The government of India knew about large leakages in the PDS, as the High-Powered Committee on grain management under Shanta Kumar pointed out in its 2015 report. (Illustration by C R Sasikumar)
There’s a well-known saying: “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.” In an earlier article (‘The problem with free food’, IE, October 18), a case was made to repurpose a part of food subsidy — Rs 2.7 lakh crore in FY 2023 — toward investments in agri-R&D, skilling, rural roads, etc, which give much higher returns than food subsidies. Milind Murugkar in his article (‘An investment, not waste’, IE, October 25) argued that food subsidies are investments and not waste. We welcome his comment. In this context, we want to highlight three key issues.
First, if the objective is to support household incomes, as Murugkar argues, do we need to support this for almost 57 per cent of the population, which is the current coverage for free food? If so, we had better stop talking about reducing poverty by 248 million during NDA rule, as Prime Minister Narendra Modi has said at several fora. Second, would Murugkar support this Public Distribution System (PDS) if he knew that roughly 28 per cent of free food never reaches the intended beneficiaries? Our PDS is still very leaky, but more on this later. Would he not, then, support direct cash transfers to the accounts of the intended beneficiaries as a better option to plug these leaks? Third, can free rice and wheat solve the problem of nutritional security, especially among children below the age of 5, which is the biggest issue in the food and nutritional security arena?
World Bank (2022) data shows that 12.9 per cent of Indians live on less than $2.15 (PPP) a day, an extreme level of poverty. The NITI Aayog report (2024) says that 248 million people came out of poverty in the last 9 years, with the multidimensional poverty index (MDPI) declining from 29.17 per cent to 11.28 per cent between 2013-14 to 2022-23. We have no problem if the government wants to give free food to, say, even 15 per cent of the population, which is extremely poor. But the current coverage is about 57 per cent of the population under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). Should those above the extreme poverty line not be charged at least half the minimum support price (MSP), as was being done under the Targeted PDS initiated by Prime Minister Atal Bihari Vajpayee in 1997-98? That would keep the food subsidy cost within manageable limits and spare resources for investments to create climate-resilient agriculture.
But the more interesting issue is that of leaky PDS. Let us now turn to that as it is the main focus of this article. We have analysed the unit-level data of the Household Consumption Expenditure Survey (HCES) of August 2022 to July 2023, which gives the amount of rice and wheat people have received under the PDS as well as any top-up by state governments. This is then compared with the off-take from the Food Corporation of India (FCI) for distribution under NFSA (PMGKAY), plus tide-over, non-NFSA state-level allocations, aligning it with the reference period of August 2022 to July 2023. The findings reveal a significant discrepancy — 28 per cent of the allocated grains, amounting to approximately 19.69 million metric tonnes (MMT) of rice and wheat, fails to reach the intended recipients. The leakage of 28 per cent of rice and wheat translates to a loss of about Rs 69,108 crore, calculated at the economic cost of these grains to FCI. And this is an annual loss, which will keep increasing year after year, as the costs rise. It is one of the biggest annual scams, which is swept under the carpet in the name of helping the poor!
The government of India knew about large leakages in the PDS, as the High-Powered Committee on grain management under Shanta Kumar pointed out in its 2015 report. At that time, the leakages were estimated at roughly 46 per cent, based on the HCES of 2011-12. In 2016, GoI introduced Point-of-Sale (PoS) machines at Fair Price Shops (FPS) to plug leakages by integrating biometric authentication and real-time transaction tracking. Today, nearly 90 per cent of FPS nationwide are equipped with PoS machines. This has helped reduce leakages from 46 per cent to 28 per cent, but they remain very high.
The leakages vary sharply across states (see infographics). Arunachal Pradesh, Nagaland and Gujarat are the top three states in terms of PDS leakages, although at all-India levels, leakages stand at 28 per cent. This highlights the need for reforming PDS.
Let us now turn to nutritional security. HCES data shows that the share of spending on pulses and vegetables declined in 2022-23 compared to 2011-12. The National Family Health Survey (2019-21) data shows that 35.5 per cent of children under five are stunted, 19.3 per cent are wasted, and 32.1 per cent are underweight. To address malnutrition, we need to convert at least some of the FPS into “nutrition hubs.” They can offer a diversified range of produce, including eggs, pulses, millets, and fruits, alongside cereals. Using a digital food coupon system, beneficiaries could redeem these coupons at nutrition hubs for a wider array of nutritious options.
To sum up, the PDS needs to be reformed. Free food to 57 per cent of the population needs revisiting. Those above antyodaya (extremely poor) need to pay at least half of the MSP. These savings can be ploughed back into agriculture. To plug leakages, direct cash transfers to beneficiary accounts are an option. Digital coupons for more nutritious food through the nutrition hubs of FPS need to be encouraged.
Gulati is Distinguished Professor and Das is a Research Fellow at ICRIER. Views are personal
