It all began with the plan of the Government of India to deliver food grains to the poor in the mid-1970s. The very idea of cash transfers/cash stamps was not in existence in India back then unlike in Sri Lanka and United States. Also, would have been too easy a policy for Indira Gandhi to take and perhaps also did not offer enough possibilities for corruption.
And, thus came to life the infamous PDS. The poor hailed Indira’s name as their saviour. Little did people and especially the poor could fathom the monstrous corrupt beast Indira had created. Indira setup the Food Corporation of India as the sole buyer and seller of the subsidized food for the poor.
Rather than buying the food from the open market or provide direct subsidies to the food shops, the government got itself into the business of buying and selling, thus creating a gazillion leaks. Government began to buy the food directly from the farmers at prices set by itself (procurement prices).
It banned the private movement of grains from surplus to deficit states, (which was a draconian policy only removed a few years ago from this writing). It began to store the food in Government silos appointing exclusive ration shops so as to distribute the government-bought food grains at the right time.
Not to mention, the government in no time began to procure as much as 70% of the total produce in the major agri states like Punjab, Madhya Pradesh and Uttar Pradesh to name a few. And, when you are storing as much as 70% of the total wheat and rice in your silos and releasing only a portion of it to be distributed amongst the poor from time to time, it’s no more storing. It’s hoarding.
And, in this manner, Indira Gandhi led Government contravened every law of the free and natural market, fractured the very supply chain of the food grains and gave rise to the hegemonic and corrupt food grains distribution system which has since then been denting the public exchequer every successive year.
The grave ramifications of this draconian and faulty policy can be understood from the following data. The 2012-2013 fiscal year, was the 35th year since PDS’s inception. In that fiscal alone, 50% of the food grains sent from FCI to the ration shops never reached the intended ration shops. This amounts to almost 25 Metric Tonnes, which is apparently something not that easy to lose.
Further exacerbating the situation, about 15 Metric Tonnes of food grains were lost due to lack of storage facilities. It was Rs. 30,000 Crores worth of central expenditure turning into rot! 3,00,00,00,00,000! And, that rot was at last sold off to liquor manufacturers at cheap prices because rotten grains happen to be an asset as far as liquor production is the case.
Observe at the beauty of this!
Government writes it off as an expenditure for the poor. FCI writes it off as a loss. Liquor manufacturers rejoice it as a bumper sale. And, nowhere in that picture did one poor man get a single kilogram of that fifteen metric ton amount of grains! If that is not a sinful mega scam then I don’t know what is.
At last from the less than 25% of the small proportion of food that reached the ration shops finally just about 10% of total food grains reached the intended poor who can be designated as Tendulkar-level poor (Tendulkar-level poor refers to ones who earns lesser than Rs. 847 per month).
PDS is a sickening government scam machine that is not just a travesty of its very definition, but also a scathing betrayal of the successive Governments which have not acted to crush this money-guzzling monster. It has been sucking the public money which if had been delivered directly as cash transfers would have saved Hundreds of Billions of Dollars in these 35 years.
Reference: Getting India Back On Track- Book by Bibek Debroy et al