Food Policy: A Case of Punctuated Equilibrium

Abstract

Beginning as a war-time food ration in the colonial era and going on to become India’s principal instrument to fight against hunger, PDS has emerged as India’s largest and arguably the most contentious social welfare program in the country. Having undergone multiple reforms in program delivery and design, the ‘new style’ PDS is finally beginning to deliver tangible benefits in terms of reducing latent hunger, food insecurity, and improved diet diversity. Yet, there is an intensified debate around replacing food transfers with cash transfers because PDS value chain relies upon an interlocked producer–consumer incentive structure which inhibits innovation in program design and therefore potentially limits its effectiveness in improving nutritional security. In this chapter, we argue that key to innovation in PDS is to reframe the food transfer debate as an issue of nutritional security. Improved nutrition as the scope of PDS might allow for greater deliberations upon the composition basket of the PDS, whether (and when) replacing it with cash transfers would be a feasible one.

Introduction

Food transfers through the Public Distribution System (PDS) are the oldest, and arguably, the most debated of all social welfare schemes in India. Accounting for around 1% of GDP and 60% of social welfare spending, PDS benefits around 800 million people, but the value chain of its operation—procurement, storage, and distribution of food grains—has traditionally been rife with leakages, corruption, and inefficiencies. While these inefficiencies have been reduced in recent years, an active debate has also emerged around replacing food grains with an equivalent amount of cash. Giving the poor cash instead of food grains would not only make the system more efficient by saving the rising cost of its value chain, but also provide people with an option of purchasing more nutritious food of their choice. Such postulations, however, lead naturally to questions. From the welfare perspective, would it not undermine food security if the transferred money was wasted on nonessential items? From an administrative point of view, does India have the organization wherewithal—from identification of beneficiaries to efficient delivery mechanisms—to move toward a cash-based program? Finally, there is a political economy question: how can cash transfers be introduced when distribution of grains is inextricably linked to the state-led procurement of food from the farmers?

While these questions on the reform of the PDS have been fodder for debate among academics and policymakers, the steady improvement in the PDS—even in the states with a poor welfare policy governance record—has led to its greater relevance for the poor. For instance, the extra provision of free food grains through the PDS during the COVID-19 pandemic has provided a much needed relief to the already suffering.¹ So, why is there a need to change the form of an already functioning social assistance program that apparently delivers?

Indeed, the PDS has been a lifeline for the poor, as it addresses the most basic need of food and ensures a “social minimum” for a dignified life, in the short run. The long-term question, however, for a resilient development process is: will the PDS promote a healthy diet and nutritional security in the future by providing calorie-rich food grains? As the country is going through its nutrition transition—decreasing household expenditure on staple cereals—with greater incidence of obesity-related non-communicable diseases (NCDs), along with high micronutrient deficiencies, would the PDS be the right policy instrument to address the nutritional challenge? Would continuing with the staple food grains—rice and wheat—as the subsidized food commodities through the PDS not harm long-term agricultural diversification and bear environmental costs? These are some of the questions we grapple with in this chapter as we deliberate upon the future of the PDS—in focus, form, and scope—to facilitate a resilient development process.

Social Welfare Through the PDS

Food assistance has been a feature of state support to the poor and needy since time immemorial.² Currently, more than 90 billion USD is spent annually on food-based safety nets—comprising a core component of global social protection schemes—benefiting around 1.5 billion people.³ PDS has been a lifeline for the poor in India. Despite its historically changing focus—in terms of geographical coverage and targeted population—PDS is one of the most powerful component of the social protection and food security in the country. According to India’s National Food Security Act (NFSA), 921 million (67% of the population) should be covered under the PDS. Since the poor spend almost half of their expenditures on food, subsidized food grains, through the PDS, provide a substantial consumption support, which could be allocated to other food and nonfood expenditures for improved welfare. Critics of the PDS argue that households could benefit more from moving to cash transfers while reducing the inefficiencies of the system.⁴ Yet, we have seen an expansion of the PDS across the country with better performance and reduced corruption.⁵

To unravel this conundrum, one must understand the interlocked incentives—which tie consumer subsidy through PDS with the agricultural policies of assured prices—which underlie the PDS value chain. Food grains for the PDS are distributed to the consumers at subsidized prices by first procuring them from farmers at assured prices. Farmers (most importantly, in Punjab and Haryana, and now in Madhya Pradesh for wheat) contribute to a central pool of food grain stock that is distributed through the PDS at ration shops across the country. Any move toward cash transfers, in lieu of food grains from the PDS, would imply either that the government stops procuring grains from farmers at the minimum support price (MSP), or stores the grains and sells them to private players domestically or on the international market. The interlocked producer–consumer incentive, therefore, restricts much of the innovation needed for a move from the PDS to cash transfers.⁶ The continuation and expansion of the PDS, in its current form, has, however, served the interests of the political class, who have used this as an opportunity to demonstrate their commitment to social welfare policies. It is important, therefore, to understand the rationale for the continued relevance of the PDS in India. We consider its origins and how it evolved—in scope, focus, and form—as we imagine its future and how it can promote development resilience.

Changing Scope, Focus, and Form

While remaining an important tool of addressing poverty, the scope and focus of the PDS has evolved considerably since its inception—from wartime relief focused on urban populations to consumption support for maintaining food security—with varying degrees of effectiveness. For the PDS to be a tool for facilitating a resilient development process, however, we need to move its scope beyond food to nutritional security, through improving the PDS delivery system, stemming the negative externalities it creates, and gradually, moving toward a cash-based system. Although the argument for cash is theoretically sound, India’s economic realities, current infrastructural deficits, and most importantly, the realpolitik of food policy all act as unyielding constraints. To understand these barriers, we must understand first the evolution of the PDS and economic policy scenario around it.⁷

The PDS has gone through multiple stages of changes in its targeted population (focus) and policy objective (scope) (Table 5.1). When it was introduced in the 1940s, it was mainly used as a tool to ensure there was sufficient food supplies for workers in the major industrial cities, limited largely to Bombay, Calcutta, and Cochin. Gradually, by the end of 1943, it was expanded to other urban centers with more than 100,000 inhabitants, and by 1946, 771 cities were covered under the PDS in an attempt to safeguard consumers against higher and volatile prices in the wake of recurrent famines and exigencies of the Second World War. The scope of the PDS operations was to maintain low food prices for the urban workers.

Table 5.1 Historical evolution of food assistance through PDS

Rationing and Price Control in Industrial Towns

Until the late 1960s, India suffered from frequent famines in various parts of the country, highlighting the fact that food insecurity occurred largely because of lack of food availability as well as access.⁸ The colonial era policies, therefore, continued with the aim of ensuring price stability, even when the demand for food exceeded the domestic supplies, and India relied upon substantial imports of food grains from abroad to supply its people through the PDS. Since India’s economic planning priorities relied upon domestic industry-led growth, the focus of the PDS on the urban working class served the industrial owners and the urban-based, politically important middle class well, as it could enable some degree of social equilibrium in industrial and urban areas (Mooij 1998). It was feared that rise in the prices of food (which comprised more than 70% of monthly food expenditures at that time) would further erode the purchasing power of the workers. As a result, urban centers had a universal entitlement to rationed amounts of food. And more urbanized states, like Maharashtra, Tamil Nadu, and West Bengal, with the metropolitan cities of Bombay, Madras, and Calcutta, received larger shares of the PDS allocations (Suryanarayana 1995).

Emergence of the Interlocked Production–Consumption Incentive

Consolidation of the PDS, as it expanded through the rural hinterland—where most Indians resided and poverty was more acute—came about because of breakthrough gains in agricultural productivity, resulting from the Green Revolution (GR). The GR solved the issue of food availability, as India became self-sufficient in staple food production. Food production—mainly, rice and wheat—was incentivized not only through better varieties of seeds, fertilizers, and irrigation infrastructure, but also through active involvement of the government in assuring farmers that excess supplies would not lead to a glut and lowering of market prices. The government set up two key public institutions: the Food Corporation of India (FCI) and the Agriculture Price Commission (APC) to manage the food supply chain. The APC would set up a MSP, at which the government promised to buy all the farmers’ produce if the farmers wished to sell to the government. The FCI was entrusted with the task of procurement, storage, transportation, distribution, and sale of the food grains. As a result, the FCI became a nationwide supply chain, which connected food surplus and food deficit areas in the country. For instance, rice from surplus states like Punjab or Haryana would be shipped as far as Tamil Nadu and Kerala, through the FCI. The food availability issue was resolved through the territorial integration of the country via the food management system.⁹ But, as PDS consolidated its expansion across the nation, its scope increasingly got intertwined with the policy of price support to farmers.

The expansion of PDS also coincided with changing economic policy in the country which put a greater emphasis on agricultural development.¹⁰ India’s rural elites, bolstered by economic gains from the GR, began to exert their political clout in influencing food policy. Mooij, a scholar of social policy and economic change in India, highlighted this shifting policy and the political scenario through the changing composition of elected representatives in the Parliament. She notes, ‘… the ratio of representation of agricultural to business and industrial interests was 2:1 in favour of the agriculturalists in the first Lok Sabha in 1951, it increased steadily to 3:1 in the second (1957), 4:1 in 1976 as the Green Revolution was gaining momentum, 5:1 in 1971, and 9:1 in 1977’ (Mooij 1998).¹¹ The agricultural lobby, especially the large farmers of Punjab and Haryana, firmly consolidated their political influence during this period and played a key role in advocating for higher MSPs (Varshney 1993). The emergence of producer-friendly policies undermined the representation of consumer’s interests (Parikh et al. 1988). While the higher prices benefited the large farmers, consumers (often also small farmers) suffered from higher prices, even during times of surplus food, as artificially high MSPs kept the open market prices above the market-clearing ones in the absence of procurement (Chetty and Srinivasan 1990; Dantwala 1967; Hayami et al. 1982).¹² As a result of this system, massive stocks of food grains have been procured and stored in the FCI warehouses, despite the expansion in the PDS (Fig. 5.1).

Fig. 5.1

(Source EPWRFITS)

Historical trends in the production, procurement, distribution, and government stocks of food grains (rice and wheat)

Inefficiencies and the Call for Reforms

Gradually, the inefficiencies in the system became evident leading to calls for reforms. The 9th Five-Year Plan (1997–2002) noted that the PDS “…has failed to translate the macro level self-sufficiency in food production achieved by the country into household level food security for the poor” (GoI 1997–2002, Sec. 2.3.1). The planning document further states that, “… [with] the mounting food subsidy in recent years, coupled with the fact that the PDS did not reach the poor, a view has emerged that the universal coverage of the PDS is neither sustainable nor desirable” (GoI 1997–2002, Sec. 2.3.2). These proclamations were based on two aspects. First, it was noted that despite the presence of the program, the poorest regions of the country, such as Orissa, Bihar, Madhya Pradesh, and Uttar Pradesh, had very low PDS offtakes from the ration shops. Second, the government took the view that universal access to the PDS (to the poor as well as the non-poor households) implied a lower per capita entitlement to each household and higher amount of procurement from the farmers.

Calls for PDS reform followed the macroeconomic restructuring of 1991, which fundamentally called for a reduction in subsidies and state control over economic activities in the country. With reference to the PDS, it called for a narrower focus—on those households that were identified as poor.¹³ As a result, in 1997, the system came to be labeled as the Targeted Public Distribution System (TPDS), dividing households based upon their economic status: Below Poverty Line (BPL) and Above Poverty Line (APL) for access to the PDS.¹⁴ In 2002, another ration card classification was introduced for the poorest of the poor among the BPL households, who were also disadvantaged in other ways, such as widows and the disabled, under the scheme Antyodaya Anna Yojana (AAY).

The ‘targeting’ aspect of PDS, however, ushered in the fundamental challenge of identifying the ‘deserving’ beneficiaries of the scheme. Identifying the poor, especially on a real-time basis, with limited information on household incomes and assets, was destined to be an administrative nightmare. Complications further arose from regional variation in poverty levels as PDS delivery is the responsibility of state governments but the share of the poor is determined by the central government. The central government had to decide upon the resources to share with the state governments based upon poverty estimates from the National Sample Survey Office (NSSO) and the corresponding population from the Census, while the state governments distributed APL/BPL cards based upon their proxy means-tested poverty criteria, leading to serious errors of exclusion and inclusion.¹⁵ An evaluation of the TPDS, in 2005, noted that around 58% of the food grains meant for poor do not reach them. Errors of targeting, inefficient operation, and corruption in the implementation of the TPDS lead to only 27% of the budgeted consumer expenditure reaching the poor.¹⁶ As a result, the government contemplated food coupons as an alternative form of the PDS in the Ninth Five-Year Plan (1997–2002) concluded that replacing the PDS might not be acceptable, despite the systemic inefficiencies in the current system.¹⁷

Economic planners recognized that the PDS relies upon the system of MSP and procurement operations which are a part of the current agricultural price policy. Replacing the PDS with a new system of food coupons is therefore fraught with administrative problems such as secured printing of coupons, corruption in distribution, periodic indexation of the coupons, etc. It was also feared food coupons, like cash, could be misused, and the greater purchasing power could further increase demand for food grains, thereby bidding their prices upward, with adverse consequences for the poor. Concerns around the inefficiencies of the PDS, and food stamps as a solution, were echoed again in the Tenth Five-Year Plan (2002–2007) along with the possibility of introducing smart cards (in the form of a food credit/debit card) but both these options were ruled out subsequently.

The Tenth Five-Year Plan however brought about newer ideas. For the first time, it was recognized that in addition to hunger (the incidence of which is on the decline), the scope of PDS could also be expanded to addressing micronutrient deficiencies (referred to as, hidden hunger) by including subsidized coarse grains, pulses, and iodized or double fortified salt to the program. On the procurement side, the Plan highlighted the need to re-examine the MSP scheme, which leads to the interlocked procurement–storage–distribution system, saying it “has served its purpose.”¹⁸ To supply non-cereals through PDS, the Plan suggested price incentives for pulses and oil seeds. The subsequent Economic Plan (2007–2012) highlighted the limited focus of the PDS as restrictive in attaining wider welfare gains. It stated that, “food-insecure households may be much higher than the official poverty ratios,” and therefore, using the 1993–1994 data projected to the population in 2000 to determine food allocations may be misleading (GoI 2007–2012, §4.136, 136). Further, it highlighted the differential ways in which state governments identify the poor, which further makes the central allocation ineffective.¹⁹ Highlighting the inefficiencies in the TPDS, it noted that, stemming this leaky system would require “political commitment and participation of the people in the [PDS] delivery process,” along with an “effective use of IT including introduction of a unique ID-based smart card system” (GoI 2007–2012, §4.1.43, 137). The plan document further stressed the issue of nutrition security as a scope of the PDS.²⁰

While the focus and scope of PDS were being deliberated upon, studies evaluating the effectiveness of PDS as a tool of hunger and poverty reduction during this period highlighted its gross failures. Because of rampant corruption in the system, a sizable portion of the food did not reach the intended beneficiaries. Even for those households which could access PDS, the transferred amount was too low to have a meaningful impact on consumption or nutrition of the targeted.²¹ The most pressing challenges were threefold. First, identification of the poor (focus) through proxy means tests in the absence of fine-grained data on individuals, their residence and socio-economic status in a vast country as India is a monumental exercise fraught with its own challenges of targeting errors. Second, the value chain of PDS, right from procurement to distribution has been rife with corruption. Grains being swindled off from the warehouses is a common occurrence, and so is the sale of subsidized grains by FPS dealers in the open market, or the presence of ‘ghost’ beneficiaries on the ration card. Third, the identified beneficiaries were often not provided the benefits, provided less than their entitlement, or grains of very poor quality owing to corruption, lack of local power dynamics and poor accountability mechanisms.

New-Style PDS

The late 2000s saw the debate around the PDS intensifying, yet the performance of PDS continued to improve, albeit with a high degree of geographical variation. Drèze and Sen (2018) referred to it as the “new style” PDS which included a wider participation in the PDS and a reduction in corruption. Across the country, there was a massive increase in the share of households which benefited from the PDS. With greater coverage of the population and lowered prices of subsidized grains, the share of households reporting consumption from foods provided through the PDS increased from a modest 24% in 2004–2005 to 44.5% in 2011–2012 (Panel A, Fig. 5.2). It also led to a reduction in as leakages—the loss of grains in the value chain from procurement to actual sale at the fair price shop (FPS)—by a significant amount (Panel B, Fig. 5.2). Greater consumption of food grains led to an increase in the corresponding, implicit food transfers to intended beneficiaries by almost three times in real terms—from INR 31 in 2004–2005 to INR 85 in 2011–2012 (Rahman 2014).²² The income effect of increased food transfers to poor households not only reduced the poverty-gap index of rural poverty by 18–22% (Drèze and Khera 2013), but also led to substantial improvements in nutrition and diversification of the food basket of poor households (Kaul 2013; Kishore and Chakrabarti 2015; Krishnamurthy et al. 2017; Rahman 2016). This improvement at an all-India level came about largely because of the improvements in the PDS across North and East Indian states, since the South Indian states have performed better on PDS traditionally.

Fig. 5.2

Improvements in the PDS: greater participation and reduced leakages

Credit for this reform goes largely to the state governments that pushed the reforms with a renewed political commitment and to the central government for their subsequent plans that gave encouragement to carrying forward these initiatives with greater vigor.²³ As a first step, many state governments, which had targeted programs, reevaluated their BPL lists and expanded the coverage of PDS to larger sets of beneficiaries. Second, greater incentives were provided to consumers as well as FPS owners. Lowering of the price at the PDS shops incentivized the beneficiaries to access the PDS, while higher commission to the PDS shop owners lowered their incentives of cheating and corruption.²⁴ Third, an updated database of the beneficiaries, FPS owners, and an improved monitoring system enabled by IT-based systems (end-to-end computerization) has further brought down inefficiencies.²⁵ This period also saw a change in the government, with the Congress government, which came into power in 2004, pushing its welfare agenda to the front.²⁶ The National Advisory Council (NAC) pushed reforms in food policy and other welfare schemes while there was a renewed political commitment of the state governments and active advocacy by the civil society advocacy group. The improved fiscal position on the back of economic growth since 1990 and the ensuing redistributive concerns also abetted the conditions for PDS reforms.

National Food Security Act, 2013 and Newer Initiatives

The watershed moment in expanding the scope of food policy in India, was the constitutional recognition to “right to food” Act.²⁷ In 2013, the National Food Security Act (NFSA) was enacted, which further expanded the focus, form, and scope of PDS. Under the NFSA, 75% of the rural population and 50% of urban population are “priority households” with a total monthly ration entitlement of 5 kg of rice, wheat, and coarse grains at INR 3, 2, and 1 per kilogram, respectively. The introduction of the NFSA was identified as an opportunity to include coarse cereals, pulses, and other edibles in the PDS, but the decision was left to the state governments, as food demand patterns vary regionally. NFSA also major landmark in making women as the head of household, under whose name the ration card would be issued, allowing for greater agency in intra-household decision-making.²⁸

Early experiences from the NFSA suggest that the PDS coverage in most states increased, with considerable improvements in previously lagging states of Bihar, Madhya Pradesh, Odisha, West Bengal, and many of India’s poorer states (Drèze et al. 2019; Drèze and Khera 2017; Puri 2017).²⁹ The income effect from large increases in the generosity of PDS transfers after the NFSA substantially improved nutrition and dietary diversity of beneficiary households (Shrinivas et al. 2018).

The expansion of PDS necessitated better organizational capacity of the system which benefited from the greater use of information technology (IT) and digitalization in service delivery. It led to greater efforts at database creation for the ‘priority’ households, some states issued smart cards, along with the investments in digitizing every transaction to avoid the last-mile delivery challenges which have traditionally affected the performance of PDS, With ‘right to food’ being an Act of parliament, it also became a political imperative—at local and national scale—to ensure PDS reaches its rightful beneficiaries.

Beneficiary Database and Electronic Records of Transactions

As part of the initiative to streamline the operations of the PDS, there has been an “end-to-end computerization” of the system.³⁰ Detailed records of all transactions, purchases at the FPSs through electronic point of sale (e-PoS) devices, and GPS-enabled movement and storage of grains in the supply chain have made the system more efficient, reducing the leakages and corruption in the system. A digitized database of all ration cardholding families has further helped to discard “ghost cards” and improve last-mile delivery to the beneficiaries. By making the database publicly available—for beneficiaries to verify the status of their monthly entitlements—with grievance redressal systems (online and toll-free helpline numbers), the government has expressed its commitment to improve the performance of PDS.³¹

Aadhaar-Based Biometric Authentication

Although the beneficiary database and computerization of the PDS supply chain have been unanimously welcomed, the most polarizing innovation has been the use of Aadhaar-based biometric authentication (pejoratively referred to as ABBA, meaning father, by its critics) for PDS transactions. Launched in 2010, Aadhaar is a 12-digit unique identification (UID) number—stored in a central database—assigned to every Indian resident. While it is similar to the Social Security Number (SSN) issued in the United States, the uniqueness of Aadhaar lies in the added information on biometric markers (fingerprints and iris patterns) stored with the UID in addition to other socio-economic and demographic information. By connecting PDS with the Aadhaar allows for ‘automated’ recognition of the beneficiary and her entitlements. The system also updates each time the beneficiary buys from the FPS which provides a check on the prevailing corrupt practices.

It is this uniqueness of biometrics-based authentication that has been considered as dangerous to individual privacy, as well as a source of exclusion.³² Aadhaar assignment, which began as a voluntary exercise, has become a sine qua-non to access state welfare programs, including the PDS. To be eligible for the PDS, beneficiaries are first required to link their Aadhaar number with the PDS database, which the FPS dealer uses along with the fingerprints to authenticate every transaction. According to the government, it helps them deliver food to the authenticated beneficiaries, cutting down on last-mile corruption, and therefore, keeping the system fiscally efficient. Every purchase through the PDS, therefore, requires the presence of a functioning ePOS, high-speed Internet, and the correct recognition of fingerprints. Field-based reports have documented how these technologies are very “fragile” yet in helping the most marginalized, who live in remote areas with poor Internet connections and the elderly and manual wage workers, biometrics often do not clearly register. Such seemingly minor technological “glitches” have robbed the poor of significant state support, with critics dubbing ABBA as a tool of exclusion or “pain without gain,” as it has been unable to reduce the malpractices of the FPS dealers in undercutting the stipulated rationed quantity (Drèze et al. 2017).³³ In fact, poor beneficiaries, unable to link their card to Aadhaar, lost out on their precious entitlements (Muralidharan et al. 2020). The criticism, however, is not against the ePOS but about allowing for offline authentication and the hassle of matching fingerprints for every transaction. Such last-mile innovations, however, in no way enhance the operational credibility of the system where the PDS is mired in local corruption.³⁴

Several states have experimented therefore with smart cards as an alternative.³⁵ Smart cards, with a PDS-like ration card number, not only do away with the unreliable “register” system of the old, but also enable more authentic bookkeeping. Smartcards do not require the use of matching biometrics-based authentication or internet connectivity requirement, thereby avoiding the ABBA-enabled exclusion of deserving beneficiaries.³⁶ Yet, technology has been less than inclusive. Consider, for example, the decision of the Andhra Pradesh government to make the PDS benefits portable across any FPS in the state. Among those who benefited from the portability option, the poor and socially disadvantaged had a significantly lower share mostly because the lower-caste households were disallowed to access shops in neighborhoods inhabited by the upper castes (Allu et al. 2022).

These findings are similar to the global evidence around the pitfalls of digital IDs as they are ‘subject to failure to deliver on high expectation’ (World Bank 2016, p. 196). For digital IDs such as Aadhaar to succeed as a tool for welfare recipients, supportive legal framework, adequate financial and human resource, committed leadership, and high trust between citizen and state is required. India fares poorly on most of these preconditions for success and therefore a unique ID could at best be one component of the social policy and not the be-it-all source of beneficiary identification.³⁷

One Nation One Ration Card

A major development in the PDS has been the introduction of the One Nation, One Ration Card (ONORC) which makes the PDS benefits portable outside of the state. Unlike earlier times, when every beneficiary was tied to an FPS within the state of residence, beneficiaries can now receive their PDS entitlement in any part of the country which makes it particularly useful for the migrant population. The operationalization of ONORC is based upon linking all ration cards with Aadhaar-based biometric authentication and electronic point of sale (e-PoS) devices at the FPSs. The ONORC is now enabled across the country, covering nearly 690 million beneficiaries (86% of the NFSA beneficiaries) in the country, according to the latest economic survey.³⁸ It has been lauded most recently as a major provision of relief via state support to migrant workers, who suffered disproportionate losses during the COVID-19 pandemic.

PDS, the Story Thus Far

The 70-year-old story of the PDS in India can be characterized as a classic case of punctuated equilibrium.³⁹ While the scope and focus of PDS has evolved in response to economic and political ideals of the times, yet, this evolution has been spurred by crisis, rather than by an organic advancement of policy ideals toward addressing the incremental challenges of human development and welfare. Although the PDS came about as a war relief program, unprecedented agricultural productivity gains led to its consolidation. The economic reforms of 1991 led to a narrowing of its focus, but civil society activism steered toward restricting the PDS with the NFSA. The emerging subnational political landscape further provided for the use of the PDS as an opportunity to seek electoral gains, leading to its further expansion and improvement. In a nutshell, the recent reforms, which have improved household welfare at least in the short run, can be attributed to the rights-based social policy agenda, politically motivated initiatives by state governments, and improvements in technology. PDS reforms, however, are still stuck in the older paradigm of food assistance, because of the political economy of farm support and struggles with identifying the poor for targeting, which hinder an innovation in the form of transfer.

Interlocked Incentive Structure and Negative Externalities

The major impediment to reforming PDS is the interlocked incentives to the farmers to grow rice and wheat. PDS reforms—movement to cash or food vouchers—are impossible without bringing about carefully crafted agricultural policy reforms and appropriate safeguards for households against the risk of higher food prices. Currently, the production incentives that the system provides to the rice–wheat-producing regions, through increased MSPs, lead to negative externalities, such as inhibiting agricultural diversification and more intensive use of natural resources, eventually harming progress on nutrition and environmental sustainability.⁴⁰ Persistence in incentivizing only staple crops may distort optimal crop allocations and crowd out production of other nutrient-rich crops, such as course cereals and pulses, undermining nutritional security for the future.⁴¹ Intensive cultivation of rice and wheat has led to further ecological degradation, such as ground water depletion.⁴² An additional negative externality of rice cultivation in Punjab and Haryana, which has received greater attention in recent times, is the massive burning of crop residue after harvest that contributes as much as half of the particulate pollution in some cities in India during harvest seasons.⁴³ Such atmospheric pollution has been found to have detrimental effects on health and mortality.⁴⁴ Yet, the conversations around the need to rethink MSPs for rice and wheat to eventually reform the form of the PDS remain on the sidelines.⁴⁵

It would be reasonable to say that simply eliminating MSPs could be disastrous—economically as well as politically—in the absence of appropriate marketing infrastructure and regulation of agricultural trade. Expenditures on staple food grains still continue to be more than half of the household budgets for the poor, and an abrupt rise in prices could undermine their food security and resilience. Similarly, a large share of farmers, even smallholders, sell at their crops at MSPs or rely on the floor prices set through its operations to sustain their livelihoods (Gupta et al. 2021). The rise of Madhya Pradesh and other states, in using decentralized procurement to expand procurement operations has further complicated the enactment of any reforms which could break the interlocked incentives. In fact, greater public procurement is increasingly being used by state governments to assert themselves in national food policy.⁴⁶

Subnational Politics

Food policy reforms, largely, have been a central part of the emerging social policy narrative at the subnational level, which does not preclude the PDS. It has been widely recognized that much of the action concerning the PDS has been championed by the forces of subnational politics. Since the 1990s, India’s federal polity changed from two central parties to a proliferation of regional parties and a coalition government at the center. Improved welfare benefits through the PDS were particularly useful for the state Chief Ministers (CMs) in their electoral pitches. For example, the states of Odisha and Chhattisgarh, with high levels of poverty and poor governance, became the torchbearers of PDS reforms.⁴⁷ These initiatives inspired other poorer states, such as Jharkhand, Bihar, and Uttar Pradesh to push for PDS reforms. Similarly, along with the governments of Madhya Pradesh and Chhattisgarh, states like Bihar and Uttar Pradesh are also pushing for state-driven procurement of food grains to feed the PDS supply chain. State governments, therefore, have been referred to as “laboratories” of social welfare policy reforms, with welfare entitlements as powerful political strategies to mobilize votes (Deshpande et al. 2017).⁴⁸

It is interesting to note that the politics of the “new style PDS” is similar to the North Indian states, which have traditionally performed worst on social welfare, following the leads of their Southern counterparts. Chief Ministers in the other states have taken a leaf out of the book of South Indian politics. It is quite well documented how the southern states of India used the PDS and other social welfare measures for electoral politics, regime legitimacy, and individual popularity. In 1960s, C. N. Annadurai, the founder and leader of the political party Dravida Munnetra Kazhagam (DMK) in Tamil Nadu had swept the elections with his slogan “three measures of rice for Re 1.”⁴⁹ Similarly, in Karnataka, CM Ram Krishna Hegde’s government expanded the PDS in rural areas with higher entitlement through the Green Card Scheme in 1985. N. T. Rama Rao from the Telugu Desam Party (TDP) famously announced the ‘two-rupees per kilo rice scheme’ through the PDS, after winning the elections in 1983. He sought to use the scheme—as CMs of Odisha and Chhattisgarh have done in recent times—to create an image of a benefactor for the Telugu people (residents of Andhra Pradesh), with colorful pamphlets showing his photo and the nickname of Anna-Varam (meaning “big brother’s gift”).⁵⁰

Even before the NFSA was enacted, the Chhattisgarh government had announced its own state-level NFSA-like scheme in 2007, labeled as Mukhyamantri Khadyann Sahayata Yojana (MKSY, or the CM’s food relief scheme), which expanded PDS coverage to almost a universal one. Many of the other CMs have similarly tried to appropriate the expansion of the PDS and the NFSA as a strength of their own pro-poor commitment. The CMs in Uttar Pradesh and Telangana distributed the new ration cards with their own pictures on them. K. Chandrasekhar Rao, the CM of Telangana, defended this action, saying that the state government is offering an extra subsidy of INR 1 per kg of rice. The Karnataka government introduced Anna Bhagya Yojana in 2013—rice through the PDS at a symbolic price of INR 1/kg—as the first executive decision of the Siddaramaiah government after his election victory. Madhya Pradesh’s Shivraj Singh Chouhan introduced the Mukhyamantri Annapurna Scheme offering rice through the PDS at INR 1/kg. Both the states sold rice at lower than the NFSA-stipulated Rs. 3 per kg. Some CMs expanded the PDS-eligible population. Mamata Banerjee, CM of West Bengal, announced that the state would include an additional 17 million people, which were above the 67% “priority households.” After being elected as CM of Jammu and Kashmir, Mehbooba Mufti announced the Mufti Muhammad Sayeed Food Entitlement Scheme (MMSFES), named after her father, providing a greater allocation and expanded coverage than NFSA.

With the weakening of party cadre structure and mass political organizations, the CMs have increasingly asserted their charisma as being “development oriented” for electoral gains (Manor 2016). The electoral appeal of low inflation and subsidized staple foods seem to have worked. Why would political leaders care about changing the form of food assistance? Cash or vouchers do not carry the same visual appeal of personal offerings from the charismatic benefactor. Therefore, any nuanced discussion around PDS reforms cannot ignore the political economy challenges of MSP and assured procurement.

Reframing the Reformed Public Distribution System

The PDS has significantly improved, albeit gradually, in most states to become a form of social protection against food price inflation, for stabilizing consumption, and for increasing dietary diversity—at least in rural India, over the last two decades. These improvements have principally come about for two reasons: greater political commitment to welfare and improvements in the last-mile delivery systems such as better targeting and technology-based monitoring of the value chain to lower corruption. These improvements, perhaps, have not yet led to big bang reform, that is, to dismantle the PDS system in favor of food coupons or cash transfers, much to the dismay of the system’s critics. The economic rationale for dismantling the current system is one of efficiency, while the reason for its persistence is path-dependent politics and imperfect institutions—political institutions and markets—which sustains this punctuated equilibrium. We argue that the way out of the policy stasis is to reframe the PDS debate and ask the following question: how can we leverage the PDS infrastructure to improve nutrition?

Nutrition as the Scope of PDS

It is important to put nutrition at the center of this debate for multiple reasons. First, nutrition is, first, about the quality and quantity of food. The current form of the PDS provides a minimum level of calorie sufficiency, but essential micronutrients (leading to hidden hunger) are insufficient through staple foods. Can we address these nutritional needs through the PDS? Second, India is undergoing a nutrition transition in which the triple burden of malnutrition—undernutrition concurrent with over-nutrition (obesity) and micronutrient deficiency—is the major challenge. There is declining trend in calorie consumption with sedentary lifestyles and better hygiene. Improvements in sanitation practices and less manually intensive occupations in the future will lower calorie requirements further and potentially increase obesity and non-communicable diseases (NCDs). We should ask, therefore, what should be the role of the PDS in the future? Third, structural transformation will mean greater urbanization, with a higher rate of migration and more nonagricultural employment. Automation of jobs implies a greater gulf between the skilled and unskilled workforce. Greater inequality could be fueled by rising informality in employment, without employer-based social protection, leading to greater demand for state support. High population density will put stress on urban water and sanitation infrastructure, leading to fears of disease epidemic. Any form of consumption support without being nutrition-sensitive would make households more vulnerable to shocks—of health and livelihood—impeding the process of development resilience. While the NFSA, as enshrined in the Constitution provides citizens their “right to food,” one should begin thinking instead of the “right to adequate nutrition.”

Need for a Gradual, and Not Hasty Move to Cash Transfers

The case in favor of cash is straightforward.⁵¹ It saves administrative costs while providing households with the ability to purchase what they would like. Arguments against cash transfers stem from multiple reasons.⁵² First, the value of the cash transfer could be eroded by inflation, and the promise of indexing the cash transfer by inflation may not be deemed credible by people. Lack of appropriate revisions in the old age or disability pensions with inflation are a case in point. Sometimes, local price increase could lower the value of a transfer, as prices vary across the rural–urban areas or even across states is substantial.⁵³ Second, Indian families are highly patriarchal and intra-household allocation of food is inequitable. The powerful members of the family could use the money on non-food items, often spending on nefarious activities, undermining household welfare. Third, the financial payment infrastructure has to step up to reach every beneficiary.⁵⁴ Many of these reasons contribute to the low popularity currently of cash among the masses.

One must understand that the question of “cash versus food” is highly embedded in the economic and political context.⁵⁵ With greater economic development, better market infrastructure, and nutritional awareness, cash transfers could become more prudent and also politically popular.⁵⁶ A hasty transition to cash from the current system exposes many of the poor to the vagaries of the market, undermine their food and nutritional security, and inhibit resilience to shocks. Experimental evidence also supports the argument that remote and underdeveloped regions exhibit an increase in price of food when cash, instead of food, is provided to the households. In the Indian context, hunger and starvation continue to be a major concern in the remote parts of the country, and the PDS provides a formidable safety net. Although in urban centers, cash transfers could be easier, a hasty shift might adversely affect the poorer regions.⁵⁷ A cash versus the PDS experiment in Delhi found cash to be useful in improving diet intake (Gangopadhyay et al. 2015). On the contrary, a similar state-sponsored experiment in the poorer state of Jharkhand led to loss of benefits because of the fragile infrastructural and institutional system around Aadhaar-based identification and delivery (Barnwal and Pandey 2019). Therefore, the transition to cash could be most successful when there is already an effective system of social protection in place, such that cash transfers are another option in the “menu” of social protection devices that are complementary to the supply-side food or nutritional assistance (Narayanan 2011). Cash, indeed, is a better alternative once the appropriate financial infrastructure for a smooth transition is available, and the social policy architecture becomes more beneficiary-centric, rather than that of administrative ease.⁵⁸ Continuing with the PDS with a better monitoring system—as it is happening currently—would eventually pave the way for an architecture useful to transfer cash. Until then, the clamor for immediate change could be premature and possibly ignorant of India’s socio-political context.⁵⁹

In the next few years, the PDS can continue in its current form with an expanded focus on addressing not merely the basic consumption support and calorie supplementation, but also hidden hunger and improved nutrition. Expansion of the nutritional scope of the PDS should include non-cereals, such as pulses and coarse cereals, in the PDS.⁶⁰ While some states have begun to include other nutritious food items such as oilseeds and pulses as part of the NFSA, progressively, one can move to a greater quantity of these non-cereals. Remaining with the current PDS and the provision of a diversified basket would imply not only continuing with the procurement–storage–distribution system that inhibits agricultural diversification, but also the need for a procurement infrastructure for non-cereals. Creating a procurement structure for coarse cereals has its own challenges.⁶¹ While one can only speculate on when it would be politically feasible and economically sound, there is no doubt that the MSP has to be eventually dismantled to achieve agricultural diversification and ecological sustainability. It, however, needs to be supplemented with adequate income support to the farmers. Expansion of PM-Kisan—cash transfers to small farmers—could be an option. Price support could be gradually replaced with income support. Further, development of rural markets and emerging demand for diversified foods could allow production diversification in the regions where large-scale procurement takes place.

Global experience suggests that some of the largest food assistance programs, such as Raskin, Baladi Bread, or Samrudhi, too, have evolved gradually rather than through radical reforms.⁶² None of these transition experiences were however smooth because of the fundamental challenges of design of an efficient delivery system for cash—identifying beneficiaries (focus) and the appropriate mode of payment (form)—in determining what is acceptable politically. In India, replacing the current PDS with cash or vouchers would imply the dismantling of the producer subsidy or compensating the producers accordingly. While we were writing this book, the farmer lobbies—mainly from Punjab and Haryana, from where the government largely procures food grains—led a massive protest against the agricultural marketing reforms which could have a bearing on the procurement system. The government eventually backed out which implies that current mode of procurement, stocking, and distribution of food grains would continue. It is evident that policy change in a democratic country often suffers from being slow and incremental. Reforming the PDS would fundamentally entail a monumental political risk. While one can say little about which regime and when such risk could be taken, or who would have the courage to take it, reframing nutritional security as the scope of the PDS could possibly be the game-changer in bridging the gap between ideologies and political ideals to bring about desired change.