Public Distribution System - 1 | Agriculture Optional Notes for UPSC PDF Download

What is a Public Distribution System (PDS)?

• The Public Distribution Scheme (PDS) functions as India's public rationing system, under the jurisdiction of the Ministry of Consumer Affairs, Food, and Public Distribution.
• Originally designed for managing scarcity, the Public Distribution System (PDS) involves the low-cost distribution of foodgrains.
• Over the years, PDS has become a crucial component of the government's strategy for overseeing the nation's food economy.
• PDS serves as a supplementary measure and is not intended to fulfill the entire commodity needs of households or specific segments of society.
• The central government handles the acquisition, storage, shipping, and bulk allocation of food grains, while state governments are responsible for distribution through approximately 5 lakh Fair Price Shops.
• Commonly supplied goods through PDS include wheat, rice, sugar, and kerosene.
• Implementing fail-safe methods to identify the poor is a prerequisite for states participating in PDS, ensuring transparent and accountable distribution of food grains at the Fair Price Shops.
• Both the central and state governments share responsibilities for identifying the poor, procuring grains, and delivering them to recipients through the PDS.

What Impact Does Procurement Have?

• There is a common assumption or expectation that raising Minimum Support Prices (MSPs) will lead to a corresponding increase in open market prices. However, this belief is often unfounded, as such government purchases do not necessarily stimulate additional demand.
• Any procurement by government agencies, regardless of the price offered, disrupts the usual demand dynamics in the market.
• The initial impact of government-led procurement is an increase in total demand.
• However, once the government channels the procured goods through the Public Distribution System (PDS), this effect is diminished.
• Consequently, the market price tends to stabilize at a level significantly lower than the MSP.
• It is fundamentally incorrect to assume that elevating MSPs from their current levels will automatically translate into higher open market prices.

What Effect Does PDS Have?

• The crops procured under Minimum Support Price (MSP) are utilized to provide end-users with goods at prices below the free market rates through the Public Distribution System (PDS).
• This practice has a significant impact on the supply dynamics, leading to a reduction in the open market price, sometimes even falling below the initial free market price.
• Consequently, the overall quantities bought and sold experience an increase due to these operations.
• The implementation of lower PDS prices tends to boost both production and consumption.
• The contrast between the procurement and PDS supplies determines the addition to or reduction of buffer stocks.

Food Corporation of India (FCI)

• Established in the 1960s, the Food Corporation of India (FCI) was part of a comprehensive initiative aimed at ensuring food security and self-sufficiency.
• Another crucial institution in this plan was the Commission for Agricultural Costs and Prices (CACP).
• The coordinated functioning of FCI, CACP, Minimum Support Price (MSP) regime, and the public distribution system was envisioned.
• FCI's designated role was to procure, store, and distribute grains in alignment with government policies.
• Like other institutions, these entities struggled to adapt to evolving circumstances, including changing economic demands over time.
• Consequently, FCI is currently grappling with persistent inefficiency marked by substantial waste, and the costs associated with grain storage continue to escalate.