Mains Practice Questions

Introduction:

The Public Distribution System (PDS) is a cornerstone of India’s food security architecture, ensuring access to subsidised food grains for nearly 81 crore beneficiaries under the National Food Security Act (NFSA).

• While it has played a critical welfare role, especially during crises like COVID-19, the rapid rise in food subsidy bills has raised serious challenges to its fiscal and administrative sustainability.
• This necessitates a careful balance between efficiency reforms and preservation of welfare objectives.

Body:

Challenges to Sustainability of PDS:

• Fiscal Sustainability
  • Rising Food Subsidy Burden On The Exchequer: Food subsidy expenditure has expanded sharply due to higher procurement, expanded coverage under NFSA, and additional entitlements during crises.
    • This has increased pressure on the Union budget and reduced fiscal space for other developmental spending.
    • The Union government’s food subsidy increased from 0.38% of GDP in 2016–17 to 0.52% in 2022–23, recording a CAGR of 17%.
  • Open-Ended Procurement And MSP Linkages: PDS sustainability is strained by open-ended procurement at Minimum Support Price (MSP), especially of rice and wheat, irrespective of demand patterns. This leads to excess stocks and high carrying costs.
    • Central food grain stocks have repeatedly exceeded buffer norms, increasing storage and interest costs for the Food Corporation of India (FCI).
  • Hidden Fiscal Costs And Off-Budget Borrowing: Administrative sustainability is weakened by reliance on off-budget borrowings by FCI to finance subsidy gaps, obscuring the true fiscal burden.
    • FCI loans from National Small Savings Fund (NSSF) accumulated significantly before being brought back on-budget in recent years.
    • In FY22, the Centre brought about ₹5 lakh crore, nearly 75%, of these liabilities onto its balance sheet, largely by taking over ₹4.27 lakh crore of NSSF loans raised by FCI to clear food subsidy arrears.
• Administrative Sustainability
  • Leakages And Diversion: Despite reforms, PDS continues to suffer from diversion of food grains and ghost beneficiaries in certain regions, undermining both fiscal efficiency and welfare credibility.
    • According to a 2024 ICRIER study based on the 2022-23 Household Consumption Expenditure Survey (HCES), approximately 28% of allocated food grains (roughly 20 million tonnes) fail to reach intended beneficiaries.
  • Storage, Transportation, And Logistical Inefficiencies: PDS involves complex logistics from procurement to fair price shops, leading to high administrative costs, wastage, and delays.
    • As of late 2025, India faced a total food grain storage shortage of nearly 166 million metric tonnes (MMT).
      • While production reached record highs of 357.32 MMT in 2024-25, the total storage capacity stood at only 145 MMT.
    • Inadequate covered storage has led to grain damage in states with surplus procurement.
  • Centre–State Coordination Challenges: PDS implementation depends heavily on states, leading to uneven performance due to varying administrative capacities and political priorities.
    • End-to-end computerisation and doorstep delivery have worked well in states like Chhattisgarh but lag in others like Punjab and Delhi.

How Efficiency can be Improved Without Compromising Welfare

• End-To-End Digitisation And Targeting: Strengthening Aadhaar-based authentication, real-time stock tracking, and portability can reduce leakages while preserving coverage.
  • One Nation One Ration Card (ONORC) enables migrant workers to access PDS benefits across states.
• Rationalising Procurement And Stocking Policy: Aligning procurement with actual consumption patterns and promoting decentralised procurement can reduce excess stocks.
  • Encouraging states to procure local crops like millets reduces central storage burden.
• Diversifying Food Basket For Nutritional Efficiency: Including millets, pulses, and fortified foods improves nutrition without proportionately increasing subsidy costs.
• Gradual Use Of Cash Or Food Coupons In Urban Areas: In select urban contexts with functional markets, cash transfers or food coupons can reduce administrative costs while retaining welfare impact.
  • For instance, Direct Benefit Transfer (DBT) pilots in Chandigarh showed reduced leakages.
• Strengthening State Capacity And Accountability: Performance-linked incentives and audits can improve delivery quality and administrative efficiency.
  • Chhattisgarh’s reforms like de-privatisation of fair price shops and community monitoring, significantly reduced diversion.

Conclusion

The PDS remains socially indispensable but fiscally and administratively strained in its current form. Rising food subsidy bills highlight the need for efficiency-oriented reforms, not welfare rollback. By improving targeting, rationalising procurement, diversifying nutrition, and leveraging technology, India can ensure that PDS remains both sustainable and humane, aligned with its constitutional and welfare commitments.