During the discussion on the National Food Security Act (NFSA) 2013, there was nervousness about guaranteeing food security through the Public Distribution System (PDS). The nervousness stemmed from the poor record of the PDS — according to National Sample Survey (NSS) data, in 2011-12, at the all-India level, leakages were at 41.7%.
The main argument in favour of continuing with the PDS was that States that had undertaken PDS reforms had witnessed major improvements. Between 2004-5 and 2011-12, several early reforming States saw a dramatic reduction in leakages: Bihar (from 91% to 24%), Chhattisgarh (from 52% to 9%) and Odisha (from 76% to 25%). With the same package of PDS reforms being mandated by the NFSA 2013, there was hope that more States could improve.
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The NSS’s Household Consumption Expenditure Survey (HCES) data for 2022-23 bears out this hypothesis. The HCES is the first large-scale nationally representative survey after the implementation of the NFSA 2013. It suggests that PDS leakages were down to 22% in 2022-23.
Understanding the data and methodology
PDS “leakages” refer to the proportion of PDS rice and wheat released by the Food Corporation of India (FCI) that fails to reach consumers. Leakages are estimated by matching NSS data on household PDS purchases with “offtake” data reported in the Monthly Food Grain Bulletin of the Food Ministry.
During the reference period (August 2022 to July 2023), PDS ration card holders were getting NFSA grain (five kilograms per capita per month for “Priority” households and 35 kg per month for “Antyodaya” households). In addition, they got Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) grain till December 2022, when PMGKAY Covid-19 relief was discontinued.
To arrive at the estimates presented here, offtake under NFSA including tide-over rations, Non-NFSA and PMGKAY is matched with HCES 2022-23 PDS purchase of (paid for and free) wheat and rice by households.
It is worth bearing in mind that these are estimates, the best possible with available data. Any mismatch between offtake and purchase is attributed to leakage, though there could be other reasons (transport losses, lags in supply and so on). For instance, the Table shows how lagging offtake by a month (July-June) yields a lower leakage estimate (17.6%), than if we match the offtake with the NSS reference period (August-July) – 18.2%. Both, however, are underestimates.
Why underestimate? Some States run an “expanded PDS”, providing PDS grain to non-NFSA beneficiaries using central contributions (for example, tide-over rations and non-NFSA allocations) as well as State contributions (for example, local procurement). For example, Chhattisgarh’s food security act, passed in 2012, made the PDS quasi-universal using local procurement. The all-India leakage estimates of 17.6%-18.2% are underestimates, because they only take into account central contributions, and not State contributions.
There are 14 crore non-NFSA beneficiaries, of whom at the most six crore are supported entirely through State contributions. If we add the State’s contribution for State-supported non-NFSA beneficiaries to total offtake, the all-India leakage estimate rises to 22%.
Impact of NFSA on PDS coverage
One of the major PDS reforms included in the NFSA 2013 was an expansion of PDS coverage that was aimed at reducing exclusion errors, but had a ‘spillover effect’ on reducing leakages. In 2011-12, before the NFSA, less than 50% of households had ration cards, and the proportion of households getting anything from the PDS was around 40%. That was an improvement over 2004-05, when less than a quarter (24%) of households were accessing the PDS.
The improvement between 2004-5 and 2011-12 was driven by reforms in States such as Chhattisgarh and Odisha where the PDS coverage increased substantially in this period. For instance, in Chhattisgarh, there was a three-fold increase (from 21% to 63%) in the proportion of households using the PDS. According to HCES data, in 2022-23, the proportion of households buying from the PDS has increased further to 70%. In large part, this is the result of the rollout of the NFSA.
In spite of the improvement in coverage, the Centre is falling short of the coverage mandated by the NFSA (50% of rural population and 75% of urban population), i.e., around 66%. Earlier work, based on administrative data, suggested that only 59% had access to the PDS as NFSA beneficiaries. Similarly, according to the HCES, out of the 70% who access the PDS, only 57%-61% have NFSA ration cards. The rest (roughly 10%) are non-NFSA beneficiaries.
PDS reforms undertaken by early reforming States such as Chhattisgarh and Odisha included a reduction in PDS prices, doorstep delivery of foodgrains, digitisation of records, deprivatising management of PDS outlets by handing them over to panchayats, and self-help groups. These reforms were incorporated in the NFSA 2013 (Chapter V).
As mentioned earlier, by 2011-12, PDS leakage estimates in the early reforming States had already crashed. Since then, more States with high leakages have managed to reduce them. According to HCES 2022-23, it was 9% in Rajasthan. 21% in Jharkhand and 23% in Uttar Pradesh (all one-time basket cases).
Many believe that the integration of Aadhaar, especially Aadhaar-based biometric authentication (ABBA), led to the improvements in the PDS. Data from primary surveys, however, do not support this. Two surveys in 2017 in Jharkhand shed light on this issue. A study by Muralidharan, Niehaus and Sukhtankar found that leakages before the introduction of ABBA were already less than 20%. Drèze, Khera and Somanchi reported that the purchase-entitlement ratios (the proportion of entitlement that people actually purchased) in offline villages and ABBA villages were virtually the same — 94% and 93%, respectively. Both surveys found little evidence of ghost cards.
Somewhat puzzlingly, leakages in States where the PDS traditionally worked better have not experienced further improvements; in fact, in some, estimated leakages have increased (example, in Tamil Nadu from 12% in 2011-12 to 25% in 2022-23).
In perspective
The PDS is now a functional instrument of social policy, guaranteeing a modicum of food security to many. During the COVID-19 lockdowns, it formed the backbone of relief efforts, along with the National Rural Employment Guarantee Act. However, the PDS remains an endangered instrument of social policy, constantly subjected to “innovations”. These include cash transfer experiments, door-step delivery to people’s homes (in Delhi), and imposing inappropriate technologies (such as Aadhaar-based biometric authentication).
Instead of expending energy on ill-conceived measures (such as the ongoing eKYC drive for the PDS) that can easily derail the PDS, scarce government capacity should be channelled to expediting the delayed Census, that is leading to the exclusion of over 100 million people. Other demands such as the inclusion of more nutritious items such as pulses and edible oil remain relevant.
Reetika Khera is Professor of Economics at IIT Delhi
Published - September 06, 2024 12:16 am IST
