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By

Ravi Shankar
Summer Intern,
VGSOM, IIT Kharagpur

Under Guidance of

Mr. Gaurav Desai


Sr. Manager
Future Supply Chain Solutions Limited
 Evolution of Public Distribution System in India

 Present Scenario of public distribution system – A detailed


study

 Evaluation of Public Distribution System

 Suggestions / Possible solutions

 Areas yet to be covered


Understanding Public Distribution System

 Rationing was first introduced in Bombay in 1939 by British


Govt. so as to ensure equitable food grain to urban consumer
in face of rice prices.

 The concept (PDS) was brought up in the year 1942 during


second world war due to shortage of food grains.

 Basic objective was price stabilization.

 Food grain policy committee (1943) introduced rationing


system exclusively for urban consumers.
 Till late 1960s, govt. focus was on cheap procurement of food.
◦ Imposition of levies, regulation on interstate movement (surplus to deficit), restriction
on exports etc.

 FCI was established in 1965 as an autonomous body working on


purchase, storage, transportation, distribution and sale of food grains.

 In 1970s, focus shifted to support to farm-gate prices, stabilization and


subsidy for lower income group.

 After undergoing several changes under five year plans, PDS role
became crucial when the entire population of country was brought
under it in the seventh five year plan.
◦ In 1984, GoI created department of food and department of civil supplies, later being
in-charge of PDS headed by minister of food and civil supplies.
 By 1984, there were 3.2 lakh fair price shops all over India. Wheat,
rice, sugar, kerosene, edible oil and soft coke were supplied as
essential commodities.

 Distribution of these commodities was made possible by multi


faceted coordination of different government agencies such as FCI
for food grains, FCI / Civil Supplies corporation for sugar, edible oil
by State trading corporation and soft coke by Coal India Limited.

 However, studies show that major weakness is in operational


inadequacy in irregular supply to FPS and poor quality leading to
non drawl.

 PDS, till 1992, was a general entitlement scheme for all consumers
without any specific targets.
 Essential supply programme gave way to Revamped public
distribution system (RPDS) in1992, under which 1775 blocks
were identified as economically and socially backward.

 It was launched so as to improve reach of PDS to far- flung, hilly,


remote and inaccessible areas where substantial section of poor
live.

 The scheme involved development of infrastructure such as


additional fair price shops & storage capacity and facility of door
delivery for FPS.

 Despite several efforts, PDS was widely criticized for its failure to
serve population BPL, its urban bias, negligible coverage in states
with highest concentration of poor people, lack of transport and
accountable arrangements for delivery.
 Realizing this, government of India introduced “Targeted
Public Distribution System in India” in the year 1997.

 The scheme was introduced so as to identify population


under below poverty line, distribute food grains to them at
special subsidized prices.

 Under TPDS, each poor family was initially entitled to 10 kg of


food grain which later on increased to 25 kg and is now 35
kg, at special subsidized prices.
 From 1997 onwards, TPDS distributes grains on the basis of
two criteria, 1. Below poverty line and 2. Above poverty line.

 Additionally, Food grains and kerosene are distributed to


consumers which are targeted under various schemes such
as: Antyodaya Ann Yojna, Mid day meal scheme, wheat based nutrition programme,
Annapurna Scheme, Sampurna gramina rojgar yojna etc.

 Today, TPDS covers more than 8 crores of poor families


across India for distribution of food grains and kerosene.

 However, its effectiveness as well efficiency in identification


& targeting the poor and distribution of entitled quantities of
food grains, are still under question.
 Since 1997, TPDS has been serving socio-economically
backward people of the country with food grains and kerosene
at subsidized prices.

 PDS is operated under joint responsibility of central and


state government. Central government through FCI, has
assumed the responsibility of procurement, storage and bulk
allocation of food grains to states govt.

 Operational responsibility such as allocation within state,


identification of poor under below poverty line and supervision
of fair price shops rests with the state government.

 Some states distribute additional items such as cloth, exercise


books, pulses, salts, baby food, tea etc.
Procurement
 Food grains are procured at minimum support price (MSP),
by the govt.

 Decentralized procurement scheme.

 Central government meet the entire expenditure incurred in


the process by the state government as per the approved
costing.

 Total procurement of rice including paddy during kharif


marketing season (KMS) in 2008-09 was 336.85 lakh tonnes.
Andhra Pradesh, Chattisgarh, Orissa, Punjab and Uttar
Pradesh together contribute about 80% to this.
 A total of 226.89 lakh tonnes of wheat was procured in the
rabi marketing season (RMS) during 2008-09. Haryana, M.P.,
Punjab and U.P. together contribute about 90% to this.

 Figures show that more than 80% of total wheat and rice
procurement is done by state agencies (SWC, CSC, STC etc.).

 The average buffer stock of food grains with FCI was 10.66
mT in 2006-07 and utilization of storage capacity was only
54% as on March 2007.

 The carrying cost of buffer stock per quintal was Rs. 407 /-, the
procurement cost for wheat and rice ranges between Rs. 180 –
200 /- and the distribution cost is about Rs. 280 /- per quintal of
food grain.
 The stock of rice and wheat in the Central Pool was sufficient to meet
the requirement under Targeted Public Distribution System (TPDS) and
Welfare Schemes during 2009-10 at existing level of allocations.
Distribution
 Food grains as per allocation to state government are further
distributed to district and block level. From there food grains are
delivered to fair price shops as per their demands.

 There are around 5 lakhs FPSs across India. Food grains are either
door delivered to or are procured by, FPS and are finally sold to
targeted end consumers at subsidized prices as per entitlements.

 For people under APL, common grade rice is sold at a central issue
price of Rs. 790 /- per quintal whereas grade A rice is sold at Rs.
895 /- per quintal and wheat is sold at Rs. 610 /- per quintal.

 For people under BPL category, both common grade and grade A rice
is sold at a central issue price of Rs. 565 /- per quintal and wheat is
sold at Rs. 415 /- per quintal.
 In addition to distribution of food grain to population under
BPL and APL, allocation is made to population identified under
various schemes such as:

◦ Antyodaya Ann Yojna


◦ Mid day meal scheme
◦ Annapurna Scheme
◦ Wheat based nutrition programme
◦ Food grains to adolescent girls and lactating mothers nutrition programme
◦ SC/ST/OBC Hostels& welfare institutions
◦ Sampurna gramin ann yojna
◦ National food for work programme
◦ Village grain bank scheme
◦ Emergency feeding programme
◦ World food programme
◦ Defense and
◦ Paramilitary forces.
Source- Annual Report 2009-10, MoCAF&PD
Infrastructure for PDS

 FCI has a total storage capacity of 252 lakh tonnes which


include hired capacity from CWC, SWC, State govt. and
private parties also.

 Capacity utilization of FCI godowns is poorer than others


which indicates under-utilization of infrastructure.
Allocation versus Off-take

 The allocation of food grains to different states is done on


the basis of average consumption of population respective
state in the past few years.

 The off-take of food grains has always been lower than the
corresponding allocation for most of the states in the
country. (Refer figures in fore-coming slides)
Issues that reflect performance of public distribution
system

 Quality of BPL identification survey

 Circulation of BPL, APL ration cards vis a vis estimation

 Efficacy in delivery mechanism in improving access of poor to


PDS.

 Off-take by poor and its determinants

 Viability of fair prices shops & its implications

 Extent of leakages and diversion of food grains


Quality of BPL Identification Survey

 The responsibility of identification of BPL population lies under the


purview of state government.

 Matter of Subject: Administrative people (Gram Panchayat) take


up the identification of BPL families as per general guidelines of
govt. However, choice of family is subject to their own discretion.

 There exist large errors of exclusion (those who are actually poor
but not issued ration cards) and errors of inclusion (those who
are not poor but are issued ration cards).

 Table on the next slide shows state-wise figures of errors of


exclusion and errors of inclusion.


 It may be noticed that except a few states, majority have high errors
of exclusion and errors of inclusion.

 Andhra Pradesh, Kerala & Himachal Pradesh have very low


errors of exclusion but high errors of inclusion whereas Madhya
Pradesh, Punjab and Rajasthan are low in both types of errors.

 It can be said that BPL families have been targeted better in south
India as compared to rest of India.

 It has been observed that some states have issued more BPL
cards than the number of households while others have problems
of identification.
Delivery Mechanism

 The administrative structures built up by states for delivery of food grains are
similar.

 Most large states have 3-4 tier structure while northeastern states have 2 tier
structure.

 Food grains are allotted to states are further sub allocated to district for
offtake.

 The actual lifting of food grains from FCI godowns is done by wholesale
dealers of food grains who operate at district or sub-district level.

 Food grains from FCI godowns are transported to wholesaler’s godowns and
from there to designated retail outlet.
Transportati
on by SCSC Transportatio
own/hired n to /by FPS
vehicles using hired
vehicles

FCI Distribu FPS


Godown tion
Points
Delivery Mechanism Across States
State Administra Structure Dealer for Delivery Transport
tive Setup lifting FG to FPS by ation
from FCI charges
godowns
Andhra 3 Tier (e - FCI - CSC - APCSC - own FPS - hired Borne by
Pradesh governed) MLS Points - vehicles vehicles govt,
FPS unloading
charges
-FPS
Assam, 2 Tier - No FCI - LAMPS Arunachal -  
Arunachal, CSC Wholesale door
Meghalaya depots - FPS delivery,
Assam &
Meghalya -
No door
delivery
Bihar 2 Tier - BSFCFCI - SFC SFC - hired FPS FPS
godowns - FPS private
vehicles
Gujarat 3 Tier FCI - Distt GSCSC FPS FPS
depots -
Delivery Mechanism Across States
State Administra Structure Dealer for Delivery Transport
tive Setup lifting FG to FPS by ation
from FCI charges
godowns
Punjab 4 Tier FCI - CSC - PSCSC till FPS FPS
Distt - Block - subcenter
Sub centre - level
FPS
Kerosene is delivered to FPS by wholesale dealers at different
prices at different places as transportation charges vary.
Haryana 2 Tier FCI - Distt DoFS - till FPS FPS
depots - FPS distt depots
Himachal 3 Tier FCI - Distt - CSC till FPS borne by
Pradesh Wholesale wholesale govt
godowns - FPS godowns
Kerosene is delivered to FPS by wholesale dealers. Transportation
charges borne by FPS, passed on to end consumers

Karnataka 3 Tier FCI - Distt - wholesale door Govt - rural


Block - FPS dealers delivery to FPS and
rural FPS reimbursed
Delivery Mechanism Across States
State Administrati Structure Dealer for Delivery to Transportat
ve Setup lifting FG FPS by ion charges
from FCI
godowns
Kerala 3 Tier FCI - Distt - wholesale FPS FPS
Block - FPS dealers, 80%
private
Maharashtra 4 Tier - No FCI - Divisional - private door delivery Either Govt /
CSC Distt - Tehsil - contractors Reimbursed
FPS
Orissa 3 Tier FCI - Distt - DoF&CW FPS FPS
Block - FPS
Rajasthan 3 Tier FCI -Distt - Tehsilwholesale wholesale Govt.
- FPS dealers dealers
Uttar Pradesh 3 Tier FCI - Distt - FPS PDS Agency    
Tamil Nadu   FCI - TNCSC - Unique because - 1. FPSs are run only by
lead society - co-op and govt sector, 2. cash credit
link society facility to lead society (FPS), OPTION CARD
(banks) - FPS SYSTEM
West Bengal 3 Tier FCI - CSC wholesale wholesale Reimbursed
godowns- dearers dealers by govt
Distribution
points - FPS
Financial Viability of FPSs

 It may be seen that in all north eastern states and Bihar &
U.P. , most of FPSs are owned by private individuals.

 Whereas in Haryana, Himachal, Madhya Pradesh, Tamil


Nadu, majority of FPSs are owned by government and
cooperatives.

 Margin for FPSs with door delivery varies from 8-45 paise
per kg of rice and 7-30 paise per kg of wheat.

 Those without door delivery varies from 10-140 paise per


kg of rice and 10- 30 paise per kg of wheat.
 Transportation, loading and unloading together constitute
more than 20% of total operating cost of FPS.

 It has been found that subsidizing these costs will turn FPSs
financially viable.

 About 23% of FPSs are financially viable ( i.e. earning more


than 12% return on working capital).
Off-take Determinants

 Difference in market price and PDS price: On an average


market prices were 150% of PDS price.

 Presence of foreign particles in food grains : 48% of BPL


cardholders across country reported presence of substantial
amount of foreign particles.

 No. of food grains installments offered: 75% of BPL


cardholders preferred to lift PDS grains in installments.

 Preference for PDS grains vis. a vis. local grains: About 75%
of BPL cardholders said PDS gains are different from local variety
while more than 70% of BPL cardholders reported strong
preference of local variety of food grains.
 Wealth status of cardholders: 36.5% of BPL cardholders
possessed any one or more assets (viz. tractor, traveller,
fridge, washing machine etc.)

 Household sizes of cardholders: The average size of


BPL cardholders family across states varies from 4-6
members. Overall average was found to be 5.
Diversion & Leakage of PDS Food Grains

 Total leakage - > 36%, leakage through ghost cards – 17% &
leakage at FPS – 19%.

 Diversion to APL – about 22%. ( AP, Karnataka and TN contributed


70% of this).

 Bihar and Punjab rank topmost with more than 75% PDS food
grains leaking out.

 A.P., Kerala, Tamil Nadu, Orissa and W.B. are state with least
quantity of food grains leaking out.
 It may be said that for making one kg of food grain
available to poor government release 2.4 kg of food grains.

 It has been noticed that subsidy is high in state where off-


take is low and leakage of food grains is high, vice versa is
also true.

 This implies excess expenditure of government, diversion


of food grain in open market, loss of welfare and defeat of
the very purpose of government.
States Running PDS Better

 Andhra Pradesh Tamil Nadu are two states who have taken
initiatives to make PDS e-governed.

 Andhra Pradesh now has electronic based solution to


TPDS wherein movement of food grains from FCI godowns
till FPS, sale of food grains at FPSs (through bar-coded
ration cards) and payment to dealers at different levels are
monitored online.

 The information on lifting, receipt and issue of food grains


at different levels is transferred to concerned people and to
central hub using hand-held device using SMS.
 Tamil Nadu and Karnataka also have vehicle tracking
system wherein the details such as vehicle details,
quantity, destination, date of delivery etc. can be tracked
online.

 Though Himachal Pradesh is not having any electronic PDS


monitoring system, the leakage, diversion and targeting
errors are among the lowest across the country.
 Excess and incorrect identification of BPL and APL households.

 Non issue of ration cards.

 Multiplicity of schemes.

 Multiplicity of prices – adds complexity, propensity to diversion.

 Expensive operation.

 Diversion of food grains.

 Leakages.
 Non availability of food grains at FPSs.

 Poor quality of food grains.

 Irregular opening of FPSs.

 Lack of training of FPS dealers.

 Lack of information.
 Implementation of Nine point Action Plan – Review of BPL, AAY,
leakage free distribution, involvement of PRIs, door delivery to FPS,
Transparency etc.

 Concurrent Evaluation of TPDS

 Adoption of Revised citizen’s charter.

 New technologies for tracking of vehicles

 Display of Identities on vehicles

 Monthly certifications by vigilance committees /


Panchayats.
 Allotment of FPS to institutions and Groups.

 Computerization of TPDS. (AP, Assam, Delhi, Chhattisgarh)

 Introduction of Bar coded coupons with ration cards.

 Smart card based TPDS (Haryana & Chandigarh).


 State government can create high quality beneficiary database using
census 2010 data.

 Enrollment of families into UID.

 UIDAI (Unique identity authority of India) issue UID based on digitized


database.

 This UID of each family member will be printed on ration card.

 Point of sale system, where system has to positively identify beneficiary


before an issue is made.

 PoS can generate receipt and automate book-keeping.


The data on eligible beneficiaries may be transferred to PoS and
offtake data of previous month may be collected.

 Efficient way of communicating entitlements to the beneficiary.

 Choice of FPS.

Information, communication technology infrastructure

 to connect all the key offices of the Food Department including the
Secretariat, Commissioner cell, District Offices, Teshil/Block offices
and Whole Sale Points.
ICT Infrastructure
RC Mgmt
System

Off-take Allotment
analysis System
System

Central MIS
System

Central
HHD in Database
Field

PoS

Grievance
Redressal
Benefits to PDS from UID

 Better identification leading to better targeting.

 Use of database for authentication of beneficiary during off-


take recording process.

 PDS can use the technology support of UID program for


enrollment process.

 UIDAI will provide duplicate detection infrastructure to PDS.

 UID will become an important identifier in banking services


and day-to-day needs of residents. This can be used for
direct cash transfer.
 Identification of BPL families should be done with the help of
reputed organizations such as NSSO, NCAER etc. Integrating
it with UID project would save cost.

 People who do not have secure source of income (e.g. daily


wage earners) should be included under BPL.

 There should be country wide computerization of database


for effective monitoring and regular updating.

 Beneficiaries should be issued:


◦ Ration cards bearing UID – food grains distribution
◦ Bank accounts - transfer of Cash
 The process of procurement, storage and distribution of food
grains under TPDS should be made electronically operated.

 GPS / GPRS tracking of movement of food grains.

 Information on stock levels of food grains at different levels


should be made available online.

 Mechanisms should be developed so as to understand the


demand patterns to smoothen procurement and distribution.

 Cost optimization of storage and transportation operations.


 Food consumption pattern should be given due weightage
while deciding composition of food grains .

 Sale of food grains to beneficiaries via biometric system.


(transaction done on acceptance by beneficiaries).

 Ensure sufficient income at all levels in the system.

 Training on duties and obligations to all the people in the


system.

 Easy to access complaint redressal system.


 Cost as well as operational efficiency of transportation and
storage of food grains under PDS.

 Feasibility of integrating PDS with UID and implementation


of e governed PDS

 Study of PDS in some more countries.


PRIMARY FOOD GRAIN SUPPLIERS (Farmers)

Procureme
nt
FCI/CWC

SW Distribution to States
C
ST , Distributi
C
on

FPS

Public Distribution Syste


 PDS – A network of retail outlets through which government sells grains
and kerosene at subsidized prices mainly to socio economically
backward population.

 Under PDS, government procures available quantities of food grains from


farmers at minimum support prices, stores them for further distribution
to various states as per their demands.
◦ Procurement is not proportionate with the demands but is done in as much quantity as
available so that the demands may be met even during the years of low production.

 Food Corporation of India (FCI) helps government in procurement,


storage and distribution process.

 FCI stores food grains, allocates quantities to states based either on


consumption in the past or the population share of that state.

 Food grains are distributed to fair price shops for final sale to the
consumers at subsidized prices.

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