This presentation was given to offices of Bangladesh Civil Service at National Centre for Good Governance in Mussourie

1. Siraj Hussain
Ex Secretary Agriculture, Government of
India
Senior Visiting Fellow, ICRIER
Food Policy and Public Distribution
System in India

2. Indian Economy-Scaling new heights
 Reform process started in 1991
 In 1991, India was a member of the G77 group of
developing countries.
 In 2016, India is a proud member of the G20, the
most-powerful countries in the world.
 In 1991, India took 40% of the funds of the
International Development Association (IDA).
 Today, India is as much a donor as a recipient.
 India itself has become a substantial donor, including
a line of credit of $10 billion to Africa and $2 billion to
Bangladesh.
 Remittances from NRIs exceed 73 Billion $ a year
 FDI and Portfolio investments exceed 85 Billion $ a
year


3. Indian Economy-Scaling new heights
 Per Capita Income now 1700$ a year. Now India is a
middle income country
 However China per capita is six times higher
 Between 2004 and 2011, 13.8 Crore Indians rose
above Poverty Line
 Two consecutive droghts in 2014 and 2015 tackled
successfully and there were no reports of starvation
deaths
 India is now a 2 trillion $ Economy, poised to reach 3
trillion in a few years
 And yet some thing is missing……………………

4. The Challenge
 As per International Criteria about 21.3% of Indian
Population was below poverty line-Less than 1.9$ a
day in 2011. That is 25.95 crore people are poor
 Rangarajan Committee (July 2015) suggested rural
poverty line at Rs 32 per day and Rs 47 per day
respectively. Estimated number of poor was 36.3
Crore in 2011-12 that is 29.5%
 Many experts argue Indian poverty line is fixed too
low and it can not provide for even basic sustenance
 In any case one third of world’s poor live in India
 One in three malnourished people are in India
 42.5 % children under 5 are under-weight. Even
higher income states have malnourished children

5. Background
 After years of debate the National Food Security
Act became Law on September 12, 2013
 Guarantees delivery of 5 Kg of food
grains/person/month to all priority beneficiaries
 Pregnant women, lactating mothers and school
going children are entitled to free meals
 In case of non-supply GOI will give food security
allowance
 Poorest of poor-Antyoday will get 35 Kg
per/family/month

6. Who will select the eligible
persons
 State Govts are to decide who is poor
 They can use Socio Economic Caste Census
 About 81.35 crore persons or 16.57 crore
households are eligible
 10 crore children covered under mid day meal
scheme in schools
 Central Issue price fixed for three years at:
 Coarse grains Rs 1/Kg
 Wheat Rs 2/Kg
 Rice Rs 3/Kg

7. Estimated Requirement
 Currently it is 61.4 Million tonnes of Grains per
annum but it may rise to 75.39 Million tonnes by
2025
 Total Food Subsidy estimated to be Rs 1,31,000
crore
 All the States and UTs have implemented NFSA
except TN, Kerala and Nagaland
 TN had almost universal PDS so it wants that
every one should continue to get subsidised food
grains
 Jammu & Kashmir also wanted higher number
covered

8. Where will the food grains come
from?
 Wheat and paddy are procured at MSP
 MSPs are raised by Rs 40-50 every year
 Most of wheat is procured in Punjab, Haryana,
MP, UP and Rajasthan
 Most of rice is procured in Punjab, Haryana, UP,
Chhatisgarh, Odisha, AP, WB and Bihar
 Surplus wheat and rice is transported to deficit
states by FCI
 Storage capacity exists in most of the districts
 India built additional 140 Lakh tonnes storage
capacity under a unique PPP model

9. Procurement of Wheat and Rice
(Lakh tonnes)
Year Wheat Procured Rice Procured
2001-2002 206.30 221.28
2002-2003 190.26 164.22
2003-2004 158.01 228.81
2004-2005 167.96 246.85
2005-2006 147.85 276.56
2006-2007 92.26 251.06
2007-2008 111.28 287.36
2008-2009 226.89 341.04
2009-2010 253.82 320.34
2010-2011 225.14 341.98
2011-2012 283.35 350.41
2012-2013 381.48 340.44
2013-2014 250.92 318.45
2014-2015 280.23 320.40
2015-2016 280.88 340.54
2016-2017 229.30

10. Who procures the grains?
 Most of the wheat is procured by farmers by Agencies
of State Govts
 FCI procures only 10-15% wheat directly
 In Punjab and Haryana the state agencies store
grains and transfer it to FCI who transports grains to
consuming states. Grains are issued by FCI to State
Agencies for PDS
 Paddy is also procured directly from farmers by State
Agencies
 Rice procured from millers also through levy route
 In some States, procurement, storage and
distribution undetaken by State Agencies-called
Decentralised Procurement

11. The debate
 Will adequate supply of grains be ensured in the
long run. This year for example procurement of
wheat is only 229 Lakh tonnes
 What happens if climate change results in lower
production
 Gobal rice market is just 380-400 Lakh tonnes. If
India enters import market, prices will shoot up
 When only 22% people are poor, why should 67%
population be given highly subsidized grains
 States may identify larger number of poor than
recommended by Niti Ayog

12. The debate
 Govt monopoly of procurement may crowd out
private sector
 This will increase open market prices of wheat
and rice
 Cost of procured grains higher than market rates
due to fee/levies and Govt’s higher carrying cost
and interest charges
 It may slow down process of diversification of
Agriculture
 Possibility of recirculation of grains

13. The debate
 Due to assured procurement farmers growing rice
in water stressed regions like Punjab, Haryana,
Western UP
 Easters States more suitable for rice cultivation
e.g. Bihar, WB, Odisha
 Alternative crops are not as remunerative for
farmers as paddy due to assured procurement
 Farmers will not shift to higher value agriculture
due to fluctuations in market prices e.g. Basmati
Paddy prices down from Rs 5000/Qtl to Rs
1600/Qtl last year

14. The debate
 High leakages in Public Distribution System
 Estimates of Leakages range from 30% to 40%
 In some states, leakages are estimated to be as
high as 90%
 High leakages in case of Above Poverty Line
families
 Physical distribution of grains is an inefficient way
of distributing subsidy to poor
 High leakages in North Eastern States except
Mizoram and Tripura

15. What are the States doing now?
 Many states have gone in for end to end
computerisation
 Data base of ration card is being validated
through Aadhar- A unique identity number
 Point of sale machines installed at ration shops
 SMS messages sent to card holders when grains
arrive at ration shops
 De-duplication of bogus ration card holders
 But there are reports of poor connectivity
(Rajasthan) and POS machines failing to
recognise biometrics
 Card holders required to make multiple visits

16. Way forward suggested by
Experts
 High Level Committee (Shanta Kumar)
recommended reduction in entitlement from 67%
population to 40%
 Regularly review list of Antyodya Anna Yojna
(AAY) and Below Poverty Line (BPL)
beneficiaries. Remove ineligible persons
 Some states have 14-15% taxes on food grains,
thus crowding out private trade-Persuade State
Govts to reduce taxes
 Don’t procure excessive quantity of food grains
 Undertake Cash transfer to Eligible beneficiaries
 Move to direct income transfer by abolishing all

17. Case for cash transfer
 Problem of malnutrition is multi dimensional
 Give cash instead of grains
 Use Aadhar platform to transfer cash
 Several Social Security programmes already
transferring cash to bank accounts e.g.
scholarships, old age pension
 Subsidy on Cooking gas now directly transferred
to bank account (Scheme name PAHAL)
 Use accounts opened for unbanked persons
under Prime Minister Jan-Dhan Yojana, Link them
to Aadhar
 Pilot going on in Puducherry, Daman and

18. Limitations of cash transfers
 In food deficit States, hilly areas etc, physical
movement of grain will have to be continued to
ensure availability
 The pilot should be expanded to States having
higher literacy and higher bank penetration
 But the states are reluctant to withdraw supply of
food grains
 Several countries have moved to Conditional
Cash Transfers
 Bolsa Familia of Brazil and Opportunidades of
Mexico are successful models
 Mexico and China have also moved to cash
transfers

19. Critique of Cash transfer
 Infrastructure-Banking and Internet may not be
widespread
 Identification of beneficiaries still required to be
done by State Govts
 Cash in the hands of poor may lead to wasteful
consumption
 Rural markets are imperfect. Brazil much more
urbanised with higher literacy levels
 Cash transfers may affect food economy as Govt
may withdraw from procurement itself. It may
disintivise farmers.
 A 2011 study of UNDP in Delhi found that cash
transfer did not result in decrease in food
consumption

20. Summing up
 Providing food security to vulnerable population is
critical to human development and peace in
society
 Identification of beneficiaries is challenging task
as many deserving persons are excluded while
undeserving are included
 Cash transfers have proven successful for
cooking gas, pensions and other social sector
schemes
 Food Subsidy and Procurement of grains are
interlinked and affect crores of farmers and poor
households