History of India’s Public Distribution Shops aka Fair Price Shops
Photo Credit © Aditya Chinchure on Unsplash.
Fair price shops (“FPS”), also known as public distribution shops, are part of India’s public distribution system (“PDS”). Its main function has been to distribute food with high calorific potential at lower-than market subsidized prices. At the time of writing, these are predominantly cereals such as wheat, rice, and coarse grains, but there is also distribution of sugar and kerosene. Certain states and Union Territories (UTs, a handful of federated states) also distribute essentials of mass consumption such as pulses, edible oils, iodized salt, and spices through the PDS outlets.
The formal establishment of the PDS was a response to successive famines in the 1960s due to shortages of food grains. The initial goals were food grain price containment and access to food for city dwellers. In its early days, FPS was not targeting particular cohorts so any consumer could purchase their food grains. With agricultural productivity initially rising under the Green Revolution, [FN1] the same measures could now be extended to tribal areas. The system then underwent several revisions. [FN2] The Revamped PDS version of 1992 reoriented priorities: food grains sold through the FPS would not only stay within the central government’s Central Issue Price (“CIP”), but also offer lower prices than CIP, necessitating additional subsidies from the states of India that fix the retail prices at the FPS. [FN3]
In the late 1990s the focus of the PDS shifted to finding, assessing and targeting the poorest populations. Targeted PDS became the new model that mandated state-level reporting on households living below the poverty line (“BPL”), with results delivered to India’s Planning Commission. The next major reform piloted late in 2000 was AAY, whose function was to target interventions for the poorest 10 million households within the BPL layer. As of March 2000, the BPL population was estimated to be 6.5 million. [FN4]
Populations defined as Above-Poverty-Line (“APL”) continued to be eligible to purchase from the PDS, but the prices were higher than those of the BPL. People classified as BPL became entitled to 20kg of food grains per household per month, buying these grains at a price 50% lower than the price set for the APL population [FN5].
The goal was to use the entire subsidy for the BLP segment. [FN6] However, wide discrepancies between states and estimations of calorific values vs. income verged on being arbitrary. [FN7]
Working at the FPS level also posed operational difficulties for the shop operators in terms of sustainability (e.g. restricted range of goods) and succession. The All-India Fair Price Shop Dealers’ Federation was established in 2003 as a voice for the 492,000 PDS dealers to create a universal public distribution and reach the end-game of a hunger-free India. [FN8]
In 2012 came the National Food Security Act which introduced further reforms, but which also and most importantly, implied a legal right to food for all citizens.
Today, the FPS system is operated under the joint responsibility of the Central and the State/UT Governments. The Central Government, through the Food Corporation of India, is responsible for procurement, storage, transportation and bulk allocation of food grains to the state governments. The states/UT governments are responsible for in-state/UT allocations, identifying of eligible families, issuing ration cards and supervising the functioning of FPS. [FN9]
By 2017, the increased assistance was, however, becoming a burden on the central government, annually costing 4,400 billion rupees (US$ 58.62 billion). [FN10] Further complicating matters has been the 2020-2021 protest movement of farmers who refused to back down concerning what they considered to be three unacceptable agricultural policies, [FN11] and the effects of the COVID-19 pandemic.
Look out for another Conversation on the effects of the COVID-19 Pandemic in the near future.
Resources & Notes
1. The term “Green Revolution” refers to the creation of high-yield varieties of food grains, use of pesticides and new management systems that were later imported to India and other Asian countries starting in the 1960s.
2. See https://nfsa.gov.in/portal/PDS_page
3. The Central Issue Price (CIP) is the price at which government makes these foodgrains available to states. The states fix retail price to be charged at fair price shops. see https://www.gktoday.in/topic/distribution-of-food-grains-in-india/ The price at which the central government procures food grains from farmers is called the Minimum Support Price.
4. AAY stands for Antodaya Anna Yojana. Poverty estimates in India are derived from the household consumer expenditure data collected by NSSO (the National Sample Survey Organisation) every fifth year. NSSO translated these income levels to calorific values. 327 rupees in rural areas translated to 2,400 Kcal and 454 rupees in urban settings translated to 2100 Kcal.
5. In the year 1999/2000 the definition of BPL was monthly per capita income of 327 rupees in rural areas (roughly US$7.25 in 2000) and 454 rupees (US$10 in 2000) in urban areas. See https://www.bookmyforex.com/blog/1-usd-inr-1947-till-now/
6. See description of estimations at https://www.revolutionarydemocracy.org/rdv11n1/poverty.htm
7. See description of estimations at https://www.revolutionarydemocracy.org/rdv11n1/poverty.htm
8. http://www.aifpsdf.org/aboutus.html
9. https://nfsa.gov.in/portal/PDS_page
10. Mid-market exchange rates on January 29, 2022, showed 1 USD$= 75,058 Indian rupees
11. See https://commonslibrary.parliament.uk/research-briefings/cbp-9226/