India missed a chance to reform the Public Distribution System

Source– The post is based on the article “India missed a chance to reform the Public Distribution System” published in the mint on 13th January 2023.

Syllabus: GS3- PDS and Food security

Relevance: Issue related to distribution of foodgrains

News- The article explains the recent government move to end the PMGKY and the need to reform the Public Distribution System.

The government finally ended the free foodgrain scheme under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) from 1 January.

What is the PMGKY?

The scheme was introduced as part of the pandemic relief effort in March 2020. It provided 5kg of free cereals, rice or wheat to eligible Public Distribution System (PDS) beneficiaries.

PDS beneficiaries are entitled to 5kg of rice/wheat/millets at ₹3/2/1 per kg as part of the National Food Security Act (NFSA). The PMGKY was over and above that.

What are the reasons for the discontinuation of the scheme?

The primary reason for the discontinuation of the scheme is the ballooning fiscal deficit of the government.

This additional step will cost the government a small sum of ₹18,000 crore.

However, the impact of both these measures taken together is likely to be an additional monthly spending of around ₹500-600 for a household of four members to purchase an additional 5kg from the market if they need it.

Why is this not the best option?

The PMGKY was meant to provide a cushion to the majority of rural and urban poor against the loss of income and employment during the pandemic.

While pandemic-related disruptions are over, most indicators of the rural economy suggest that distress persists.

Cereal inflation has been in double digits with no signs of slowing. The additional foodgrain could have been continued until inflationary pressures cooled.

A more serious matter of priority is for the government to reform the PDS as it exists today.

What is the way forward?

The PDS plays an important role for consumers and farmers. It enables the government to procure foodgrains for distribution. There is need take bold steps towards reforming the PDS in line with NFSA goals

Diversifying to oilseeds and pulses is essential to incentivize their production.

A better option would be to expand the beneficiary roll while retaining subsidised issue prices for food staples. That would have been a fiscally neutral step.

Government needs to simply increase prices a little to keep real prices constant. It enables the government to raise the quantum of grains given to beneficiaries without affecting its fiscal discipline. It is also possible to provide pulses and edible oil, which were given during the pandemic.