A Case for a Revamped, Need-Based PDS

Context: The continuously rising food subsidy bill calls for fundamental reforms in the current PDS model.

Key Issues with current PDS model

• Food subsidy bill becoming unmanageably large: Cited Economic Survey 2020-21.
  • During 2016-17 to 2019-20, the subsidy amount clubbed with loans taken by the Food Corporation of India (FCI) under the National Small Savings Fund (NSSF) was ?2.2-lakh crore.
  • In near future, the food subsidy bill of the Centre is expected to be about Rs.2.5-lakh crore.
• Rise in the quantity of food grains drawn by States: Due to enhanced entitlements under National Food Security Act (NFSA) 2013, which requires each beneficiary to be provided 5 kg of rice/wheat per month.
• Pandemic impact: Revised estimate of food subsidy put at Rs.4.23-lakh crore.
  • Centre set apart 94.35 million tonnes to States for distribution among poor free of cost.
• Neglect of price revision: Central Issue Price (CIP) remained Rs.2 per kg for wheat and Rs.3 per kg for rice for years, though NFSA envisaged a price revision after three years.
• Variation in retail issue prices: for Priority Households (PHH) and Antyodaya Anna Yojana (AAY) ration card holders it is nil in Karnataka and West Bengal, ?1 in Odisha, ?3 & ?2 in Bihar for the two categories.
• Resource crunch: A mere increase in CIPs without a corresponding rise in issue prices by states would only increase the fiscal burden of States.
• Political compulsions: Revision of PDS issue prices could come at a high political cost.

Way Forward

• Revisit NFSA norms and coverage: An official committee in January 2015 called for decreasing the quantum of coverage under the law, from the present 67% to around 40%.
  • Data: As per Rangarajan group’s estimate in 2014, the share of people living Below the Poverty Line (BPL) in the 2011 population was 29.5%.
• “Give-up” option: For all ration cardholders drawing food grains, as done in the case of cooking gas cylinders, can be made available.
• Synchronise PHH criteria and identification: Centre can nudge them into pruning number of beneficiaries.
• Flat rates should be replaced with a slab system: Barring the needy, other beneficiaries can be made to pay a little more for a higher quantum of food grains. Need for consultations.
• Check diversions and leakages: Continue on-going PDS reforms such as end-to-end computerization of operations, digitisation of data of ration cardholders, seeding of Aadhaar, & automation of fair price shops