Context

• The National Food Security Act (NFSA) of 2013aimed to guarantee food security through an expanded Public Distribution System (PDS) in India.
• However, concerns over inefficiencies in the PDS, particularly high levels of leakages, have persisted.
• Therefore, it is important to have an assessment on the evolution of the PDS, its reforms, and the ongoing challenges it faces considering recent data from the Household Consumption Expenditure Survey (HCES) 2022-23. 

Concerns Surrounding Inefficiencies in the PDS

• Leakages in the PDS refer to the failure of food grains to reach the intended beneficiaries, often due to corruption, theft, or inefficiencies in the supply chain.
• According to the National Sample Survey (NSS) of 2011-12, at the national level, PDS leakages stood at an alarming 41.7%.
• This figure reflected a poorly functioning system, contributing to the nervousness surrounding the NFSA’s ambition to guarantee food security through this channel.
• Despite the initial pessimism, there was optimism in some quarters, driven by the experiences of states that had successfully reformed their PDS.
• States like Bihar, Chhattisgarh, and Odisha saw dramatic reductions in leakages between 2004-05 and 2011-12 after implementing key reforms.
• For instance, Bihar reduced leakages from 91% to 24%,Chhattisgarh from 52% to 9%, and Odisha from 76% to 25%.
• Encouraged by these results, the NFSA 2013 mandated the same package of reforms across the country.
• The latest HCES data for 2022-23, the first large-scale survey after the NFSA’s full implementation, confirms the hypothesis that PDS reforms would reduce leakages.
• Nationally, PDS leakages have dropped to 22%, a significant improvement over the previous decade.

Estimating and Understanding PDS Leakages

• Methodology of Estimating PDS Leakages
  • To estimate the extent of PDS leakages, data from the National Sample Survey (NSS) and the Monthly Food Grain Bulletin of the Ministry of Food are cross-referenced.
  • Specifically, the survey compares household reports on the quantity of PDS grain they purchased with the total amount of grain off taken from government warehouses, primarily the Food Corporation of India (FCI).
  • The gap between what is supplied (offtake) and what households report purchasing is attributed to leakage.
  • During the 2022-23 reference period (August 2022 to July 2023), PDS ration cardholders were entitled to food grains under the NFSA.
  • This included 5 kg of grain per capita per month for Priority households and 35 kg per household for Antyodaya families.
  • This was along with additional allocations under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) during the COVID-19 pandemic, which was discontinued in December 2022.
  • The data includes grain provided both free and for a nominal cost.
• Sources of Inaccuracy in Leakage Estimates
  • Time Lag in Data Collection
  • One major source of inaccuracy is the mismatch in timing between the data on offtake and household purchases.
  • For instance, if the time-period of the PDS offtake is shifted by just a month, the leakage estimate can change significantly.
  • According to estimates, lagging the offtake data by one month reduces the leakage estimate to 17.6%, compared to 18.2% when the periods are matched exactly.
  • Such variations highlight the sensitivity of the estimates to the reference period used in calculations.
• Expanded PDS Systems
  • Some states have implemented their own expanded PDS programs beyond the NFSA-mandated coverage, providing additional food grains to non-NFSA beneficiaries using both central government allocations and their own resources (e.g., local procurement).
  • For instance, Chhattisgarh passed its own food security law in 2012, making the PDS quasi-universal through local procurement and expanded eligibility criteria.
• Diverse Causes of Leakages
  • While the methodology attributes all mismatches between offtake and purchases to leakages, there could be other explanations for these gaps.
  • Transport losses, pilferage during distribution, discrepancies in reporting, and delays in the delivery of food grains to PDS outlets may all contribute to the observed shortfall.
  • Some portion of what is classified as leakage may simply be a result of operational inefficiencies rather than intentional diversion of grain.

PDS Coverage, Impact of NFSA, Reforms and Technological Innovations

• PDS Coverage, Impact of NFSA
  • The expansion of PDS coverage under the NFSA 2013 has played a crucial role in reducing exclusion errors and leakages.
  • Before the NFSA, less than 50% of households held ration cards, and only about 40% accessed PDS benefits.
  • However, reforms between 2004-05 and 2011-12 in states like Chhattisgarh and Odisha led to a substantial increase in PDS participation.
  • In Chhattisgarh, for example, the proportion of households accessing the PDS tripled during this period.
  • By 2022-23, the proportion of households purchasing PDS grains increased to 70%, largely due to the NFSA's expansion.
  • However, the government is still falling short of the coverage mandated by the NFSA, which stipulates 75% coverage of rural households and 50% of urban households.
  • According to HCES data, only 57%-61% of households have NFSA ration cards, with around 10% being non-NFSA beneficiaries.
• Reforms and Technological Innovations
  • Early reforming states like Chhattisgarh and Odisha introduced several key changes.
  • These changes contributed to the success of the PDS, including reducing PDS prices, ensuring doorstep delivery of food grains, digitising records, and handing over management of PDS outlets to local bodies such as panchayats and self-help groups.
  • These reforms were subsequently adopted at the national level through the NFSA.

The Future of PDS and Policy Recommendations

• The PDS remains a vital instrument of social policy in India, ensuring food security for millions.
• Its importance was particularly evident during the COVID-19 pandemic, when it formed a crucial part of the government’s relief efforts.
• Despite this, the PDS faces challenges from ongoing policy experiments, including cash transfer initiatives and the imposition of inappropriate technologies like Aadhaar-based authentication.
• Rather than focusing on such innovations, the government should prioritise addressing the root causes of exclusion and inefficiencies.
• One critical area is the delayed Census, which has left over 100 million people without access to PDS benefits.
• Additionally, demands for including more nutritious food items such as pulses and edible oils remain pressing and should be addressed.

Conclusion

• The NFSA 2013, along with the reforms it mandated, has led to significant improvements in the PDS, particularly in reducing leakages and expanding coverage.
• However, challenges remain, including reaching full coverage and addressing the inefficiencies in states that have historically performed well.
• The government must focus on strengthening the PDS further by continuing state-level reforms, expediting the Census,and incorporating more nutritious food items into the distribution system.