From 1997 the government introduced targeted PDS. It was criticised that PDS failed to serve the rural poor. Now it was decided to serve APL and BPL families. Special cards are issued to BPL families and food grains are sold to them at highly subsidised prices. From April 1, 2002 allocation of foodgrains has increased to 35 kg per family per month. At this programme rice is available at Rs 3 per kg and wheat at Rs. 2 per kg. This is under Antyodaya Anna Yojna (AAY).

Continued rise in minimum support price and consequent rise in economic cost without commen­surate rise in issue price has caused rice of food subsidy. Reduction of PDS price for BPL and Antyodaya have caused further rise in size of food subsidy. Producers and consumers are major beneficiary within the vulnerable section of the community.

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The subsidy incurred on supply of food grains through PDS at below at FCI economic cost constitutes the subsidy of consumer, while produce subsidy is the direct outcome of the price support based on procuring operation of thus government. The producer subsidy along with cost of maintaining the buffer stock accounts for cost buffer stock operation. Consumer subsidy together with the buffer carrying cost constitutes the foods subsidy. Government is committed to provide food security through PDS and has been increasing food subsidy Bill for last few years. For the protection of poor the subsidy should be continued. This is also a method of transferring income to the poor. But PDS should be made effective so that BPL families get genuine protection.

PDS should be strengthened to safe the poor suffering from food insecurity. The committee submitted its Report in July 2002. The committee recommended that: (i) Quality norms should be strictly adhered to while procuring food grains for PDS distribution. (ii) Payments as statutory levies to state governments by FCI are essentially transfers from the centre to the state governments.

These should be taken care of separately between the Centre and the States without involving the FCI. (iii) MSP for paddy should be fixed only for a single grade. (iv) APL price should be reduced to 80 percent of the economic cost and BPL price to 50 percent of the economic cost excluding statutory levies. This would also help improve the viability of the face price shops in the distribution network. (v) Once the current high stocks are reduced, the resultant savings could be used for employment schemes, for which there was a strong felt need and which could be used to develop rural infrastructure. (vi) The existing Antyodaya scheme of food support could also be expanded to become a food security system for the entire destitute population.

(vii) A system of universal PDS is introduced with uniform CIP, one each for rice and wheat respec­tively, for all consumers in all parts of the country. (viii) The Central Government should announce its MSP policy before the sowing season on recom­mendations of the Commission for Agricultural Costs and Prices (CACP). (ix) The CACP should be made an empowered statutory body. (x) In recommending MSPs, which should apply only to Fair Average Quality grain, the CACP should go strictly on the basis of cost of production (i.e., all costs including imputed costs of family labour, owned capital and rental on land) in more efficient regions.

(xi) While the centre has to continue to take the primary responsibility for procurement, as production is dispersed, procurement should also become more dispersed and this process can definitely save costs of transportation and meet consumer needs more adequately. (xii) All compulsory levy orders on rice millers under the Essential Commodities Act (ECA) should be removed with immediate effect. (xiii) A different problem likely to arise as a result of lower MSPs is that there will be a probability for market prices to exceed MSP and, therefore, quantities offered for sale at MSP may fall short of PDS and buffer stocks requirements. In situations where market conditions are such that purchases fall short of requirements, Government would need to make purchases on the basis of best terms. This may imports, open market purchases from secondary markets or through open tender purchases or purchase from farmers at a market determined above MSP. (xiv) Crop diversification is very import at the current stage of India’s agricultural development, given changing dietary patterns. There is need for special packages for diversification. (xv) There should be an automatic and transparent policy of variable tariffs both agricultural imports and expect linked to the deviation of spot international prices from their long run trends.

This is required for stabilisation of prices in an open economy. (xvi) Barriers to private trade, economic well as legal, should be eased. (xvii) FCI has performed its role in its functions reasonably well and should continue to do so keeping in mind that there has to be a work culture of total quality management. (xviii) It is desirable that the FCI’s role be confined to procurement of the major cereals for the PDS that price support operation coarse cereals are handled by agencies.