Context: 

A new report by the Indian Council for Research on International Economic Relations (ICRIER) has revealed that 69000 crores worth of the grains, meant for India's Public Distribution System (PDS), never reached to the intended beneficiaries. 

More on the news

• According to ICRIER, this 28% of vanished ration resulted in an estimated annual economic loss of over ₹69,000 crore to the government in the implementation of PM Garib Kalyan Anna Yojna (PMJKAY).
• The report uses data from the Household Consumption Expenditure Survey (HCES) and the Food Corporation of India’s (FCI) monthly offtake figures (Aug 2022 - July 2023).

Key Highlights of the report:

• The analysis of the report indicates that around 20 million tonnes of rice and wheat, meant to feed 814 million people under government programs, are either diverted to the open market or exported.
• Annual leakage of 20 million tonnes is an improvement from 46% wastage in 2011-12 but still is a major concern.
• The introduction of point-of-sale (POS) machines in ration shops in 2016 along with integration of Aadhar card has reduced leakages but hasn’t fully solved the problem yet.

State-wise Leakage Rates:

• Highest Leakage: Arunachal Pradesh, Nagaland, and Gujarat report the highest rates, with northeastern states struggling due to lack of digitalization.
• Significant Improvements: Bihar reduced leakage from 68.7% in 2011-12 to 19.2% in 2022-23. West Bengal reduced leakage from 69.4% to 9% during the same period.
• Top in Absolute Terms: Uttar Pradesh has an estimated leakage rate of 33%.

Recommendations of the report: 

Targeting Beneficiaries More Effectively: The PDS currently covers 57% of India’s population, but only the bottom 15% need free food. 

• A targeted system, where those between 15-57% receive grains at 50% of MSP, could reduce costs and better allocate resources for development.

Transforming Fair Price Shops into Nutrition Hubs: Some FPSs can be reformed into nutrition hubs using food coupons (e-coupons or vouchers) to ensure only eligible individuals get subsidized grains. 

• Digital tracking systems would reduce fraud and improve food security and nutrition.

Direct Benefit Transfers (DBT) for Ration Card Holders: Switching to DBT would allow beneficiaries to choose their food, cut down on waste, and reduce administrative costs. 

• Linking cash transfers to Aadhaar ensures targeted support but may face resistance from intermediaries like FPS owners.

About PDS

India’s PDS serves over 800 million people, making it one of the largest welfare programs globally. 

PDS is operated under the joint responsibility of the Central and the State/UT Governments. 

• The Central Government, through Food Corporation of India (FCI), has assumed the responsibility for procurement, storage, transportation and bulk allocation of food grains to the State Governments. 

Under the PDS, presently the commodities namely wheat, rice, sugar and kerosene are being allocated to the States/UTs for distribution. 

The current government has extended Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) until 2028, providing five kg of grains per month to 813 million people, with food subsidy expenses reaching Rs 2.72 lakh crore in FY23 and Rs 2.12 lakh crore in FY24.