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  1. 1. Submitted by: SIBM BENGALURU Gundeep Kaur KumarVaibhav Sunil KumarArya Tejaswi S. Vrushali Sawant Improving reach and Efficiency of Public Distribution System
  2. 2. Overview PDS is a food security bill established by GOI under Minister Of consumer Affairs, Public Distribution and is managed jointly with state governments of India. It distributes subsidized food and non-food items to India's poor, major commodities distributed include staple food grains. Distribution happens through a network of Public distribution shops, also known as Ration shops established in several states across the country. Central government is responsible for procurement, storage, transportation, and bulk allocation of food grains. State governments hold the responsibility for distributing the same to the consumers through the established network of Fair Price Shops (FPSs).
  3. 3. Overview State governments are also responsible for operational responsibilities including allocation and identification of families below poverty line, issue of ration cards, supervision and monitoring the functioning of FPSs. Under PDS scheme, each family below the poverty line is eligible for 35 kg of rice or wheat every month, while a household above the poverty line is entitled to 15 kg of food grain on a monthly basis.
  4. 4. Flaws of P.D.S Growing instances of the consumers receiving inferior quality food grains in ration shops. Deceitful dealers replace good supplies received from the F.C.I with inferior stock and sell FCI stock in the black market. Illicit fair price shop owners have been found to create large number of bogus cards to sell food grains in the open market. Lack of clarity to the people , mortgage their ration cards for money. Poor supervision of FPS and lack of accountability Middlemen corruption
  5. 5. Leakages & Diversion in PDS  Leakage and Diversion in PDS  “For every Rs. 4 spent on PDS, only Rs. 1 reaches the poor”  “57% of the PDS food grain does not reach the intended people”  The major reasons for leakage and diversion in PDS are:  Inclusion Error:  This is caused due to inclusion of people who are not eligible into BPL and AAY category. It results in diversion of subsidies to unintended beneficiaries and also in many cases poorer off take of food grains from FPS which in turn incentivizes the FPS owners to divert this portion of food grains to open market.  Ghost Cards:  Bogus ration cards in the name of fictitious owners, is a serious problem causing significant leakages as it does not reach the intended beneficiaries.
  6. 6. Leakages & Diversion in PDS  Shadow Ownership: This is caused due to migrant families in search of work not able to avail their quota or poor families due to paucity of funds keep the ration cards with FPS owners or others to avail credit or get small portions of cash.The non-viability of FPS’s is one of the major drivers for the diversion of food grains from retail points.The FPS owners in order to bridge the viability gap divert the food grains intended for ration card holders to open market and report unavailability of stock in the store.This is further supported by the fact the leakage is predominant in states where FPS’s are highly unviable. In order to decrease the exclusion errors we may relax the rules for identification and include larger population but this in turn leads to inclusion errors.This phenomenon is significantly witnessed by southern states.
  7. 7. Leakages & Diversion in PDS
  8. 8. Leakages & Diversion in PDS  High exclusion errors imply low coverage of the target group (BPL  households). Of the estimated 45.41 million BPL households (March 2000),  TPDS has extended coverage to only 57% BPL families.  The problems of targeting errors and ghost cards have serious implications for the performance, impact and delivery cost ofTPDS.These, along with certain weaknesses in the delivery mechanism (Chapter 3), have led to large scale leakages (36.38%) and diversion (21.45%) of subsidized grains to unintended beneficiaries.
  9. 9. Leakages & Diversion in PDS  Wide inter-State variations in different types of leakages have been observed. In the self-explanatory tables below, the States are grouped w.r.t the intensity of the problem of leakage of subsidized grains.
  10. 10. Leakages & Diversion in PDS
  11. 11. Leakages & Diversion in PDS
  12. 12. Leakages & Diversion in PDS  In addition to leakages,TPDS suffers from diversions of subsidized grains to unintended beneficiaries (APL households) because of Error of Inclusion.  While small inclusion errors and diversions could be ignored (as these could be due to genuine measurement errors), in the States ofAndhra Pradesh (36%), Himachal Pradesh (20%), Karnataka (42%), Kerala (21%) andTamil Nadu (50%), the proportion of subsidized grains received byAPL households is unacceptably large. Notes prepared by the field units of PEO suggest that a section of theAPL households holding BPL cards actually do not lift their ration quota.  Thus, a part of the entitlement of theseAPL households holding BPL cards is actually leaked out of the PDS supply chain.  It is, however, difficult to capture this form of leakage empirically
  13. 13. Recommendations Operational • Improving supply chain • Reducing the amount of middlemen • Inventory Control • BringingTechnology • Automation • Quality Check Legal • Strict actions • Exploitation • Transparency • Regulation and selection of FPS Awareness • Awareness for poverty stricken families. • Extensive Communication • Awareness Programs
  14. 14. Operational  The main problem in the supply chain of PDS is MIDDLEMEN who consume a good proportion of the stock meant for the poor.  There is a great need to control the amount of middlemen and to alter the supply chain.  The government should not only look at the receiving end but the supplying end also.The farmer from which the crop is being purchased gets the minimal benefit as the major chunk of money goes to the distributors(middlemen).  The employment should be created in a chain purchase from farmer( giving him money) and supply to poor(people who cannot afford food).
  15. 15. Network of Supply Chain: •The central government has to ensure that these people get the fair price deal. •The cycle of employment will happen then. •Another major problem is wastage of grain before being distributed, sometimes the inventory gets damaged due various reasons. Problems at this level are huge: •long waiting times •exorbitant corruption •rude behavior of shopkeepers •poor service delivery.
  16. 16.  The demand and supply of the grains should be done correctly.The demand should be accurately forecasted to avoid wastages or shortages.  Flow of information across all the stages of PDS should be there as this will ensure availability of correct quantities of scheduled commodities to fair price shop owners and the end customers thus, improving the service delivery.  Maintain sufficient inventory in the warehouses(inventory control).  The improvement in PDS operations is possible when all the activities of the system are analyzed in an integrated manner.  Procurement of food grains, their storage, their inter-state movement, their allocation to various states and distribution by FPS are not isolated problems and therefore, must be tacked in a holistic perspective.
  17. 17.  Automation: Since the era ofADHAR CARD has started and the essence of this is giving a unique identity to a card holder so what we propose is having a strong automation process which will take care of the following: • When a buyer claims a P.D.S he should produce hisAdhar card and the F.P.S owner should make a entry on the Adhar card. • ThisAdhar card transaction would be linked to the centralized system i.e. the government would be able to regulate the owners of F.P.S and this will further reduce the leakages to huge extent. • By having a proper automation system , the owner of the F.P.S wont be able to indulge in inappropriate activities like selling to other markets as there would be regular quantity check by the government.
  18. 18. Legal  The legal norms of the country have to be more strict towards P.D.S  No control on corruption and no check on the centers, the food meant for he poor is sold at high prices in different markets this should be addressed.  The state government should look into the exploitation at the consumers end.The consumer is exploited at every stage, which creates a hatred for the government and consumers takes a step back which encourages the owners of the stores to RULE.
  19. 19. Awareness  The whole essence of the P.D.S is helping poor get the basic food requirements for those who cannot afford these and on government record sheets every month the numbers gets updated but the question s are people really getting the benefit or for that matter do people really know what the scheme is.  It is very important to make people educated about the rights that they have or the power that has been invested in them.  The state government should take hold of this.
  20. 20.  What we suggest is that every state should appoint some local representatives to go to the extremely poor section and inform those people about the process.These representatives should also introduce these people to the centers and make them familiar with all the procedure.  This local representative will closely observe these families and should check the purchase level( quantity and frequency).  The shop owners should also contribute in the process and should help creating awareness as an illiterate learns best from others behavior and from his experiences.  The shop owners sells these grains to other markets or to the same people at high prices, here people should be educated.  The communication should happen at a mass media level.
  21. 21. Thank you “Lets make India a better Place”