Expenditure management in the public distribution system

Abstract

Food subsidy is a significant part of the cost incurred by the national exchequer. The Public Distribution System (PDS) has been long criticised for its inefficient track record with enormous leakages. This is a significant loss to the country. One of the main reasons for existence of leakages in the PDS system is the price differential that exists between market prices of food grains and the price at which it is sold at PDS. Additionally, the PDS has also faced criticism in recent years with regardsto the quality of food distributed through them, transparency in the distribution network, and lack of coverage for passing benefits to the lower economic strata.This paper describes a new model for the PDS which makes use of technology along with appropriate process changes to address the issues plaguing the current system. It proposes changes to the mannerin which food grains are supplied to Fair Price Shops (FPS) and last mile delivery of grains to entitled individuals. Together, it leads to the creation of a robust tight system aimed at effective delivery ofbenefits to the needy individuals without wasteful leakages. Moreover, the paper considers the fact that more than ensuring mere food security, it is also important to ensure that the needy receive a nutritious meal at an affordable price. For this, the paper recommends making use of the extensive reach of the PDS to distribute a more nutritious mix of food items to the poorer masses of the country.Usage of PDS as a tool to regulate prices of critical food items will also result in significant cost savings for the poor and the nation as a whole.