Food Subsidy, Income Transfer and the Poor : A Comparative Analysis of the Public Distribution System in India’s States

The Targeted Public Distribution System (TPDS) — the largest food subsidy programme in
India — has been a dismal failure in targeting the poor. The present paper examines its
performance in three Indian states — Andhra Pradesh, Maharashtra and Rajasthan, based on
primary data collected for this study. As real income transfers through food price subsidies
are a tiny fraction of expenditure per person under this scheme, a contribution of the present
study is to model determinants of real income transfers through subsidised wheat, rice and
sugar. The analysis throws new light on how income transfers vary with economic status of a
household, inequality in the distribution of land in a village, amount of food price subsidy,
transaction costs of buying from ‘fair price shops’ (FPS), and supply shortages. The policy
implications of these results are profound. Desperate measures such as a universal food
subsidy enshrined in a proposed National Food Security Act are rejected on the grounds that
the enormous leakages and wastage under the present TPDS would only get worse.
Assertions that a universal food subsidy is the only option consistent with the right to food
are rejected as mistaken, as the latter could be interpreted as a right to a right, or, more
specifically, as a right to sensible livelihood expansion and price stabilisation policies.