General Studies IIIAGRICULTUREEconomy

Public distribution system

GS III –  Public Distribution System- objectives, functioning, limitations, revamping

What is a Public Distribution System (PDS)?

Public Distribution Scheme (PDS) is the public rationing system of India which is administered by the Ministry of Consumer Affairs, Food, and Public Distribution.

The Public Distribution System (PDS) evolved as a system of management of scarcity through distribution of foodgrains at affordable prices. Over the years, PDS has become an important part of Government’s policy for management of food economy in the country. PDS is supplemental in nature and is not intended to make available the entire requirement of any of the commodities distributed under it to a household or a section of the society.

While the central government is in charge of food grain acquisition, storage, shipping, and bulk allocation, state governments are in charge of distributing the grains to consumers through a network of around 5 lakh Fair Price Shops. Wheat, rice, sugar, and kerosene are among the most common goods supplied. States were obligated under the PDS to develop and implement fail safe methods for identifying the poor in order to deliver food grains and distribute them in a transparent and accountable way at the FPS level. The responsibility for identifying the impoverished, procuring grains, and delivering food grains to recipients is shared by the centre and the states.

Evolution of PDS in India

  • PDS was introduced around World War II as a war-time rationing measure. Before the 1960s, distribution through PDS was generally dependant on imports of food grains.
  • It was expanded in the 1960s as a response to the food shortages of the time; subsequently, the government set up the Agriculture Prices Commission and the FCI to improve domestic procurement and storage of food grains for PDS.
  • By the 1970s, PDS had evolved into a universal scheme for the distribution of subsidised food
  • Till 1992, PDS was a general entitlement scheme for all consumers without any specific target.
  • The Revamped Public Distribution System (RPDS) was launched in June, 1992 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 underprivileged classes lives.
  • In June, 1997, the Government of India launched the Targeted Public Distribution System (TPDS) with a focus on the poor.
    • Under TPDS, beneficiaries were divided into two categories: Households below the poverty line or BPL; and Households above the poverty line or APL.
  • Antyodaya Anna Yojana (AAY): AAY was a step in the direction of making TPDS aim at reducing hunger among the poorest segments of the BPL population.
    • A National Sample Survey exercise pointed towards the fact that about 5% of the total population in the country sleeps without two square meals a day. In order to make TPDS more focused and targeted towards this category of population, the “Antyodaya Anna Yojana” (AAY) was launched in December, 2000 for one crore poorest of the poor families.
  • In September 2013, Parliament enacted the National Food Security Act, 2013. The Act relies largely on the existing TPDS to deliver food grains as legal entitlements to poor households. This marks a shift by making the right to food a justiciable right.

Objectives of the PDS

  • Creation of Food Corporation of India and Agricultural Prices Commission in 1965 consolidated the position of PDS. The government was now committed to announce a minimum support price for wheat and paddy and procure quantities that could not fetch even such minimum prices in the market.
  • The resultant stocks were to be utilized for maintaining distribution through the PDS and a portion of these were used to create and maintain buffer stocks.
  • All through the ups and downs of Indian agriculture, PDS was continued as a deliberate social policy of the government with the objectives of:
  • Providing foodgrains and other essential items to vulnerable sections of the society at reasonable (subsidised) prices
  • to have a moderating influence on the open market prices of cereals, the distribution of which constitutes a fairly big share of the total marketable surplus
  • to attempt socialisation in the matter of distribution of essential commodities.

Procurement of food grains from Farmers

The food grains provided to beneficiaries under TPDS are procured from farmers at MSP. The MSP is the price at which the FCI purchases the crop directly from farmers; typically the MSP is higher than the market price. This is intended to provide price support to farmers and incentivize production. Currently procurement is carried out in two ways:

  • centralised procurement, and
  • decentralised procurement.
  • Centralized procurement is carried out by the FCI, where FCI buys crops directly from farmers.
  • Decentralized procurement is a central scheme under which 10 states/Union Territories (UTs) procure food grains for the central pool at MSP on behalf of FCI. The scheme was launched to encourage local procurement of food grains and minimize expenditure incurred when transporting grains from surplus to deficit states over long distances. These states directly store and distribute the grains to beneficiaries in the state. Any surplus stock over the state’s requirement must be handed over to FCI. In case of a shortfall in procurement against an allocation made by the centre, FCI meets the deficit out of the central pool.

The centre procures and stores food grains to:

  • meet the prescribed minimum buffer stock norms for food security,
  • release food grains under TPDS on a monthly basis,
  • meet emergency situations arising out of unexpected crop failures, natural disasters, etc., and
  • sell through the Open Market Sale Scheme (OMSS).

The central government introduced the Open Market Sale Scheme (OMSS) in 1993, to sell food grains in the open market. This was intended to augment the supply of grains to moderate or stabilize open market prices.

Issues in implementation of PDS

Identification of beneficiaries

Studies have shown that targeting mechanisms such as TPDS are prone to large inclusion and exclusion errors. This implies that entitled beneficiaries are not getting food grains while those that are ineligible are getting undue benefits. An expert group in 2009 estimated that about 61% of the eligible population was excluded from the BPL list while 25% of non-poor households were included in the BPL list.

Ghost Cards

“Ghost cards” are cards made in the name of non-existent people. The existence of ghost cards indicates that grains are diverted from deserving households into the open market.

Production vs Procurement

Under the National Food Security Act, the centre procures millions of tonnes of food grains consistently every year to deliver rights under the law. Procurement of this quantity of food grains might be easier in years when production is high. However, in years of drought and domestic shortfall, India will have to resort to large scale imports of rice and wheat. This will exert significant upward pressure on prices. This further raises questions regarding the Government’s ability to procure grains without affecting open market prices and adversely impacting the food subsidy bill.

Allocation and offtake of food grain

The centre allocates food grains to states on the basis of the identified BPL population, the availability of food grains stocks, and the quantity of food grains lifted by states for distribution under TPDS. The allocation to a state changes every year on the basis of the state’s average consumption over the last three years.

However, according to the CACP, based on 2009-10 data from the National Sample Survey, consumption under TPDS was only 60% of the total offtake. This implies that nearly 40% of offtake is being leaked into the open market.

Rising food subsidy

The food subsidy has increased over the years, having more than quadrupled from Rs 21,200 crore in 2002-03 to Rs 2.2-lakh crore in 2019-2020.

The factors that contribute to the rising food subsidy are:

  1. record procurements in recent years, as discussed above,
  2. increasing costs of buying (at MSP) and handling food grains, and
  3. a stagnant CIP

Imbalances in the availability of storage capacity across states

There is an imbalance in the availability of storage capacity across regions. On the one hand, there is a shortage of space in consuming states, such as Rajasthan and Maharashtra, and on the other hand, 64 percent of the total storage capacity is concentrated in states undertaking large procurement such as Punjab, Haryana, Andhra Pradesh, Uttar Pradesh and Chhattisgarh. 

Maximum buffer norms not specified:

The minimum buffer norms prescribed by the government do not clearly delineate individual elements of food security (e.g., emergency, price stabilization, food security reserve, and TPDS) within the minimum buffer stock. The existing norms also do not specify the maximum stock that should be maintained in the central pool for each of the above components. 

Low utilisation of existing capacity in various states/UTs:

CAG audit observed that despite storage constraints in FCI, utilization of existing storage capacity in various states/UTs is abysmal.

Leakage of food grains

TPDS suffers from large leakages of food grains during transportation to and from ration shops into the open market. In an evaluation of TPDS, the Planning Commission found 36% leakage of PDS rice and wheat at the all-India level.

Issue prices and politics

Central Issue Price (CIP), has remained at Rs. 2 per kg for wheat and Rs. 3 per kg for rice for years, though the NFSA, even in 2013, envisaged a price revision after three years.

What makes the subject more complex is the variation in the retail issue prices of rice and wheat, from nil in States such as Karnataka and West Bengal for Priority Households (PHH) and Antyodaya Anna Yojana (AAY) ration card holders, Rs. 1 in Odisha for both categories of beneficiaries to Rs. 3 and Rs. 2 in Bihar for the two categories.

The Centre stated that “the economic cost of food management in view of rising commitment” towards food security, does not want the NFSA norms to be disturbed.

But, a mere increase in the CIPs of rice and wheat without a corresponding rise in the issue prices by the State governments would only increase the burden of States, which are even otherwise reeling under the problem of a resource crunch.

Revamping the PDS

  1. End to End computerisation:
    •  The Justice Wadhwa Committee Report for PDS (2011) recommended computerisation for two reasons: a first one to prevent diversion, and a second one to enable secure identification at ration shops.
    • The Committee has recognised Chhattisgarh as a model state for the first component, and Gujarat as a model for the second. Other states have embarked upon the ambitious effort of computerising the whole supply chain, most notably Karnataka, where electronic PDS (e-PDS) covers transactions with authorised wholesale dealers and a biometric database of users.
  2. Universal PDS: Tamil Nadu implements a universal PDS, such that every household is entitled to subsidised food grains. This way, exclusion errors are reduced.
  3. Digitalisation: States such as Chhattisgarh and Madhya Pradesh have implemented IT measures to streamline TPDS, through the digitisation of ration cards, the use of GPS tracking of delivery, and the use of SMS based monitoring by citizens.
  4. Use of Adhaar: As part of Beneficiary Data Digitisation, States/UTs have been requested to seed the Aadhaar Number wherever available so as to weed out bogus/duplicate/ineligible beneficiaries. So far data of 61.25 per cent beneficiaries have been linked to the Aadhaar Number.
  5. Direct Cash Transfers: For checking of leakage and diversions, the Government is also pursuing with States/UTs to opt for Direct Benefit Transfer (DBT) under which subsidy component will be credited to bank accounts of beneficiaries to ensure their entitlement making them free to buy foodgrains from anywhere in the market.
  6. Improving storage capacities: As it is understood that storage capacities need to be improved ensuring proper storage of procured food grains for PDS schemes. Thus, storage capacities have been augmented across the country by using funds under plan schemes as well as through private investment in Public Private Partnership (PPP) mode. Under the Private Entrepreneur Guarantee (PEG) Scheme, godowns are constructed through private investors and hired by FCI for a guaranteed period of 10 years.
  7. Checking corruption: 
    • Every State/UT Government is required to set up Vigilance Committee at the State, District, Block and Fair Price Shop (FPS) level. These Committees regularly supervise the implementation of all the schemes covered under National Food Security Act and informs the District Grievance Redressal Officer in writing of any violation as well as any misappropriation of funds.
    • Under the new policy for allotment of Fair Price shop, preference is given to Panchayats, Self Help Groups, Co-operatives, in licensing of Fair Price Shops.

Technology-based reforms to TPDS undertaken by some states

Type of reformBenefits of reformStates implementing reforms
Digitisation of ration cardsAllows for online entry and verification of beneficiary data
Online storing of monthly entitlement of beneficiaries, number of dependants, offtake of food grains by beneficiaries from FPS, etc.
Andhra Pradesh, Chhattisgarh, Tamil Nadu, Madhya Pradesh, Karnataka, Gujarat, etc.
Computerised allocation to FPSComputerises FPS allocation, declaration of stock balance, web-based truck challans, etc.Allows for quick and efficient tracking of transactionsChhattisgarh, Delhi, Madhya Pradesh, Tamil Nadu, etc.
Issue of smart cards in place of ration cardsSecure electronic devices used to store beneficiary dataStores data such as name, address, biometrics, BPL/APL category and monthly entitlement of beneficiaries and family membersPrevents counterfeitingHaryana, Andhra Pradesh, Odisha etc.
Use of GPS technologyUse of Global Positioning System (GPS) technology to track movement of trucks carrying food grains from state depots to FPSChhattisgarh, Tamil Nadu
SMS based monitoringAllows monitoring by citizens so they can register their mobile numbers and send/receive SMS slerts during dispatch and arrival of TPDS commoditiesChhattisgarh, Uttar Pradesh, Tamil Nadu
Use of web-based citizens’ portalPublicises grievance redressal machinery, such as toll free number for call centres to register complaints or suggestionsChhattisgarh


PDS vs. Cash Transfers

  • National Food Security Act,2013 provides for reforms in the TPDS including schemes such as Cash transfers for provisioning of food entitlements.
  • Direct Benefit Transfer (DBT) aims to:
    • reduce the need for huge physical movement of foodgrains
    • provide greater autonomy to beneficiaries to choose their consumption basket
    • enhance dietary diversity
    • reduce leakages
    • facilitate better targeting
    • promote financial inclusion

Advantages and disadvantages of PDS and other delivery mechanisms

PDSInsulates beneficiaries from inflation and price volatilityEnsures entitlement is used for food grains onlyWell-developed network of FPS ensures access to food grains even in remote areasLow offtake of food grains from each household High leakage and diversion of subsidised food grain Adulteration of food grainLack of viability of FPS due to low margins
Cash transfersCash in the hands of poor increases their choices
Cash may relieve financial constraints faced by the poor, make it possible to form thrift societies and access credit
Administrative costs of cash transfer programmes may be significantly lesser than that of other schemes
Potential for making electronic transfer
Cash can be used buy non-food itemsMay expose recipients to price volatility and inflationThere is poor access to banks and post offices in some areas
Food couponsHousehold is given the freedom to choose where it buys foodIncreases incentive for competitive prices and assured quality of food grains among PDS storesRation shops get full food grains from the poor, no incentive to turn the poor awayFood coupons are not indexed for inflation; may expose recipients to inflationDifficult to administer; there have known to be delays in issuing food coupons and reimbursing shops

Steps Taken by Government

  • Aadhaar Seeding in PDS: To weed out duplicate/in-eligible/bogus ration cards and to enable rightful targeting 83.41% i.e. about 19.41 crore ration cards (as on 29th May, 2018) have been Aadhaar seeded.
  • Automation of Fair Price Shops:In 2014 Department of Food & Public Distribution prescribed the guidelines and specifications for use of PoS at FPS. At present 3,16,600 FPSs (as on 29th May, 2018) out of 5,27,930 have PoS.
  • Digital/Cashless/Less-cash Payments in PDS:To promote the use of less-cash/digital payment mechanisms, the Department has issued detailed guidelines for use of AePS, UPI, USSD, Debit/Rupay Cards and e-Wallets in 2016. At present in 10 States/UTs a total of 51,479 FPSs are enabled for digital payments.
  • Digitization of Ration Card: 100% digitization of Ration Card data has been done. All States have transparency portal, 30 States have online allocation of food grains and 21 States/UTs have computerised supply chain management system.
  • ‘Integrated Management of PDS’ (IM-PDS): The scheme has been approved with an outlay of Rs. 127.3 crore to be implemented during FY 2018-19 and FY 2019-20 for establishing Public Distribution System Network (PDSN) to establish central data repository and central monitoring system of PDS operations and to also enable implementation of national level portability.
  • Construction of Godowns and Silos:A total storage capacity of 22.23 lakh MT has been added during last four years under the PEG Scheme. A road map for creation of 100 Lakh MT storage capacity in the form of Steel Silos by FCI and other agencies including State Governments on PPP mode for wheat and rice has been approved. Construction has been planned in a phased manner. 6.25 Lakh MT Steel Silos have been completed and contracts for 23.5 Lakh MT capacity have been awarded.
  • Simplified Registration Rules, 2017: To simplify the process of registration of warehouses and for their better and effective regulation and supervision, new rules namely, the Warehousing (Development and Regulation) Registration of Warehouses Rules, 2017 have been notified.
  • INGRAM portal: It was launched under National Consumer Helpline in 2016 for providing a common IT platform for various stake holders involved in the Consumer Grievance Redressal Mechanism and for disseminating information to consumers.

Suggestions to increase the efficacy of PDS

  1. To eliminate exclusion errors:
    • For including the excluded in the PDS during this pandemic, experts like Abhijeet Banerjee, Amartya Sen and Raghuram Rajan have gone on record recommending a temporary ration card for a period of six months to everyone who is in need with minimal checks. They have rightly remarked: “The cost of missing many of those who are in dire need vastly exceeds the social cost of letting in some who could perhaps do without it.”
    • The Delhi government has initiated this type of temporary e-coupon system
  2. Door-step Delivery:
    • During this pandemic, all the respondents complained of overcrowding at the ration collection points. They also expressed fear of catching the disease due to the complete absence of social distancing norms. Door-step Delivery is a good alternative to respond to such a situation.
    • If the doorstep delivery takes time to be rolled out, the government can consider increasing and diversifying distribution points. Government schools have already been used as PDS delivery points but other public spaces such as sports stadia, public parks, post offices can be roped in to distribute ration as an emergency measure.
  3. To meet inadequate food-supply:
    • various State governments should consider establishing community kitchens providing free food as done by the Kerala government to cater to the hungry as an immediate measure. Kerala’s community kitchens have been quite successful in the current situation.
  4. Addressing the food quality issue: 
    • technology-driven solutions have the potential to resolve immediate challenges as well as long term challenges. Use of upcoming technologies like Artificial Intelligence, Machine Learning, and the Internet of Things could be urgently adapted to eliminate the menace of adulteration and bad quality food grains.
  5. Ensuring accountability:
    • One mechanism for checking and making the process of distribution more accountable was suggested by the Delhi High Court in a petition filed by Delhi Rozi Roti Adhikar Abhiyan which sought time-bound redressal of complaints regarding non-supply of rations and transparency in the distribution of food grains.
  6. A separate cadre for ration inspection:
    • Experts suggest that a separate cadre of government employees be established for this purpose and stationed at all the FPS. They could be called Ration Inspectors and their job would be to ensure impartial and hassle-free delivery of food grains from the FPS.
    • The formation of such a cadre only needs a notification by the Ministry of Consumer Affairs, Food and Public Distribution, and the legislation can take place later.
    • We do have a provision for periodic inspection of FPS by the Circle food supply officers and Special Commissioners. Unfortunately, with no accountability and lack of supervision of these officers, inspections have been few and sporadic, and consequently, progress on the ground has been negligible. Therefore, having a cadre of officers permanently stationed at the FPS would have an impact.


  • The loss of livelihood induced by the pandemic has severely hampered people’s access to food.
  • Given the fact that massive unemployment and loss of livelihood has already engulfed the working millions due to the pandemic, and that some members of the households are excluded from the PDS, the quantity of ration provided by the government cannot act as a bulwark against hunger and want.
  • It naturally leads us to the question of how they survive for the rest of the days without any source of income. Most of the respondents borrowed money to meet their food requirements.
  • Thereafter consuming the ration from the PDS that lasts up to 15 days, they borrow money from their neighbours and friends. Similarly, those who received the kits only once in the last two months used their savings and borrowed money to buy these items again.
  • Few are surviving on meagre savings while the rest are borrowing money from friends and neighbours. None of them could access bank credit due to lockdown. Each had developed their networks of informal borrowing, which they relied upon in times of extreme distress.
  • In such a scenario, they expressed their anguish at falling deeper into a debt trap and not having a clue as to when they will be able to come out of it. The respondents declared that their meagre savings, ration from the PDS, and borrowed money from neighbours and friends are their only hopes of survival.
  • To address this, PM Garib Kalyaan Anna Yojana was launched


  • A pandemic has again driven home the importance of well-designed and meticulously implemented food security policies that provide for timely access to adequate quality and quantity of food (and water), and good hygienic norms.
  • Most of the problems that India’s poor are encountering could be attributed to a lack of implementation of the existing food security framework, although the ‘law may look good on paper’ .
  • To improve India’s food security, most recommendations involve strengthening the existing PDS and other levers. For instance, the National Food Security Act (NFSA), 2013 mandates all State governments to set up grievance redress mechanisms and a State Food Commission to oversee the proper implementation of the law. However, States have not ensured such a mechanism to date. Some States have constituted their food commissions but they do not function fully.
  • The PDS may not be able to eliminate the issue of malnutrition and childhood morbidity or mortality in India, but it can reduce the levels of hunger in India if implemented effectively. Integrating the PDS with other interventions that will increase transparency and accountability may increase its potential to realise every citizen’s right to nutritious food while propagating good health.

Lessons from Brazil’s initiatives

Bolsa Familia:

  • ‘Bolsa Familia’ involves conditional cash transfers (CCT) to the poorest families in situations of food insecurity. This scheme provides stipends and food to the poorest if they meet certain conditions, such as that children attend school, or babies are vaccinated.
  • The programme has improved the lives and nutritional intake and has about 12.4 million families enrolled.
  • It has been referred to as a ‘model of effective social policy’ by a former World Bank president. The programme allows children to miss about 15% of classes; if a child gets caught missing more than that, payment is suspended for the entire family. 
  • ‘Bolsa Familia’, while not a panacea, has a record of attaining its target better than most CCT schemes. Brazil’s success, possible through strong political commitment, might be adaptable for State-level implementations in India

The Food Products Procurement Programme:

  • It was also introduced in Brazil to ensure a market and reasonable price for products from small-scale farmers.
  • This programme involved direct procurement of products at harvest for maintaining:
    1. local food security stocks;
    2. advanced procurement of products at planting time;
    3. local procurement by local governments to be used in school feeding programme; and
    4. a programme supporting milk production and consumption, benefiting producers with limited production and bargaining power

Source: NFSP

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