Food Security and the Public Distribution System

In one of the previous posts I had written that I will discuss about the PDS. Since the topic is too exhaustive, I will break it down into parts covered over some posts.

(I) Public Distribution System is the physical implementation of the Government mission to provide food security for all. It is the means to the end i.e. the target of feeding over 1.1 billion people in India. Though many of these people are today self sufficient in managing ‘un-subsidized’ foodgrains on their own, a huge portion of Indian population is still dependent on the food subsidy.

(II) In opinion of a group of academicians, the subsidy and the corruption in the system of PDS actually distorts the free trade and thus harms the poor by indirectly raising the price of the food grains. The figures proposed by these people of allotted food grains actually reaching the right beneficiaries varies from 80% to as low as only 1 %. They opine, if left to market forces, the price of the food grains will adjust as per the demand and supply forces and elimination of corruption could even bring the prices down.
A fair point if it can be established by some mechanism.

(III) However, historically there have been few instances when such market forces have been efficient enough in case of food security to keep the prices low and distribution efficient. The reflection of this failure is evident in the famous Bengal famines during pre independence era where immense loss was caused by the failure of distribution system (and not lack of food grains). Going further down in history is the evidence of regional armies (corresponding to some state boundaries) attacking the neighbour to mitigate crop scarcity in their own region.

(IV) This points to the actual problem, which is the unequal distribution of food grain production, arising due to differences in rainfall across the country, differences in soil productivity and the differences in population density vis-à-vis local crop production.

(V) PDS, despite its weaknesses, has been able to transfer the grains from the surplus regions to the deficient regions. Not to mention that a major portion of the subsidy in the schemes is consumed in transferring the food grains from one region to another.

(VI) What could the prices of foodgrains look like without PDS is evident from the price ranges of Rs 15- 30 per kg for medium quality rice and from some Rs 30 per kg to as high as Rs 80 per kg for scented rice. However, the benefit of high prices rarely transfers to the cultivator i.e. the farmer, in our ‘free market economy’.

(VII) While working in the District and being involved in the procurement of food grains for the Government, I observed that the private purchasers or the middlemen delay the purchase of foodgrains from the farmers after the harvest of the crop. By this time, a vast majority of the small and medium farmers have spent their savings in cultivating the crop and many are under debt. Every passing day that delays the purchase of the crop from the farmer, also breaks the resistance of the farmers to avoid what is known as ‘distress sale’ of the crop. This purchase of the crop by the middlemen at throw away prices is avoided through the minimum support price of procurement declared by the Government.

(VIII) PDS not only provides food grains to the below poverty line people (through PDS) and the old people (Annapurna Yojana) and the poorest of the poor (Antyodaya Yojana) but also protects the poor farmers from distress selling their crop as they can sell it to Government at the minimum support price. (You are right if you are thinking of the demand and supply curves of Micro economics and the loss of the consumer surplus explained there)

(IX) However, the fate of the farmers growing cash crops (instead of food grains which have a support price) is evident in the form of occasional suicides by farmers when the market fails to buy their produce even at the break even point. The issue of loss of consumer surplus, to me, is also artificial. Since in the minimum support price some people who have surplus income are paying more for the Government procurement. This consumer surplus is much less than what people lose while buying the scented rice in the suggested ‘free market’. Certainly, the market price here is not a free market intersection of demand and supply curves. Instead it is a reflection of monopoly power of some in an unregulated market.

With this background in perspective, in my opinion, it is the PDS which has been the biggest binding factor of the Indian Nation State in the post independence period. We do see the rising tension between the states for distribution of river water during the sowing period, but the tensions are immediately subdued due to maintenance of the buffer stock of the grains and transfer of those before the situation aggravate.

So is this system perfect as it is? Is it really corrupt? And if yes, how does this corruption works and whether we can target it? Some of these questions have been pressing the Government, media and academicians consistently in the past and remain one of the prime agendas for Government for some time until a really workable solution is found. These and some more questions, like how have some large multinationals been able to tackle some of the issues involved through efficient supply chains?, I would discuss gradually over next few posts.