Public Distribution System in India

The Public Distribution System is a system that facilitates the supply of food grains to the poor at
a subsidized price. It provides rationed amounts of basic food items (rice, wheat, sugar, edible
oils, kerosene) to the rural and urban population at below market prices to customers through a
network of 5 lakh fair price shops. As such the PDS in India presents the largest and almost
universal type of food delivery systems in the world.

The specific goals of PDS are to: (i) make goods available to consumers, especially the
disadvantaged/vulnerable sections of society at fair prices; (ii) rectify the existing imbalances
between the supply and demand for consumer goods; (iii) check and prevent hoarding and black
marketing in essential commodities; (iv) ensure social justice in distribution of basic necessity of
life; (v) even out fluctuations in prices and availability of mass consumption goods; (vi) support
poverty‐alleviation programs particularly rural employment programs
(SGRY/SGSY/IRDP/Midday Meals, ICDS, DWCRA, SHGs and Food for Work and educational
feeding programs)

Both the Central and State Governments participate in the procurement and distribution of food
grains. A certain portion of the grain output from the producers or traders is purchased by the
government at the minimum support price fixed by it on the basis of recommendations of the
Commission for Agricultural Costs and Prices (CACP). Much of the procured output is supplied
to the states at a uniform issue price for supporting their public distribution systems.

The purchase, storage and movement and distribution of food grains are entrusted to Food
Corporation of India (FCI). Besides the FCI, the states have also their own food and civil
supplies corporations or cooperative marketing agencies which make purchases and sales on
behalf of FCI. The allocations to the states are made by the FCI on the basis of allocations made
by the Government of India. The state governments lift their allotments from the FCI godowns
and distribute them through a network of Fair Price Shops (FPSs). In most states, except a few,
practically everyone is entitled to draw supplies from the fair price shops.
Since issue price of FCI is much lower than the cost incurred by it, the essential articles supplied
through ration shops, the PDS has been instrumental in not only ensuring food security to the
people but also the instrument of price stabilization . The difference in the issue price and the
cost price is met by the Government of India by way of subsidy. The retail price of food grains is
fixed by each state government after adding its distribution cost and taxes to the FCI issue price.
However, in certain cases, the state governments have been adding additional subsidy and fix the
retail price of the ration articles at more attractive prices for their card holders.

The diagrammatic representation of the PDC supply chain is shown below:

Source: Centre for Civil Society