Food Security and the Public Distribution System Pranab Banerji
Evolution of the PDS Genesis: food problem of late 50s & 60s Green revolution Economic reforms 1991 Revamped public distribution systems (RPDS) 1992 (1752 DDP, DPAP, ITDP etc. blocks) Targeted public distribution systems (TPDS) 1997, 2000 (BPL, AAY, APL)
Objectives of Food Policy Assuring remunerative rates for farmers Supply of food grains at reasonable prices to consumers (through the PDS) Poverty alleviation
Main Activities Market interventions, imports, buffer stocking and regulation Public Distribution System: Procurement, Storage, Movement, Distribution, Delivery
PDS: Responsibility of cetnre and states Centre s responsibilities Procurement Storage Transportation Bulk allocation of food grains Subsidies States responsibilities Identification of BPL families Issue of ration cards Allocations with in the states Intra state transportation Licensing of FPSs Supervision & Monitoring
Procurement Objectives: remunerative prices, service PDS, buffer stocks Minimum support price Procurement of wheat, paddy and levy rice CACP s recommendations and MSP Fixing of procurement prices at levels higher than the CACP s recommendations has led to the procurement of an additional quantity of 12.8 mt of wheat and 3.4 of rice.
CACP prices and MSP (Wheat) (Rs./quintal) Year 1997-98 1998-99 1999-00 2000-01 2001-02 Price recommended by CACP 405 455 490 550 580 Price announced by Govt. 475 510 550 580 610
Minimum support price (Rs./quintal) Years 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 Wheat 620 620 630 640 650 750 Paddy Common Grade-A 530 560 550 580 560 590 570 600 580 610 -- --
Procurement of rice for central pool (in lakh tonnes) Years Procurement FCI State Agencies Total 2002-2003 72.96 91.14 164.10 2003-2004 109.73 118.55 228.28 2004-2005 116.31 130.52 246.83 2005-2006 109.77 166.80 276.56 2006-2007 110.04 18.65 128.69
Procurement of Rice, Kharrif (2005-06) in lakh tonnes States Andhra Pradesh Chhattisgarh Haryana Madhya Pradesh Maharashtra Orissa Punjab Tamil Nadu Uttar Pradesh Uttaranchal Others Quantity Procured 49.72 32.64 20.54 1.36 1.94 17.85 88.55 9.26 31.51 3.36 19.83 % of Quantity Procured to Total Procurement 17.97 11.80 7.43 0.49 0.70 6.45 32.02 3.35 11.39 1.20 7.17
Procurement of Wheat (2006-07) in lakh tonnes States Quantity procured FCI State Agencies Total Haryana 2.69 19.60 22.29 M.P. 0.00 0.00 0.00 Punjab 10.63 58.83 69.46 Rajasthan 0.02 0.00 0.02 U.P 0.05 0.44 0.49
Food Subsidy of the Central Government Year 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1999-00 2000-01 2001-02 2001-02 2002-03 Amount (Rs. Crore) 2450 2850 2785 5537 4509 4960 5166 7500 8700 9200 12125 17612 21200 % of total Govt. Expenditure 2.33 2.56 2.27 3.9 2.8 2.78 2.46 3.23 3.11 3.03 3.61 4.83 5.17
Objectives of buffer stocks Meet the prescribed minimum buffer stock norms for food security For monthly releases of food grains for supply through the Public Distribution System/Welfare Schemes To meet emergent situations arising out of unexpected crop failures, natural disasters etc. For market intervention to augment supply so as to help moderate the open market prices.
Issues in buffer stocking Base level stocks PDS & welfare schemes Stabilization factor Minimum & maximum stocks Sources of stock
Normative stocks for the central pool (With effect from April 2005) In Lakh Tonnes DATE RICE WHEAT TOTAL 1 st April 122.0 40.0 162.0 1 st July 98.0 171.0 269.0 1 st Oct. 52.0 110.0 162.0 1 st Jan. 118.0 82.0 200.0
Actual & Minimum buffer stocks (in lakh tonnes As on 01.01.2002 01.01.2003 01.01.2004 01.01.2005 01.01.2006 Actual Stock 580.32 482.02 244.14 216.94 188.00 Total Minimum buffer norms 168.00 168.00 168.00 168.00 200.00 1.01.2007 177.06 200.00
Distribution & Delivery Identification of BPL households:inclusion, exclusion & ghost cards Licensing of fair price shops: issues relating to viability Market prices and off take Leakages
CIPs of wheat Effective from 1.7.2002 to till date BPL APL AAY 415 610 200 (w.e.f. 25.12.2000) CIPs of Rice Effective from 1.7.2002 to till date BPL APL AAY 565 830 300 (w.e.f. 25.12.2000)
Limitations of TPDS GOI spends Rs. 3.65 to transfer Re 1 to the poor About 57% of subsidized grains does not reach the target group Implementation of TPDS is plagued by large errors of exclusion and inclusion. PDS is a less efficient mode of income transfer to the poor. The Economic costs of grains are higher than the market prices in most of the States Only 23% of sample FPSs are viable. The rest survive on leakages and diversions of subsidized grains.
Targeting Errors (% of households) States Exclusion Error Inclusion Error Shadow Ownership Error Karnataka 23.38 42.43 20.58 Madhya Pradesh 19.61 12.49 5.27 Tamil Nadu -- 49.65 10.20 Uttar Pradesh 26.75 13.25 10.50
Viability of FPS Nationally only 38.9% of the selected FPSs made a positive net income over their monthly recurring cost, while 22.7% could mop up a return of annualized 12% of their working capital and only less than a third of the latter could mobilize an income sufficient to justify the ownership and running of a FPS.
Factors affecting off take Open market prices Transaction costs Quality Own product Income/wealth
Alternatives (Tenth Plan) Restructuring of PDS Food Stamps and Food Credit Cards Decentralization of Operations Operation of Buffer Stocks and FCI Private Trade in Food grains TPDS, NPDS or UPDS?
Thank you