PDS reforms must be in line with the current needs

Rakesh Allu/Sarang Deo/Sripad Devalkar/Maya Ganesh | Updated on May 26, 2020 Published on May 26, 2020

Redesigning the PDS supply chain is essential for successful delivery of food under the Atmanirbhar Bharat Abhiyan

As a part of the Atmanirbhar Bharat Abhiyan (ANBA), the Government of India has extended the benefits of the public distribution system (PDS) to an estimated eight crore migrants for two months. While this represents a 10 per cent increase over the current number of beneficiaries under the National Food Security Act (NFSA), there is general agreement that it falls significantly short of the need.

At the very least, the estimate of the potential NFSA beneficiaries is based on the 2011 Census and does not account for the increase in the number of poor households or migrants over years. Further, it does not include households that have been pushed into poverty due to the Covid-19 crisis. However, beyond increased allocation, we contend that key functions of the PDS supply chain need to be redesigned to ensure that food reaches beneficiaries across the country.

Under normal circumstances, demand for grains across the PDS supply chain is stable, driven by monthly entitlements of beneficiaries with ration cards, and does not experience large or abrupt changes. Consequently, supply chain planning (eg inventory levels, replenishment patterns, mode of transport) also follows stable and repetitive patterns in a monthly cycle to minimise cost. However, in the current situation, demand will be highly variable across geography and over time. As a result, demand forecasting and fulfilment processes of the PDS need to be revamped.

Demand forecasting

Availing of benefits under the ANBA does not require identification, which is albeit a positive measure for beneficiaries, but poses a challenge for forecasting the total additional demand. Nonetheless, it is beyond a doubt that the number of migrants in a State is strongly correlated with its economic performance. In fact, more populous States such as UP and Bihar have a net outflow of migrants, whereas smaller States such as Delhi and Goa have a large net inflow of migrants.

Similarly, the coverage of PDS compared to the actual number of eligible poor households also differs across States. For instance, the shortfall is as high as 14.1 per cent in Bihar and as low as 2.82 per cent in Kerala.

Consequently, the current proposal to uniformly increase the allocation of all States by 10 per cent of current beneficiaries should be modified to account for these variations. This demand variability persists within each State too. Ration shops in more industrialised districts, (eg Mumbai and Pune in Maharashtra), will need greater additional allocation than the less industrialised ones (eg Ratnagiri and Sindhudurg).

Furthermore, demand at each location will also vary significantly over time. First, as the lockdown extends, a greater fraction of the low-income, non-migrant urban households will be unable to afford open-market prices for food and will avail of these benefits, thereby increasing demand. Second, continuing movement of migrants toward their home-States will further change the pattern of demand across different districts and States over time. As a result, static allocation combined with monthly planning cycles will not be appropriate.

Demand forecasts, and consequently inter- and intra-State allocation, will require frequent updates. State and district administrations must partner with grassroots organisations at the forefront of current relief efforts to collect real-time information and improve accuracy of demand forecasts on weekly, or more frequent, basis.

Demand fulfilment

Although the total stock of food grains in the country is adequate to satisfy the increased demand due to the ANBA, it is worth noting that the stock positions in different States and districts are planned to cater to the steady, regular PDS demand. Recent increase in allocation to NFSA beneficiaries for the next three months has already created some imbalance between demand and existing stock, compared to regular operations, which will be further exacerbated by this new expansion of benefits beyond NFSA allocation. Our calculations indicate that States in the eastern region (Bihar, Jharkhand, Odisha and West Bengal) will need an influx of at least 18 lakh MT (approximately 77 per cent of their current stock positions) to meet the increased demand under ANBA. Dynamic changes in demand across different parts of the country will require rapid rebalancing of stock positions and revamping the regular movement plans for food grains using more flexible and expensive modes of transport.

In addition to the above changes, the last-mile distribution operations will also need substantial redesign. In this regard, the PDS should borrow a page from the changes made for rabi wheat procurement in Punjab and Haryana. First, the network of last-mile delivery points must be expanded beyond existing ration shops in partnership with civil society organisations to ensure coverage of locations where migrants are stranded. Second, ration shops should expand their working hours per day and working days per month to stagger distribution to beneficiaries and avoid crowding.

In summary, the PDS supply chain must rapidly reinvent itself during this time of crisis to successfully alleviate hunger among millions of poor. In particular, it needs to transform its rigid planning processes into responsive and flexible processes that can serve the highly variable and dynamic demand with alacrity.

Allu is PhD Student, Cornell University. Deo is Professor; Devalkar is Associate Professor; and Ganesh is FPM Student, Indian School of Business

Published on May 26, 2020
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