Wednesday, February 4, 2015

Corruption in PDS: Rising or falling?

A group of economists have recently opposed the leakage figure of 47% in public distribution system (PDS) that was earlier endorsed by the Report of the High level Committee on Reorienting the Role and Restructuring of Food Corporation of India, written under the chairpersonship of Shanta Kumar.

The HLC report on FCI reforms actually had taken the estimate on PDS leakage from an academic paper written by Ashok Gulati and Shweta Saini, which was published from Indian Council for Research on International Economic Relations (ICRIER) in January this year. Dr. Ashok Gulati was also a member in the HLC on FCI reforms.

In a briefing session for media persons on 3 February, 2015 held in New Dehi, the group which challenged the HLC figure informed that leakages and diversion from PDS stood at nearly 42%. They clarified that methodological differences is leading to 2 different estimates regarding PDS leakages. (Please check the chart below).

Please note that many of the states/ UTs for which leakages have been calculated by Gulati and Saini are not shown in the above chart.

It was earlier seen in a number of studies that leakages from the PDS reduced over the years. Thanks to a series of measures undertaken in states like Odisha, Bihar and Chhattisgarh, PDS could see a turnaround in these states. For example, PDS leakage in Bihar reduced to 24% in 2011-12 from 91% in 2004-05 due to introduction of coupon system, while diversions declined in Chhattisgarh to 3.3% in 2011-12 from 52.0% in 2004-05 as a result of transparency measures adopted apart from complete overhauling of PDS.

This indicates that PDS can be corrected and made to perform, provided there is adequate political will and enough room for introducing innovative measures. However, on the sole ground of leakage, the HLC on FCI restructuring had suggested to replace PDS with cash transfers without going into further details.

Two economists, namely Reetika Khera from IIT Delhi and Jean Dreze, Visiting faculty at Ranchi University, who disagree with the HLC recommendations on PDS dilution, have alleged that Gulati and Saini miscalculated the figures on total PDS offtake from FCI and total PDS purchase.

Dreze and Khera have argued that most of the leakage is in the Above Poverty Line (APL) quota (apart from the 'ad hoc quotas') into which more and more foodgrain is presently being dumped. Comparatively, there is much lower leakages in the below poverty line (BPL) quota.

One calculation by Dreze and Khera, based on National Sample Survey (NSS) data, shows that while leakages in the BPL/ Antyodaya Anna Yojana (AAY) quota was to the tune of 30%, it was nearly double (i.e. 67%) in the case of APL quota during 2011-12.

Instead of using the NSS data, if the India Human Development Survey (IHDS) data of National Council of Applied Economic Research (NCAER) is considered, then one can find that leakages from PDS was around 32% in 2011-12, which once again puts a question mark on the leakage figure quoted by HLC.

Apart from end-to-end computerization, the Government should ask the states to release the Socio Economic and Caste Census (SECC) data so that eligible households could avail the benefits of PDS, suggested Dreze and Khera.


Report of the High level Committee on Reorienting the Role and Restructuring of Food Corporation of India, January 2015,

Leakages from the Public Distribution System (PDS) and the way forward - Ashok Gulati and Shweta Saini (2015), ICRIER,

The National Food Security Act 2013

The National Food Security Ordinance 2013

FCI reforms: prescription to cure or kill? -Roshan Kishore,, 27 January, 2015,

Water For The Leeward India -Jean Dreze and Reetika Khera, Outlook, 24 March, 2014,

Public Distribution System Reforms and Consumption in Chhattisgarh -Prasad Krishnamurthy, Vikram Pathania, and Sharad Tandon, Economic and Political Weekly, Vol-XLIX, No. 8, February 22, 2014,

Ajay Chhibber, Director General of the IEO, a former assistant secretary general of the UN Development Programme, interviewed by Sanjeeb Mukherjee, Business Standard, 3 February, 2014,

Rural Poverty and the Public Distribution System-Jean Dreze and Reetika Khera, Economic and Political Weekly, Vol-XLVIII, No. 45-46, November 16, 2013,

Reforming the Public Distribution System: Lessons from Chhattisgarh by Raghav Puri, Economic and Political Weekly, February 4, 2012,

PDS leakage drops to 10-15%: govt, The Indian Express, 12 December, 2011,

Revival of the Public Distribution System -Reetika Khera, Economic and Political Weekly, November 5, 2011, Vol xlvi, No. 44 & 45,

Trends in diversion of PDS grain -Reetika Khera (2011), Working Paper No. 198, Centre for Development Economics, Department of Economics, Delhi School of Economics,

PEEP survey 2013 and PDS Survey 2011,