Public Distribution System (PDS)

The Public Distribution System (PDS) evolved (in 1970s) 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.

PDS is operated under the joint responsibility of the Central and the State/UT Governments.
The Central Government, through Food Corporation of India (FCI-set up in 1965), has
assumed the responsibility for procurement, storage, transportation and bulk allocation
of food grains to the State Governments. The operational responsibility including allocation
within State, identification of eligible families, issue of Ration Cards and supervision of the
functioning of Fair Price Shops (FPSs) etc., rest with the State Governments. Under the PDS,
presently the commodities namely wheat, rice, sugar and kerosene are being allocated to
the States/UTs for distribution. Some States/UTs also distribute additional items of mass
consumption through the PDS outlets such as pulses, edible oils, iodized salt, spices, etc.

History of Public Distribution

Public Distribution System in 1960s:

The public distribution of essential commodities was in existence in the country during the
inter-war period. However, PDS, with its focus on distribution of foodgrains in urban scarcity
areas, had originated from the critical food shortages of 1960s. PDS had substantially
contributed to the containment of rise in food grains prices and ensured access of food to
urban consumers. As the national agricultural production had grown in the aftermath of Green
Revolution, the outreach of PDS was extended to tribal blocks and areas of high incidence of
poverty in the 1970s and 1980s.

Revamped Public Distribution System (RPDS):

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 poor live. It covered 1775
blocks wherein area specific programmes such as the Drought Prone Area Programme
(DPAP), Integrated Tribal Development Projects (ITDP), Desert Development Programme
(DDP) were being implemented and in certain Designated Hill Areas (DHA) which were
identified in consultation with State Governments for special focus. Food grains for
distribution in RPDS areas were issued to the States at 50 paise below the Central Issue Price.
The scale of issue was up to 20 kg per card.

The RPDS included area approach for ensuring effective reach of the PDS commodities, their
delivery by State Governments at the doorstep of FPSs in the identified areas, additional
ration cards to the left-out families, infrastructure requirements like additional Fair Price
Shops, storage capacity etc. and additional commodities such as tea, salt, pulses, soap, etc. for
distribution through PDS outlets.

Targeted Public Distribution System (TPDS):

In June, 1997, the Government of India launched the Targeted Public Distribution System
(TPDS) with focus on the poor. Under the PDS, States were required to formulate and
implement foolproof arrangements for identification of the poor for delivery of foodgrains
and for its distribution in a transparent and accountable manner at the FPS level.

The scheme, when introduced, was intended to benefit about 6 crore poor families for whom
a quantity of about 72 lakh tonnes of food grains was earmarked annually. The identification
of the poor under the scheme was done by the States as per State-wise poverty estimates of
the Planning Commission for 1993-94 based on the methodology of the "Expert Group on
estimation of proportion and number of poor” chaired by Late Prof Lakdawala. The
allocation of food grains to the States/UTs was made on the basis of average consumption in
the past i.e. average annual off-take of food grains under the PDS during the past ten years at
the time of introduction of TPDS.

The quantum of food grains in excess of the requirement of Below Poverty Line (BPL)
families was provided to the State as ‘transitory allocation’ for which a quantum of 103 lakh
tonnes of food grains was earmarked annually. Over and above the TPDS allocation,
additional allocation to States was also given. The transitory allocation was intended for
continuation of benefit of subsidized food grains to the population Above the Poverty Line
(APL) as any sudden withdrawal of benefits existing under PDS from them was not
considered desirable. The transitory allocation was issued at prices, which were subsidized
but were higher than the prices for the BPL quota of food grains.
Keeping in view the consensus on increasing the allocation of food grains to BPL families,
and to better target the food subsidy, Government of India increased the allocation to BPL
families from 10 kg to 20 kg of food grains per family per month at 50% of the economic
cost and allocation to APL families at economic cost w.e.f. 1.4.2000. The allocation of APL
families was retained at the same level as at the time of introduction of TPDS but the Central
Issue Prices (CIPs) for APL were fixed at 100% of economic cost from that date so that the
entire consumer subsidy could be directed to the benefit of the BPL population. However, the
CIPs fixed in July and December, 2000 for BPL & AAY respectively and in July, 2002 for
APL were not revised upwards since then even though procurement cost have gone up
considerably.

The number of BPL families was increased w.e.f. 1.12.2000 by shifting the base to the
population projections of the Registrar General as on 1.3.2000 instead of the earlier
population projection of 1995. With this increase, the total number of BPL families came to
652.03 lakh as against 596.23 lakh families originally estimated when TPDS was introduced
in June 1997.

Under the TPDS, the end retail price was fixed by the States/UTs after taking into account
margin for wholesalers/ retailers, transportation charges, levies local taxes etc. The States
were earlier requested to issue food-grains at a difference of not more than 50 paise per kg
over and above the CIP for BPL families. However, since 2001, flexibility was given to
States/UTs in the matter of fixing the retail issue prices by removing the restriction of 50
paise per kg over and above the CIP for distribution of food grains under TPDS.

Antodaya Anna Yojana (AAY) (Launched in 2000)

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.
This section of the population could be called as "hungry”. 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.

AAY involved identification of one crore poorest of the poor families from amongst the
number of BPL families covered under TPDS within the States and providing them food
grains at a highly subsidized rate of Rs.2/- per kg. for wheat and Rs.3/- per kg for rice. The
States/UTs were required to bear the distribution cost, including margin to dealers and
retailers as well as the transportation cost. Thus the entire food subsidy was passed on to the
consumers under the scheme. The scale of issue that was initially 25 kg per family per month
was increased to 35 kg per family per month with effect from 1st April 2002.

The AAY Scheme has since expanded to cover 2.50 crore poorest of the poor households as
follows:

1. First Expansion

The AAY Scheme was expanded in 2003-04 by adding another 50 lakh BPL households
headed by widows or terminally ill persons or disabled persons or persons aged 60 years or
more with no assured means of subsistence or societal support. Order to this effect was issued
on 3rd June, 2003. With this increase, 1.5 crore (i.e. 23% of BPL) families were covered
under the AAY.

2. Second Expansion

As announced in the Union Budget 2004-05, the AAY was further expanded by another 50
lakh BPL families by including, inter alia, all households at the risk of hunger. Order to this
effect was issued on 3rd August 2004. In order to identify these households, the guidelines
stipulated the following criteria:-

a) Landless agriculture labourers, marginal farmers, rural artisans /craftsmen, such as potters,
tanners, weavers, blacksmiths, carpenters, slum dwellers and persons earning their livelihood
on daily basis in the informal sector like porters, coolies, rickshaw pullers, hand cart pullers,
fruit and flower sellers, snake charmers, rag pickers, cobblers, destitute and other similar
categories in both rural and urban areas.

b) Households headed by widows or terminally ill persons/disabled persons/ persons aged 60

years or more with no assured means of subsistence or societal support.

c) Widows or terminally ill persons or disabled persons or persons aged 60 years or more or
single women or single men with no family or societal support or assured means of
subsistence.

d) All primitive tribal households.

3. Third Expansion
As announced in the Union Budget 2005-06, the AAY was expanded to cover another 50 lakh
BPL households thus increasing its coverage to 2.5 crore households (i.e. 38% of BPL).
Order to this effect was issued on 12th May, 2005.

National Food Security Act, (NFSA) 2013

The basic concept of food security globally is to ensure that all people, at all times, should get
access to the basic food for their active and healthy life and is characterized by availability,
access, utilization and stability of food. Though the Indian Constitution does not have any
explicit provision regarding right to food, the fundamental right to life enshrined in Article 21
of the Constitution may be interpreted to include right to live with human dignity, which may
include the right to food and other basic necessities.

Though the issue of 'food security' at the household is continuously being addressed by the
Government since long, through the Public Distribution System and the Targeted Public
Distribution System, the enactment of the National Food Security Act, (NFSA) 2013 on
July 5, 2013 marks a paradigm shift in the approach to food security from welfare to
rights-based approach. The Act legally entitles up to 75% of the rural population and 50%
of the urban population to receive subsidized foodgrains under Targeted Public Distribution
System. About two thirds of the population therefore is covered under the Act to receive
highly subsidized foodgrains. As a step towards women empowerment, the eldest woman of
the household of age 18 years or above is mandated to be the head of the household for the
purpose of issuing of ration cards under the Act.

The Act is being implemented in all the States/UTs, and on an all-India basis, out of
maximum coverage of 81.34 crore persons, around 80 crore persons have been covered under
NFSA at present for receiving highly subsidized foodgrains. The identification of
beneficiaries by States/UTs is a continuous process, which involves exclusion of
ineligible/fake/duplicate ration cards and also exclusion on account of death, migration etc.
and inclusion on account of birth as also that of genuine left-out households.

One of the guiding principles of the Act is its life-cycle approach wherein special provisions
have been made for pregnant women and lactating mothers and children in the age group of 6
months to 14 years, by entitling them to receive nutritious meal free of cost through a
widespread network of Integrated Child Development Services (ICDS) centres, called
Anganwadi Centres under ICDS scheme and also through schools under Mid-Day Meal
(MDM) scheme. Higher nutritional norms have been prescribed for malnourished children up
to 6 years of age. Pregnant women and lactating mothers are further entitled to receive cash
maternity benefit of not less than Rs. 6,000 to partly compensate for the wage loss during the
period of pregnancy and also to supplement nutrition.

In case of non-supply of the entitled quantities of foodgrains or meals to entitled persons

under NFSA, such persons shall be entitled to receive such food security allowance from the
concerned State Government to be paid to each person, within such time and manner as may
be prescribed by the Central Government. These provisions are governed through the Food
Security Allowance Rules, 2015.

RESPONSIBILITIES UNDER NFSA

NFSA defines the joint responsibility of the Centre and State/UT Government. While the
Centre is responsible for allocation of required foodgrains to States/UTs, transportation of
foodgrains up to designated depots in each State/UT and providing central assistance to
States/UTs for delivery of foodgrains from designated FCI godowns to the doorstep of the
FPSs, the States/UTs are responsible for effective implementation of the Act, which inter-alia
includes identification of eligible households, issuing ration cards to them, distribution of
foodgrain entitlements to eligible households through fair price shops (FPS), issuance of
licenses to Fair Price Shop dealers and their monitoring, setting up effective grievance
redressal mechanism and necessary strengthening of Targeted Public Distribution System
(TPDS).

COVERAGE AND ENTITLEMENT UNDER NFSA

NFSA covers up to 75% of the rural population and 50% of the urban population under
Antyodaya Anna Yojana (AAY) and priority households. While AAY households, which
constitute poorest of the poor are entitled to 35 kg of foodgrains per family per month,
priority households are entitled to 5 kg per person per month. Corresponding to the all-India
coverage of 75% and 50% in the rural and urban areas, State-wise coverage under NFSA was
determined by the erstwhile Planning Commission (now NITI Aayog) by using the NSS
Household Consumption Survey data for 2011-12. Within the coverage under TPDS
determined for each State, the work of identification of eligible households is to be done by
States/UTs. It is the responsibility of the State Governments/UTs, to evolve criteria for
identification of priority households and their actual identification. Section 10 of the Act
provides that within the number of persons determined for coverage under TPDS, the State
Government shall identify the households under AAY as per guidelines applicable to the said
scheme and the remaining households as priority households to be covered under TPDS, in
accordance with such guidelines as the State Government may specify.

CENTRAL ISSUE PRICE UNDER NFSA

Foodgrains under NFSA were to be made available at subsidized prices of Rs. 3/2/1 per kg
for rice, wheat and coarse grains respectively for an initial period of three years from the date
of commencement of the Act (July 13, 2013). Thereafter, prices were to be fixed by the
Central Government from time to time, but not exceeding MSP. Government has decided
from time to time to continue the above-mentioned subsidized prices under NFSA and their
validity has last been extended up to June, 2019.

TIDE OVER ALLOCATION

Tide over allocation is the additional quantity of food grains that is protected for states and
union territories (UTs) whose allocation under the National Food Security Act (NFSA) is
lower than their current allocation. The Act provides that in case any State/UT’s allocation
under NFSA is lower than their current allocation, it will be protected up to the level of
average offtake under erstwhile normal TPDS during 2010-11 to 2012-13, at prices to be
determined by the Central Government. Prices for APL households under erstwhile TPDS i.e.
Rs. 6.10 per kg for wheat and Rs 8.30 per kg for rice has been determined as issue price for
the additional allocation under Tide Over.

DIRECT BENEFIT TRANSFER (DBT)

National Food Security Act (2013) provides for reforms in the TPDS including schemes such
as Cash transfers for provisioning of food entitlements. In pursuance of enabling provisions
under section 12 of NFSA for cash transfer, Govt. notified ‘Cash Transfer of Food Subsidy
Rule, 2015’ in Aug 2015. The DBT experiment aims to (i) reduce the need for huge physical
movement of foodgrains (ii) provide greater autonomy to beneficiaries to choose their
consumption basket (iii) enhance dietary diversity (iv) reduce leakages (v) facilitate better
targeting (vi) promote financial inclusion.
Direct Cash Transfer in food was started in UTs of Chandigarh and Puducherry from
the month of September, 2015 and part of Dadra & Nagar Haveli from March, 2016. In
these UTs, NFSA is being implemented in cash transfer mode under which cash equivalent of
subsidy is being transferred directly into the Bank accounts of eligible households to enable
them to purchase foodgrains from open market. The Scheme is optional for States/UTs and
operates in "Identified areas” in a State or Union territory or any specified area within the
State or Union territory for which there is a written consent of the State Government for
implementation of the Scheme. Prevailing system of distribution of food grains through
Public Distribution System may continue in the remaining areas not covered under the
Scheme.

POWER OF CENTRAL GOVERNMENT TO MAKE RULES

Under Section 39(1) of NFSA, the Central Government may, in consultation with the State
Governments and by notification, make rules to carry out the provisions of the Act. The
following Rules have been notified by the Central Government:

i. Provisioning of Funds to State Governments for Short Supply of Foodgrains Rules, 2014.

ii. Food Security Allowance Rules, 2015.

iii. Food security (assistance to State Government Rules) 2015

iv. Cash Transfer of Food Subsidy Rules, 2015

v. Notification of WCD and HRD

Section 40 of the National Food Security Act provides that the State Governments may, by
notification and consistent with the Act and the rules made by the Central Government, make
rules to carry out the provisions of this Act.