Expenditure Management in the Public Distribution System

30 Pages Posted: 3 Mar 2015

See all articles by Charan Singh

Charan Singh

Indian Institute of Management (IIMB), Bangalore

Anushi Shah

Indian Institute of Management (IIMB), Bangalore

Myanka Aggarwal

Indian Institute of Management (IIMB), Bangalore

Padmakumar Nair

Indian Institute of Management (IIMB), Bangalore

Ritanshu Kashyap

Indian Institute of Management (IIMB), Bangalore

Shamil Mohamed

Indian Institute of Management (IIMB), Bangalore

Shomrita Pal

Indian Institute of Management (IIMB), Bangalore

Date Written: February 23, 2015

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 regards to 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 manner in 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 of benefits 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.

Keywords: Public distribution system; Food Corporation of India; Food subsidy; Minimum support price; and food grains.

Suggested Citation

Singh, Charan and Shah, Anushi and Aggarwal, Myanka and Nair, Padmakumar and Kashyap, Ritanshu and Mohamed, Shamil and Pal, Shomrita, Expenditure Management in the Public Distribution System (February 23, 2015). IIM Bangalore Research Paper No. 481, Available at SSRN: https://ssrn.com/abstract=2572239 or http://dx.doi.org/10.2139/ssrn.2572239

Charan Singh (Contact Author)

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India
080-26993818 (Phone)

Anushi Shah

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Myanka Aggarwal

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Padmakumar Nair

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Ritanshu Kashyap

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Shamil Mohamed

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Shomrita Pal

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

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