand, off take trends, relative needs and other related factors, and

(iii) Market intervention stock for release in the open market to augment supply and help moderate the open market prices.)

Buffer stocks no doubt are important and to an extent indispensable for maintaining food security in the country, still some issues plague the buffer stocks.

It is contended that buffer stocks are maintained substantially higher than the operational requirements.

The cost of storage, maintenance and interest for carrying these stocks is very high and takes away a substantial part of the food subsidy.

The wastage of foodgrains owing to lack of adequate storage facilities. However, in the light of the changes that have taken place in recent years in the cost of holding stocks and certain other parameters, there is a strong case for substantially reducing the average level of buffer stocks held by the Govt., procurement, distribution and holding costs have risen sharply partly because of a rise in interest costs and partly because of the dis-economics associated with the large scale of public operations in foodgrains. As procurement prices become more attractive and more grain is offered to public agencies during the immediate post-harvest period, the peak marketing period is becoming shorter and market arrivals are becoming increasingly concentrated. As a result, the difference between the issue price of grain and the all-in-cost to public distribution agencies has widened to a point where the actual benefit to the consumer from food subsidy is less than half the fiscal cost of providing this subsidy. The higher the level of average buffer stocks, the lower is the benefit per rupee of subsidy to the consumer.

Recent reforms

PDS, till 1992, was a general scheme for all consumers without any specific target, Revamped Public Distribution System (RPDS) was launched in 1992 in 1775 blocks throughout the country.  The Targeted Public Distribution System (TPDS) was introduced with effect from 1997.

The Revamped Public Distribution System (RPDS) was launched with a view to strengthen and streamline the PDS as well as to improve its reach in the far-flung, hilly, remote and inaccessible areas where a substantial section of the poor live.

In 1997, the Government of India launched the Targeted Public Distribution System (TPDS) with focus on the poor. The identi?cation of the poor under the scheme is done by the States as per State-wise poverty estimates of the Planning Commission. The allocation of food grains to the States/UTs was made on the basis of average consumption in the past i.e. average annual off take of food grains under the PDS during the past ten years at the time of introduction of TPDS.

Over and above the TPDS allocation, additional allocation to States was also given. The transitory allocation was intended for continuation of benefit of subsidized food grains to the population Above the Poverty Line (APL)

Antyodaya Anna Yojana (AAY): AAY is a step in the direction of making TPDS aim at  reducing hunger among the poorest segments of the BPL population. “Antyodaya Anna Yojana” (AAY) was launched in 2000 for one crore poorest of the poor families providing them food grains at a highly subsidized rate of Rs.2/- per kg for wheat grid Rs.3/- per kg for rice. They are being provided 35 kg of food grains (25 kg wheat & 10 kg rice) a month at Rs.2/- per kg, or rice at Rs.3/0 per kg. The State/UTs are required to bear the distribution cost, including margin to dealers and retailers as well as the transportation cost.

Shanta kumar committee on fci restructuring, pds, buffer stocks and food security reforms

Food Security is based on four pillars namely- Availability, Affordability, Nutrition & Stability

In India these four objectives are achieved by various agencies and means.

Availability is ensured by measures like MSP, fertilizer subsidy, subsidised electricity and water. These measures encourage farmers to produce more crops thereby ensuring availability.

Affordability is ensured by PDS, NFSA, AntoyadyaYojana etc.

Nutrition is ensured by schemes like Mid-day meal, Iron-folic acid supplements, ICDS etc.

The task of stability lies within the ambit of FCI which ensures it by three duties/objectives-

• Procurement
• Storage
• Distribution

Stability here refers to the stability in prices of essential grains over time despite fluctuations in forces of demand and supply.

Certain disturbing Numbers and facts tell us that there is urgent need to undertake restructuring of the existing system of Food Policy.

• Only 6% of farmers avail the MSP.  Most of these are big farmers of North West India. The rest of the farmers are either unaware of the system or are too small to produce any marketable surplus.
• As per NSSO report and Planning Commission estimates around 60% of PDS grain does not reach intended beneficiaries and is instead siphoned off for black market sale.
• FCI has storage capacity for only 40% of its procured grains thereby leading to huge amounts of wastage.
• The cost of implementing the NFSA @1.15 lakh crore is fiscally unsustainable.
• FCI procures way higher than that needed for buffer stocks thereby leading to shortage of grains in open market.
• Even at a persistent food inflation of 8-12% during past few years FCI did not go for open market sales of grains.
• The numbers show that FCI has not performed adequately in terms of its objectives and hence the Shanta Kumar committee recommends certain measures at its restructuring so as to better achieve the targets of our Food Policy/ Security.

On procurement related issues

• The FCI should hand over all procurement operations of wheat, paddy, and rice to states that have gained sufficient experience in this regard and have created reasonable infrastructure for procurement. The FCI will accept only the surplus (after deducting the needs of the states under the NFSA) from these state governments (not millers) to be moved to deficit states.
•  The FCI should move on helping those states where farmers suffer from distress sales at prices much below MSP, and which are dominated by small holdings.
• Centre should make it clear to states that in case of any bonus being given by them on top of MSP, it will not accept grains under the central pool beyond the quantity needed by the state for its own PDS and OWS.
•  The statutory levies including commissions need to be brought down uniformly to 3 per cent, or at most 4 per cent of MSP, and this should be included in the MSP itself (states losing revenue due to this rationalization of levies can be compensated through a diversification package for the next three-five years);
• The Government of India must provide better price support operations for pulses and oilseeds and dovetail their MSP policy with trade policy so that their landed costs are not below their MSP.
•  Cash transfers in PDS should be gradually introduced, starting with large cities with more than 1 million population; extending it to grain surplus states; and then giving deficit states for the option of cash or physical grain distribution.

On PDS- and NFSA-related issues

• Given that leakages in the PDS range from 40 to 60 per cent, the GoI should defer implementation of the 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.
• Coverage of population should be brought down to around 40 percent.
• BPL families and some even above that they be given 7kg/person.
•  On central issue prices, while Antyodya households can be given grains at ` 3/2/1/kg for the time being, but pricing for priority households must be linked to MSP

On stocking and movement related issues

• FCI should outsource its stocking operations to various agencies.
•  Covered and plinth (CAP) storage should be gradually phased out with no grain stocks remaining in CAP for more than 3 months.
• Silo bag technology and conventional storages wherever possible should replace CAP.
• Grains to be transported in containers instead of gunny bags to minimise wastages and leakages.
• Use of Inland waterways and coastal shipping to minimise transportation cause.
• On Buffer Stocking Operations and Liquidation Policy
• DFPD/FCI have to work in tandem to liquidate stocks in OMSS or in export markets, whenever stocks go beyond the buffer stock norms. A transparent liquidation policy is the need of hour, which should automatically kick-in when FCI is faced with surplus stocks than buffer norms.
• Greater flexibility to FCI with business orientation to operate in OMSS and export markets is needed.
• If need be there is no harm in resorting to imports.

On direct subsidy to farmers

• Farmers be given direct cash subsidy (of about Rs 7000/ha) and fertilizer sector can then be deregulated. This was initiated via  PM-KISAN in 2019 whereby Rs. 6000 is given to every farmer.

On end to end computerization

• The committee recommends total end-to-end computerization of the entire food management system, starting from procurement from farmers, to stocking, movement, and finally distribution through the TPDS.

These measures if implemented could check leakages, wastages, unintended subsidy burdens and ensure efficiency and fiscal prudence in the food policy matters of India.

National Food Security Mission (NFSM)

The food security system in India is managed by intertwined organizational framework between Centre and States that involves centralized and decentralized procurement of food grains through price support operations, allocation and distribution of food grains at reasonable prices to consumers/beneficiaries through TPDS (Targeted Public Distribution System) and the maintenance of buffer stocks for price stabilization. There are multiple objectives to be achieved through the system of procurement operations as implemented in India in terms of providing fair price to farmers, making food grains affordable to low income consumers, provisioning for contingencies/shortages by maintaining buffer stocks and to reduce food price volatility.

The procurement at MSP is open-ended, while distribution is governed by the scale of allocation and its offtake by the beneficiaries. The offtake of food grains is primarily under the National Food Security Act, 2013 (NFSA) and other welfare schemes of the Government of India. During the financial Year 2017-18 (upto 27.11.2017), Rs.2785 crore has been released to State Governments as Central assistance to meet the expenditure incurred on intra-State movement of foodgrains and fair price shop dealers’ margins.

With a view to make receipt of foodgrains under TPDS a legal right, Government of India has enacted NFSA which came into force w.e.f. 5th July, 2013. The Act provides for coverage of upto 75 per cent of the rural population and upto 50 per cent of the urban population for receiving subsidized food grains under Targeted Public Distribution System(TPDS), thus covering about two-third of the population. The eligible persons identified by the States/UTs are entitled to receive 5 kg of foodgrains per person per month at subsidized prices of Rs.3/2/1 per kg for rice/wheat/nutri-grains (coarse grains). The existing Antyodaya Anna Yojana (AAY) households, which constitute the poorest of the poor, continue to receive 35 kg of foodgrains per household per month. As on 1st November, 2016 NFSA has been implemented in all the 36 States/UTs and they are receiving monthly allocation of foodgrains under NFSA. During the year 2017-18, Government of India has so far allocated 606.43 lakh tons of foodgrains to States/UTs/Other Welfare Scheme (OWS) etc.

Foodgrains allocation under NFSA/Non NFSA (2017-18)

The Economic Cost of foodgrains consists of three components, namely, pooled cost of grains, procurement incidentals and the cost of distribution. Pooled cost of food grains is the weighted MSP of the stock of foodgrains available with FCI at the time of calculating the economic cost. The economic cost for both wheat and rice witnessed significant increase during the last few years due to increase in MSPs and proportionate increase in the incidentals.

In addition to maintaining buffer stocks and for making a provision for meeting the requirement of the Targeted Public Distribution System (TPDS) and Other Welfare Schemes (OWS), FCI on the instructions from the Government sells excess stocks out of Central Pool through Open Market Sale Scheme (Domestic) [OMSS (D)] in the open market from time to time at predetermined prices to achieve the following objectives:-

•To enhance the supply of food grains during the lean season and deficit regions

•To moderate the open market prices

•To offload the excess stocks

•To reduce the carrying cost of food grains