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Policy Watch Episode – 279: Government Mulls Foodgrains Subsidy

Policy Watch Episode – 279: Government Mulls Foodgrains Subsidy

Food Ministry’s plan of subsidy transfer for public distribution system of subsidized foodgrains will be on the lines of LPG Subsidy Transfer Scheme. Beneficiaries will get the subsidized amount in advance in their bank accounts and they will have to buy the foodgrains from any ration shop which has got the electronic POS devices. The Ministry hopes that this initiative will ensure zero leakage on the subsidy and foodgrains as well.


This can be made to work if the Government puts in place necessary conditions to implement it such as:

  1. Foolproof identification of beneficiaries.
  2. IT and digital infrastructure
  3. Robust mobile and banking network

The aim is very simple i.e. instead of giving foodgrains to the shopkeeper at a subsidized rate, it will be given directly to the consumers and hence save leakage of money. For example- today if the cost of a particular foodgrain is Rs.15/kg and Government gives it at Rs.5/kg, there is an incentive for the shopkeeper to sell it at Rs. 15 outside. The customer will buy it for Rs.15 and Rs.10 will be deposited by the Government in the customer’s bank account just like LPG subsidy transfer. 

This is likely to work in large parts of urban India but the infrastructure is not ready on all four parameters. Banking infrastructure is still lagging, POS machines have failed and mobile telephony has not reached those areas where poorest people are living. Therefore, this idea has to be rolled out in a very careful deliberated manner.

Government had done three pilots in Chandigarh, Daman and Diu and Pondicherry. According to the report of NITI Aayog, there were huge operational problems. Until and unless these are addressed,  foodgrains subsidy cannot be rolled out successfully.

It should be ensured that National Food Security Act is implemented in the spirit it was written and drafted in the past. Unfortunately, the government has not paid enough attention to this.

  1. Maternity entitlement in that was rolled out three years late.
  2. There are many reforms listed in the PDS such as decentralizing the shops, take them away from private sector and give it to the women co-operatives and panchayats (like the very successful Chattisgarh model).

The system has been successful in those states where corruption was brought down considerably such as Tamil Nadu, Bihar, Chattisgarh, Madhya Pradesh. Entitlement will not be fixed to a shop if there is DBT and a person can draw it from anywhere. But for this, bank accounts with Aadhar card linkage, inter-state operability and digital infrastructure have to be put in place.

Instead of pushing for those reforms which are tried and tested like doorstep delivery and decentralized procurement to ensure people have their rights, focus is being given to curb subsidy. PDS system till now was a little beneficial to the people. In case of LPG, to get the gas cylinder connection, one has to go to the authorized dealer. Therefore, it is easy to track and is transparent to a certain extent. But, in case of foodgrains, looking for those ration shops which actually have POS machines itself would be a challenge.


Food is the basic minimum requirement. In a country where many people sleep without having food, the process should be simplified and not be made more tedious.