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PDS IMPACT ON HOUSEHOLD EXPENDITURE

Syllabus:

GS 2:

• Welfare Schemes for Vulnerable Sections of the population by the Centre and States and the Performance of these Schemes
• Issues relating to Poverty and Hunger.

Why in the News?

The Public Distribution System (PDS) is in the news due to ongoing discussions surrounding its effectiveness in ensuring food security amidst challenges like inclusion errors, infrastructure limitations, and leakages. Efforts to improve targeting, infrastructure, and governance are critical amid persistent socio-economic disparities.

Source: Disc

The PDS Impact on Household Expenditure

• Social Security: The Public Distribution System (PDS) is a crucial social security program in India, aimed at ensuring food security.
• Eligibility Coverage: Up to 75% of the rural population and 50% of the urban population are eligible for subsidized foodgrains under the National Food Security Act (NFSA), 2013.
• Resource Allocation: Subsidized PDS foodgrains free up household resources for other nutrient-rich food items like vegetables, milk, pulses, eggs, fish, and meat.
• Consumption Diversification: It remains an empirical question whether households diversify their food consumption due to PDS subsidies.
• HCES Data: The Household Consumption Expenditure Survey (HCES): 2022-23 data will renew interest in understanding the impact of PDS on household expenditure beyond foodgrains.
• Expenditure Impact: The survey will help analyze how free food items from the PDS influence household spending on non-foodgrain items.

Representativeness of Household Consumption Expenditure Survey (HCES):

• Survey Scope: The HCES: 2022-23 canvassed information on food and non-food items received by households free of cost through various social welfare programs.
• Detailed Information: Pages 15 to 18 of the HCES: 2022-23 report published by the National Sample Survey Office (NSSO) provide detailed information on the survey’s findings.
• Objective: The survey aims to provide estimates of household benefits from various schemes, though coverage estimates may be lower than administrative data.
• Inclusion and Exclusion Errors: Researchers will compare household PDS consumption with NFSA coverage to study inclusion (ineligible households consuming PDS) and exclusion (eligible households not consuming PDS) errors.
• Household Characteristics: Survey data allow examination of characteristics of households reporting benefits from social programs.
• Health and Education Data: Detailed information on health and education expenditures is collected separately, highlighting the limitations of imputing values in the HCES.

Imputation of Values

• Imputed Value: The NSSO imputed value figures for selected food and non-food items received free of cost, providing two metrics: Monthly Per Capita Consumption Expenditure (MPCE) and MPCE with imputation.
• Modal and 25th Percentile Prices: For imputation, two sets of values are suggested for each state and sector (rural, urban): modal unit price and 25th percentile unit price.
• Out-of-Pocket Expenditure: Consumption expenditure refers to out-of-pocket expenses, while the value of consumption includes free and subsidized items.
• Foodgrain Focus: The primary imputed items are foodgrains received free from the PDS, with 94% and 95% of the imputed value in rural and urban areas attributable to food items.
• Imputed Value: For all households, the imputed value for food is ₹82 in rural areas and ₹59 in urban areas.
• Fractile Classes: The report provides average MPCE for various fractile classes, showing how imputation affects household consumption values, particularly for those at the lower end of the distribution. 

Implications for Poverty

• Poverty Line Discussion: The release of the report has sparked discussions on where to draw the poverty line, considering both expenditure and total consumption value.
• In-Kind Transfers: In-kind social transfers, such as free PDS foodgrains, significantly impact the well-being of households at the bottom end of consumption or income distribution.
• Value of Consumption: Determining poverty should factor in the value of free items consumed, not just out-of-pocket expenditure.

• Social Transfers: In-kind social transfers significantly enhance the consumption value of poorer households.

• Poverty Estimation: The number of poor households could be estimated based on expenditure or the total value of consumption, including free items.
• Well-being Impact: In-kind transfers help increase the value of consumption for poorer households, potentially affecting poverty metrics.
• HCES Utility: The HCES data provide valuable insights into household consumption patterns, crucial for policy-making and poverty alleviation strategies.
• Policy Considerations: Policymakers need to consider the broader impact of social transfers on household consumption and poverty metrics.
• Research Utilization: Researchers can use modal values for subsidized purchases, increasing the average MPCE with imputation, providing a more accurate poverty assessment.

Challenge:

• Inclusion and Exclusion Errors: Ensuring that only eligible households benefit from the PDS remains challenging, with both inclusion (ineligible households receiving benefits) and exclusion (eligible households not receiving benefits) errors persisting.
• Infrastructure Limitations: The effectiveness of PDS is hampered by inadequate storage and transportation facilities, leading to food wastage and distribution delays.
• Leakages and Diversions: Significant portions of subsidized food grains are diverted to the open market due to corruption and inefficiencies within the supply chain.
• Quality Control: Maintaining the quality of food grains distributed through PDS is difficult, with many beneficiaries receiving substandard or spoiled food.
• Awareness and Accessibility: Lack of awareness and difficulties in accessing PDS benefits, particularly in remote and rural areas, limit the program’s reach.
• Administrative Challenges: Bureaucratic hurdles and lack of coordination among various agencies involved in PDS implementation affect its efficiency.
• Technological Barriers: Insufficient integration of technology in the distribution process leads to errors and delays.
• Economic Constraints: Limited budgetary allocations and financial constraints hinder the expansion and improvement of PDS infrastructure and services.

Way Forward 

• Improving Targeting: Enhancing the accuracy of beneficiary lists through regular audits and use of technology like Aadhaar to minimize inclusion and exclusion errors.
• Strengthening Infrastructure: Investing in better storage facilities and efficient transportation systems to reduce food wastage and ensure timely distribution.
• Addressing Leakages: Implementing strict monitoring mechanisms and leveraging technology to track the movement of food grains, reducing corruption and diversions.
• Ensuring Quality: Establishing stringent quality control measures at various stages of procurement, storage, and distribution to ensure beneficiaries receive good quality food.
• Increasing Awareness: Conducting awareness campaigns and simplifying procedures to make PDS more accessible, especially for marginalized communities in remote areas.
• Enhancing Coordination: Improving coordination among central and state agencies involved in PDS to streamline operations and reduce bureaucratic delays.
• Adopting Technology: Integrating technology solutions like biometric authentication, real-time tracking, and digital payment systems to enhance transparency and efficiency.
• Boosting Funding: Securing increased budgetary allocations and exploring public-private partnerships to strengthen PDS infrastructure and expand its reach and impact.

Conclusion

In conclusion, addressing the challenges faced by the Public Distribution System (PDS) requires a multifaceted approach involving technological integration, better infrastructure, enhanced governance, and increased public awareness. Strengthening these areas will be crucial in realizing the PDS’s goal of ensuring food security for all vulnerable populations in India.

Source:Indian Express

Mains Practice Question:

Discuss the challenges facing India’s Public Distribution System (PDS) and suggest measures to enhance its effectiveness in ensuring food security.

Associated Article:

https://universalinstitutions.com/q-6-reforms-in-public-distribution-system-pds-and-food-corporation-of-india-fci-are-two-sides-of-the-same-coin-discuss-the-statement-along-with-suitable-reforms-in-pds-and-fci/