Plugging the Leaks: Improving reach & efficiency of the Public Distribution System

Presented By:

• Aakriti Bhardwaj

• Aastha Sharma

• Dhruvika Sharma

• Navita Deswal

• Aman Bhalla

Agenda

* What is PDS * Problems in current PDS * Causes & Impact of problems * Proposing solutions to overcome problems * Issues in implementing solutions & their mitigation * PDS Path Ahead * Appendix

What is PDS ?

Public Distribution System ( PDS ) * It is an Indian food security system. Established by the Government of India under Ministry of Consumer Affairs. It distributes subsidised food and non-food items to India's poor. Major commodities distributed include staple food grains, such as wheat, rice, sugar, and kerosene, through a network of Public distribution shops (FPS). Food Corporation of India, a Government-owned corporation, distributes food grains to FPS throughout the country. * In terms of both coverage and public expenditure, it is considered to be the most important food security network. Today, India has the largest stock of grain in the world besides China, the government spends Rs.750 billion ($13.6 billion) per year, almost 1 percent of GDP, yet 21% remain undernourished. Distribution of food grains to poor people throughout the country is managed by state governments. As of date there are about 5 million Fair Price Shops (FPS) across India

Problems in PDS ?

Problem Statement : Minimal reach of goods & intended benefits to deserving poor as part of PDS scheme. Hence increasing the India State Hunger Index (ISHI)

Key facts : • 48% of children under five are malnourished. • India ranked 65 in 2009 with global hunger index of 23.9 • 25% of worlds hungry poor are in India (FAO 2009, HT)

Causes & Impact of Problems

Inferior quality

Deceitful dealers replacing good

supplies received from the F.C.I with inferior stock and sell FCI stock in the

black market.

Malpractices

Many FPS dealers resort to malpractice, illegal diversions of commodities, hoarding and black marketing due to the minimal salary received by them.

Impact

Mediu

m

Irregular Services

Identification of households of denoted status & distribution to granted PDS services has been highly irregular and diverse in various states.

Bogus Beneficiaries

Illicit fair price shop owners have been found to create large number of bogus cards to sell food grains in the open market.

Infrastructure Issues

• No proper transportation • No proper storage provision

Impact

Mediu

m

Impact

High

Impact

High

Impact

Mediu

m

Solutions to overcome problems in PDS Description Details

Inferior quality • F.C.I. and other prominent agencies should provide quality food grains for distribution • The Civil supplies Corporation should open more Fair Price shops in rural areas

Bogus Beneficiaries • Frequent checks & raids should be conducted to eliminate bogus and duplicate cards, which is again an added

expenditure and not fool proof. • Personnel-in-charge of the department should be chosen locally.

Malpractices

• Vigilance squad should be strengthened to detect corruption • It may be more efficient to move towards a new system of providing food subsidy through the normal food

supply shops (including the FPS), supplemented by new/additional FPS in remote and inaccessible regions where such shops do not exist. This could be achieved through the introduction of food stamps or the food credit card system.

• Margin of profit should be increased for honest business, in which case the market system is more apt anyway. • The Fair Price dealers seldom display rate chart and quantity available in the block-boards in front of the shop

Infrastructure Issues

• Develop Roads & transportation facilities • Development of storage of the crops • The food debit/credit card can also have the in-built flexibility of changing over from a food subsidy to an income

transfer system if there is a subsequent change in the policy • There could be different levels of entitlement based on age. All adult members from a poor family, for example,

could be entitled to ‘a’ number of food stamps per month while the entitlement for a child could be ‘b’ number of food stamps.

Irregular services

• Service should be proper and regular, development of mechanism which initiates automatic trigger once the stock is low.

• The main objective of providing food subsidy to the poor is to ensure food security. Since rice and wheat are the basic necessities for the poor, food subsidies must be restricted to these two commodities.

Issues implementing solutions & their mitigations

• Lot of administrative & infrastructure cost required

• Opening more FPS & controlling the quality.

• Collaborating with existing pvt. retail chains to curb cost

• Making surprise checks & selecting in charge with good moral values

Solution Issues Mitigation

• Checks with such large FPS chain not feasible

• Difficult to access the person on moral grounds

• Laws, punishment & it’s implementations should be strong for guilty.

• In-charge morality should be judged via people perception

Issues implementing solutions & their mitigations (Contd..)

• Difficult to control malpractices

• More strong vigilance and reducing incidents of malpractices

• Making policies to control malpractices.

• Giving more incentives based on the honest sales

• Developing infrastructure for storage & transportation

Solution Issues Mitigation

• Hefty cost is required to set-up infrastructure

• Using existing pvt. Company networks to transport goods.

• Motivating NGO to donate for the storage

• Using advertising mechanism to earn revenue & utilize it for infra setup

Issues implementing solutions & their mitigations (Contd..)

• Infrastructural Limitations

• No timely intimations when stock is low

• Services should be more regular

• Reducing the travel time of delivery

• Using existing pvt. Company networks to transport goods.

• Introduction of a more effective Management Information System

• Streamlining of the supply chain by construction of small intermediary godowns between FCI's base godown and FPSs in the interior.

Solution Issues Mitigation

PDS Path Ahead

* Despite the huge stock of food grains available in FCI godowns, hunger deaths are still being reported. The food distribution system, therefore, needs to be reformed and made more efficient. * The present system could be replaced by a system of food stamps and eventually by a food credit card system. * Surveys by the National Sample Survey Organisation (NSSO) show that consumers today prefer to consume less of cereals and more of fruits, vegetables and animal products than before. Hence this should be considered * Studies show that a buffer stock of 10mt is adequate to meet food security needs. The FCI could intervene in the market by timely sales and purchases to maintain stability in food grain prices. * The scheme for decentralised procurement of food grains should be encouraged and more states could be brought under its fold. Similarly, the operation of the PDS

Recommendations

* The full monthly quota of food grains for distribution must reach the retail outlets (FPSs) within the first seven days of the month. * The FPS-wise information on delivery against quota/requirement and ration cards

should be computerized at the block /village level for onward transmission

and monitoring.

* For ensuring transparency in delivery, it should be authenticated by the PRI or other designated agencies. * Considering the high cost of holding buffer stock and low off-take at Economic Cost, it is felt that both BPL and APL cardholders may be issued additional quantity of grains at less than economic cost. This will involve no additional budgetary subsidies, but will have a significant impact on the off-take of grains. * To minimize leakages at FPS level and ensure their transparent operation, these retail outlets must be made financially viable. * The process of channelising food grains to the existing beneficiaries needs improvement as the beneficiaries have to wait for a long period to get their quota

Appendix

• http://en.wikipedia.org/wiki/Public_Distribution_System • http://planningcommission.nic.in/plans/planrel/fiveyr/10th/volume2/v2_ch3_4.pdf • http://planningcommission.gov.in/reports/sereport/ser/std_pdstn.pdf • ARCWP38-Kattumuri.pdf

Thank You