High levels of malnourishment and persistent poverty are key challenges facing the country. Access to sufficient food at affordable prices remains a major challenge for poor households.
Government’s response is centred around production and consumer based subsidies focused on ensuring that there is an adequate supply of food in the market at affordable prices and that poor households are able to access the food. Basic food grains are distributed to poor households through a number of schemes such as the Public Distribution System, the Mid-Day Meal and the Integrated Child Development Scheme (ICDS) and at present roughly 62 million tonnes of food grain is distributed at a cost of Rs. 130,000 crore.
The most significant of the food subsidy programs is the Public Distribution System (PDS) a rationing mechanism that supplements household food requirements and entitles households to specific amounts of selected commodities at subsidized prices. A large network of Fair Price Shops (FPS) have been established through which households purchase rationed items.
Until 1997, the program was universal in principle and all households rural and urban with a registered address were entitled to subsidized rations. The program was re-designed in 1997, as the Targeted Public Distribution System (TPDS) to more effectively reach poor households and reduce leakages within the program. A two tier system was designed within which identified poor households were designated Below the Poverty line (BPL) and receive a fixed amount of food grains and other commodities at specially subsidized prices. The remainder households were identified as Above the Poverty Line (APL). In 2000 an additional element was introduced to the TPDS in order to more finely target the poor, the Antodaya Anna Yojana (AAY) to provide 10 million of the poorest households with 25kg per month at Rs. 2/kg for wheat and Rs. 3/kg rice. Administering states were able to set their own guidelines and alter the scheme by adding items, and changing quantities and prices. The Food Corporation of India (FCI) is tasked with overseeing and implementing national food policy including the procurement and distribution of food grains through the PDS (although it does not directly distribute any stocks).
In 2013, as part of an overarching policy to reduce malnourishment the PDS became the centrepiece of the National Food Security Act that covers 67% of the population (50% urban and 75% rural) and guarantees 5 kg of food per person (AAY households get 35 kg) at Rs. 3/2/1 for rice, wheat and millets with the oldest women in the household accessing the entitlement. The NFSA also proposes a number of reforms for the PDS in order to improve on its efficiency and the policy has also allowed for alternative mechanisms of delivery such as cash transfers.
The expansion of the PDS comes at a time when a number of studies on the PDS have highlighted high levels of leakage in the programme resulting from errors of inclusion and exclusion of the wrong beneficiaries and the diversion of food grains in the supply chain. Studies also highlight a poorly designed supply chain mechanism particularly in the viability of the FPS. Wide inter-state variations in implementation have meant that a small number of states have developed models for implementation while others lag.
The cost of the subsidy has increased from Rs. 30,056 crore in 2001-2 to Rs. 1,26, 480 in 2012-13, increasing at an annual rate of 14% although as a percentage of GDP at market prices it remains at 1.19% and 1.26% for the same period. Himanshu and Sen 2013; Gulati, 2014
A 2004-05 evaluation by the Planning Commission of the TPDS found that inefficiencies in the system meant that it cost Rs. 3.65 to transfer Rs. 1 to the poor. About 57% of the subsidized grain did not reach the target group of which 36% was siphoned off in the supply chain. The program was plagued by large errors of exclusion and inclusion. According to the study only 23% of the FPS were viable and the rest survived on diversion of grains.
Over the past five years food price inflation has remained consistently high in double digits and the average Indian household spends close to 50% of their expenditure on food. In 2012 and 2013 public agencies accumulated massive stocks of food for example 80 mts. and 72 mts. respectively for wheat, the highest levels of stocks ever held by government.2 Against this backdrop the need for evidence based public policy intervention has grown to ensure that efforts around food security interventions are correctly targeted and are able to impact on improved nutritional outcomes and poverty reduction.
Why undertake a study of the PDS?
The passing of the NFSA and the expanded role of the PDS within it presents a significant policy shift and a unique opportunity to assess the impact of the PDS in its new expanded role. This evaluation will allow us to develop a baseline of information that will answer key questions around the functioning of the PDS both in terms of design, processes and the impact of the scheme in improving food security, nutritional outcomes and in reducing poverty that will allow us the assess the impact of the NFSA and the expanded PDS through amid term impact evaluation.
The PDS evaluation
The IEO has undertaken an impact evaluation of the PDS beginning in April 2014 for the duration of 15 months. There are four components to this evaluation;