Organization and Working of Public Distribution System in India a Critical Analysis

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  Research on Humanities and Social ISSN 2224-5766(Paper) ISSN 2225-0484(Online)Vol.1, No.1, 2011 4 | Page  Organization and Working of Public Distribution System inIndia: A Critical Analysis Brij Pal 1* 1.   Department of Public Administration, S. A. Jain College, Ambala City 134003, Haryana, India* E-mail of the corresponding author: Abstract   The Public Distribution System (PDS) plays an important role in the provision of food security. PDS inIndia facilitates the supply of food grains to the poor at a subsidized price. It also helps to modulate open -market prices for commodities that are distributed through the system. Government accords greatimportance to the objective of measuring outcomes of PDS so as to ensure that equal distribution systemserves up the purpose for which it was set up. The present paper critically analyzes the organizationalstructure and their loopholes in the functioning of agencies like Food Corporation of India & CentralWarehousing Corporation engaged in the procurement, transportation, storage and distribution. Andsuggests remedial measures to make the PDS transparent, efficient and effective without which the visionof food for all cannot be attained in India. Keywords: PDS, Food-Security, FCI 1. Introduction Food security at the level of each individual child, woman and man is the first requirement for a healthyand productive life. Jawaharlal Nehru had said in 1947, everything else can wait, but not agriculture .These words are more relevant today than 65 years ago, since our population has grown from 300 to 1,200million during this period. The vision of food security in developing country like India where corruption isprominent in every sphere of public life can’t be fulfilled without the transparent and effectivePublicDistribution System (PDS) which is a programme of food security that provides a minimum amount of cereals at subsidized prices. Recent data from the 61st round of the National Sample Survey in 2004-2005establishes that targeting of PDS has led to high rates of exclusion of deprived households from the systemand clear worsening of coverage in various States. The concept of Public Distribution System in Indiaappeared during 1942 for the first time in the modern shape as a result of shortage of food grains duringWorld War. Consequently Government started intervention in release of food to the people. Thisinterference of Government in distribution of food grains sustained in major cities, towns & certain otherfood dearth areas. Infect PDS in India is more than half-a century old as rationing was first introduced in1939 in Bombay by the British Government as a measure to ensure equitable distribution of food grains tothe urban consumers in the face of rising prices. Thus, rationing in times of crisis particularly during faminewas the historical ancestor to the national policy of stabilization and management of food grains.In the face of indistinct inflationary pressures in the economy immediately after Independence, theGovernment had to reintroduce rationing in 1950. India retained public distribution of food grains as afocused social policy, while it embarked on the path of designed economic development in 1951. In theFirst Five Year Plan, the scope of distribution system was broadened to make comprehensive to cover allsuch rural areas which suffered from stable food shortages. Earlier this programme was basically urbancentric. However, truly speaking food production dropped in 1958, when the Second Plan had justcommenced. This factor forced the Government to restart procurement of food grain and cereals andimpose control on trading of food grains. It also decided to re -introduce PDS. 2. Concept of Public Distribution System  Research on Humanities and Social ISSN 2224-5766(Paper) ISSN 2225-0484(Online)Vol.1, No.1, 2011 5 | Page  PDS is a system whereby accessibility of vital supplies is assured within easy reach of the consumers inevery corner and bend of the country. This is a transaction system where food grain, sugar, and othernecessary items like kerosene oil and edible oil etc. are made available to the people of the state atreasonable price to meet their minimum needs. Regular and timely availability of supplies is assuredthrough close monitoring system to make PDS an effective instrument against various forces in the openmarket and to keep under check the inflator tendencies. Certain supply on fixed and reasonable prices alsokeeps in control the changeable trends of market due to vagaries of whether and subsequent changingprospects of crops. It serves as a steady stable check on market forces and work as an effective stabilizingfactor. PDS also serves as an effective tool of social welfare and directly contributes to the development of rural population at large and the poorest of the poor in particular who can not afford to buy necessary andessential items from open market. PDS also serves as an instrument of rural development especially in far –flung and inaccessible areas.   For the sake of clarity, the history of PDS in India can be into four phases. The first phase was from itssrcins to 1960, a period when the system was extended to other cities. During this phase, distributionthrough PDS was usually dependent on imports of food grain. The second phase, from 1960 to 1978, wasone which proverb major organizational changes. Specifically, in response to the food crisis of the mid-1960s, the government of India took a holistic approach to food security, procurement and storage. Thethird phase, from 1978 to 1991, was marked by large-scale growth of the PDS, supported by domesticprocurement and stocks. The fourth phase, from 1991 to the present, is one in which the policy of universalPDS has been replaced by a targeted policy in line with the objectives of economic liberalization. Thus,over the entire period, the PDS grew from a rationing scheme in selected cities to a national universalprogramme of food distribution and then to a policy targeted at the income-poor. 3. Organization and Working For the proper management and distribution of food grains the government of India has created Ministry of Consumer Affairs, Food and Public Distribution. The ministry has been divided into two departmentsnamely Department of Food and Public Distribution and Department of Consumer Affairs. The departmentof food and public distribution is again divided into two parts for the purchase and storage of food grain. 3.1 Food Corporation of India (FCI) FCI was setup on 14th January 1965 having its headquarters at Chennai under the Food Corporations Act1964 to implement the following objectives of the National Food Policy: ã   Efficient price support operations for conservation the interests of the farmers. ã   Distribution of food grains throughout the country for Public Distribution System and ã   Maintaining satisfactory level of operational and buffer stocks of food grains to ensure NationalFood Security.FCI is the largest corporation in India and probably the largest supply chain management in Asia. Itoperates through 5 zonal offices and 26 regional offices. Each year, the Food Corporation of Indiapurchases roughly 15-20 per cent of India's wheat output and 12-15 per cent of its rice output (Singh & Sen2011). The purchases are made from the farmers at the rates declared by the Govt. of India. This rate iscalled as MSP (Minimum support Price). There is no limit for procurement in terms of volume; anyquantity can be procured by FCI provided the stock satisfies FAQ (Fair Average Quality) specificationswith respect to FCI. The stocks are elated through all India and issued to the State Government nominees atthe rates affirmed by the Government of India for further distribution under the PDS for the use of theration card holders. FCI itself does not directly deal out any stock under PDS and its operation end at theway out of the stock from its depots. The difference between the purchase price and sale price, along withinternal costs, are reimbursed by the Union Government in the form of Food Subsidy. At present the annualsubsidy is around $10 billion (Sud 2011). FCI by itself is not a Decision making authority; it does not  Research on Humanities and Social ISSN 2224-5766(Paper) ISSN 2225-0484(Online)Vol.1, No.1, 2011 6 | Page  decide anything about the MSP, imports or exports. It just implements the decisions made by the Ministryof Food and Ministry of Agriculture. 3.2 Central Warehousing Corporations (CWC) The policy purpose is to produce available storage ability necessary for (i) buffer and ready stock of foodgrains to supply to the Public Distribution System and (ii) General Warehousing. The attempt is to updatestorage ability and to decrease dependence on the capacity under Cover and Plinth (CAP). There are threeagencies in the public sector which are engaged in building large scale storage/ warehousing capacity,namely, Food Corporation of India (FCI), Central Warehousing Corporation (CWC) and 17 StateWarehousing Corporations (SWCs). While the ability accessible with FCI is used mainly for storage of food grains, but CWC and SWCs is used for storage of food grains and also other notified commodities.The Warehousing (Development and Regulation) Act 2007 was enacted and notified in September 2007.The Act ensures that the farmers are able to keep their goods in certified warehouses and use warehousesreceipt as a negotiable instrument. With the full execution of this Act, farmers would find it easy to takeloans from commercial banks against negotiable warehouse receipts and not resort to distress sales to takecare of their urgent cash needs. The Act has since been given effect to in September, 2010. A regulatoryAuthority namely Warehousing Development & Regulatory Authority (WDRA) has been set up on26.10.2010 under the Act to register and regulate warehouses issuing negotiable warehouse receipts and toimplement other Provision of the Act. 4. Food Procurement Policy The stockpile of food grains available with the government agencies as on 1 July 2002 was 63.01 milliontonnes (mt) — (21.94 mt of rice and 41.07 mt of wheat). This was well above the prescribed buffer stock norms. While the changing demand patterns is one reason for the buildup of surplus food grains, anotherfactor is the propensity of consecutive governments to fix minimum support prices (MSP) for paddy andwheat in excess of the levels prescribed by the Commission for Agricultural Costs and Prices (CACP).While this has given the farmers an incentive to produce more but it has raised the market prices andreduced the demand for cereals. Studies conducted at the National New Delhi, show that fixing of procurement prices at various levels , higher than the CACP’s recommendations has led to the procurementof an additional quantity of 12.8 mt of wheat and 3.4 mt of rice (George 2010). These points to the need tostrictly adhere to the recommendations of the CACP. A realistic MSP will help in promoting thediversification of cropping patterns. The system of MSP served the country well in the past three and a half decades but has started encountering certain problems in recent years. This is because the agriculturalproduction scenario has undergone significant changes over the past four years.Many states, including formerly deficit states like Bihar, Assam and Uttar Pradesh, have reported surplusesof several agricultural commodities, especially cereals and this trend is likely to continue in the comingyears as well. The average production of food grains, which was 187 mt during the Eighth Five Year Plan,is expected to have increased to 205 mt in the Ninth Five Year Plan (Revallion 2009). Thus, the increase inaverage total food production is in excess of the total food grains requirements of around 196 mt at the endof the Ninth Plan as worked out on the basis of normative approach.. The food grains has to be procure atthe Minimum Support Price (MSP) fixed by the Government. The MSP for Common and Grade 'A' paddywas fixed at Rs 1000/- and Rs 1030/- per quintal respectively for the 2010-11 Kharif Marketing Season(October, 2010- September, 2011). The MSP of wheat was fixed at Rs1100/- per quintal for the RabiMarketing Season 2010-11. The comparative MSP of wheat and paddy since 2004-2005 to 2010-2011(marketing seasons) is given in table no. 2.. 5. Transportation and Storage Transportation and storage from procurement centre to the regional depots is the responsibility of FCI.Transportation is generally arranged through private contractors. Lifting of grains from the regional depots  Research on Humanities and Social ISSN 2224-5766(Paper) ISSN 2225-0484(Online)Vol.1, No.1, 2011 7 | Page  to the issue centre is mainly the responsibility of the Civil Supplies Corporation of the state government.From the issue centre to FPSs it is the responsibility of FPSs , except in state of Andhra Pradesh where thestate government provides transportations . Proper storage of such large stocks is an important aspect of Public Distribution System (PDS). The main goal is to keep the cost down and to prevent deterioration instocks. Various agencies are engaged in this process. But there is chances of corruption during thetransportation as a case came into existence in Ambala district of Haryana state .A truck having 200 KT.wheat as a part of Antyodaya Anna Yojna scheme under PDS was taking it in the open market to be soldwas captured by the police. Hence there is possibility of corruption in PDS, if the transportation system ishired from private agencies. 6. Problems The problems of Public Distribution System have not been uniform in the country. In some states theadministration is weak and corrupt. In these states deficiencies regarding huge shortage of stocks, fakesupply entries in ration cards, diversion of commodities for sale to open market and bogus ration cards arenoted. PDS suffers from irregular and poor quality of food grain made available through Fair Price Shops(FPS). The position in rural areas in this respect is much worse than urban areas .The PDS in rural areas hasnot been given much attention. Most of the FPSs are economically non-viable, which is the main reason forthe low rate of commission. The storage facilities in India are not sufficient to cope with the problems.There is also a possibility of corruption at local level. The procurement system in India is not uniform. Thedistribution system of essential commodities is so meager that it can hardly suffice the need of a family.And even for this the consumers have to make repeated visits to the ration shops in their respective areas.Most of the times they come back empty handed with assurance that ration would be made available tothem in the next week. 7. Policy and Procedural Suggestions The following reforms may help in improving the situation confronted with PDS in India and ease of usefor the poor:   ã   Presently, the BPL cardholder is identified by the local bureaucracy with the help of GramPanchyat and there is no involvement of Gram Sabha in this process. There is no clear policy forthe identification of BPL families and sometimes fake BPL cards are made by the bureaucrats byinvolving the Sarpanches/ Panches .The bureaucrats should involve the GS in the selection of BPL card and the list of the BPL families should be passed in the meetings of the GS. ã   The PDS is not equipped with the proper storage and transportation facilities. There are variousprivate agencies engaged in the process of transportation. Besides, the FCI and SFCs do not haveproper storage facilities. The government should provide transportation to depot holder for takingration from the district/ regional stores to the FPSs so that there can be check on the corruptpractices while transportation. The state government should construct more storage godowns withthe involvement of local bodies. ã   It has been found in many states that ration cards are being mortgaged to ration shop owners andthe beneficiaries are not aware about their rights. It is suggested that there should clear cut policyregarding ration cards. All card holders must be motivated and should be made aware about theirrights. A penalty should be imposed on such owners who are involved in such activities. ã   In most of the states the FPSs are equipped with wheat and rice items only. There is nonavailability of other essential products on FPSs. It is suggested that the dealers should beencouraged to make their shop a multi-product shop so that the customers can be satisfied under asingle roof.  8. Conclusion
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