The annual fiscal cost of leakage in the distribution of food grain to more than 800 million beneficiaries under the free rations scheme is estimated at Rs 69,000 crore, according to a study.
The report has estimated the grain leakage under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) at 17 million tonne (MT) of rice and 3 MT of wheat or 28% of the 71 MT of grain offtake by states during August 2022- July, 2023.
“This leakage of 20 MT of rice and wheat translates into a substantial financial burden, costing the exchequer Rs 69,108 crores in 2022-23 considering the economic cost of rice and wheat for that year,” a study titled ‘rationalising public distribution system in India’ by ICRIER.
The leakages in PDS was arrived at by taking into account monthly offtake of grain by states under free ration scheme and aligning it with the reference period of the Household Expenditure Survey, 2022-23.
The report stated that while reducing leakages under the public distribution system is a major policy concern, alongside re-evaluating the scope of the coverage of free grains to focus on the bottom 15% of the population, while the 15-57% income group could be given access to grains at half of the minimum support price (MSP).
‘This targeted approach could alleviate the exchequer’s burden while addressing the food security needs,’ the report stated.
In FY23, centre’s food subsidy’s expenses were Rs 2.72 lakh crore as the centre was allocating double the entitlement of 5 kg of grain per person under the National Food Security Act (NFSA) till December, 2023 as COVID relief measure, In 2023-24, the expenses (revised estimate) on account of food subsidy was Rs 2.12 lakh crore.
Reforms in PDS according to the ICRIER study could aim to reduce the excessive coverage of the current public distribution system (PDS), which serves nearly 57% of the population -813.5 million out of a total population of about 1.43 billion-, although NFSA, 2013 had provisioned for 67% of total population (75% rural and 50% urban).
The report stated that while linking the ration card of beneficiaries under national food security act with their Aadhaar numbers has increased the efficacy of distribution, ‘the leakage in the PDS still remains a concern. They have not been fully plugged,’. This significant loss highlights the urgent need for reforms and a shift towards Direct Benefit Transfer (DBT) for better efficiency and accountability in the distribution of food subsidies.
It stated that end-to-end computerisation of the PDS program has reduced the leakage as the system is digitized from procurement to distribution across the country, the efficiency of the system varies across states.
North-eastern states Arunachal Pradesh, Nagaland followed by Gujarat are the top three states in terms of PDS leakage of grains. One of the reasons for higher leakage particularly in North-eastern states is lack of digitalisation of the distribution system.
States like Bihar and West Bengal have achieved significant reductions in PDS leakage over the past decade. In Bihar, leakage dropped sharply from 68.7% in 2011-12 to just 19.2% in 2022-23. West Bengal saw a decrease from 69.4% to 9% over the same period.
The report stated that in Uttar Pradesh, PDS leakage remains at 33%, with the state topping the list in terms of the absolute quantity of grains leaked.
In terms of providing nutritional security, the report has stated that reliance on grain distribution alone may not adequately address the diverse dietary needs of the population, especially as nutritional challenges increasingly demand access to a variety of high-value foods, including fruits, vegetables, and protein-rich items.
The Food Corporation of India in collaboration with state agencies procures and distributes more than 55 MT of wheat and rice annually under PMGKAY also known as free ration scheme through 530,000 fair price shops across the country.
The government has extended PMGKAY where 813 million people are currently being provided 5 kg each of specified grains per month free of cost, by five years till 2028.