A study on the efficacy of the Public Distribution System in India with special emphasis to the functioning of agricultural warehousing agencies

Abstract

The study analyses the effectiveness of the public distribution system in India with special emphasis to the functioning of public sector agricultural warehousing agencies such as Food Corporation of India (FCI) and Central Warehousing Corporation (CWC), engaged in the procurement, transportation, storage and distribution of food grains. The data for the period of 2007-08 to 2011-12 has been collected from secondary sources and has been interpreted. The study shows that the current procurement trends of food grains would not sufficient to meet the allocation and the future requirements in the twelfth plan period. The per capita net availability of rice and wheat declined marginally, while the total availability of cereals and other pulses increased significantly. The total cost of food subsidies contributed about 5 % of agricultural GDP during the last 5 years. The main reason for increase in economic cost of food grains is the higher procurement prices which also lead to rising food subsidies. Instead of open-ended procurement policy in India, a need-based procurement system has to be implemented. I. Introduction: India has seen tremendous progress in agricultural produce as it has quadrupled its food grain production since independence. Indias food grain production has mounted over 250 million tons in 2011-2012 from a mere 120 million tons in 1980. Rice and wheat accounts for over 75% of all food grain output. These staples are vital for household food security and constitute a major source of calories especially for over 300 million deprived populations in the country. (Rehman et al., 2012). Given that about two-third of Indian population make their income from agriculture and an average Indian household spends about 30% of its budget for food grains, the structure and efficiency of Indian food grain marketing is not negligible in Indian economy. Food grain marketing consists of all the activities involved in the movement of food grains from producers to consumers. In order to ensure food security in the nation, Government of India formulated a food grain management strategy focused on procurement of food grains at remunerative prices from the growers; its storage and movement; maintenance of buffer stocks and ensuring availability of food grains to the public at reasonable prices. The overall responsibility for management of food grains given to the Ministry of Consumer Affairs and Ministry of Food and Public Distribution, Govt. of India. The procurement of food grains by Government is primarily intended to provide remunerative prices to farmers, thereby avoiding distress sale of food grains; and to build up a stocks to ensure the supply of subsidized food grains to the needy and poor. The responsibility for distribution of food grains to the beneficiaries vests with the respective State Governments. The Public Distribution System (PDS) is the most important channel through which the Government ensures food security at the micro level. India has a large programme of public distribution, mainly food grains, through a network of Fair Price Shop (FPS), both in rural and urban areas. With more than 460 thousand FPS, its reach in rural areas is sometimes better than the open market. The PDS is the largest food subsidy programme in India, and perhaps in the world. It reaches out to nearly 10.5 crores households in the country and provides food grains at subsidized rates. Despite this, India continues to have one of the worst track records globally, as far as the commitment to tackle hunger and malnutrition is concerned. (Bhat and Hussain; 2012). However, PDS in India was widely criticized for its failure to serve the population below the poverty line, its urban bias, negligible coverage in the states with highest concentration of rural poor and lack of transport and accountability ( Sawant and Jadhav, 2013). In 1997, the Govt. of India launched a revised scheme of distribution known as the Targeted Public Distribution System (TPDS) to benefit the poor and to keep the budgetary food subsidies under control to the desired extent One of the foremost objectives of the TDPS is to insulate the poor form rising market prices for food grains Under TPDS, food grains were distributed as a two-tier delivery system to households below poverty line (BPL) and above poverty line (APL), with each BPL family receiving a set quota of food grains per month at heavily subsidized prices. The TPDS is an important instrument of policy aimed at reducing poverty through the mechanism of delivering desired requirements of food grains at highly subsidized prices to the population below the poverty line. In addition to TPDS, Govt. of India initiated a number of schemes to further support the deprived such as Antyodaya Anna Yojana, Annapurna scheme,