India'sPublic Distribution System (PDS) was started on 1-1-1965 along with the establishment of the Food Corporation of India (FCI). Actually, the planners and economists were against the PDS because of the principle that state should not involve itself with the sale and purchase of commodities and should restrict itself to exercising control over those involved with it. The question of setting up FCI, therefore, was referred to the Foodgrains Policy Committee (FPC) under the chairmanship of Prof. ML Dantwala, an eminent economist of India. In the report submitted on 15-9-66, the FCI says:
?It has to be remembered that purchase operation of a single large buyer tend to raise prices much more than by a large number of small buyers. Government purchase-prices are likely to be so high that neither the objective of holding the price line, nor that of equitable distribution to all can be achieved. It would be a different matter if the country is prepared to bear a crippling burden of very large subsidies. We do not recommend it.? (Page 37)
The FPC had strongly opposed government'sinvolvement with procurement and sale of foodgrains. But, the government held the views of the FPC as being against the tenets of socialism which stipulate state control over production and distribution of all essential services and commodities. The FPC had to relent under the great pressure from the government. It agreed to the functionary of FCI, but recommended that ?FCI should strive to reduce cost of procurement handling and distribution of foodgrain and set norms for the government and trade. (Page 52)
But, the FCI flouted all conditions laid down by the FPC and its handling charges have been rising ever since its inception in 1965. This has resulted in a continuously rising trend in the amount of food subsidy paid by government to the FCI.
The food subsidy paid by government, which was only Rs 71 crore in 1970-71, rose to be Rs 26, 200 crore in 2005-06. ( See Graph and Table)
In June 1988, Government of India asked the Bureau of Costs and Prices (BICP) to review the costs of FCI and suggest ways and means for controlling the rising trend in subsidy.
In July 1990 the BICP; made seven specific recommendation in this regard. Such recommendation were also made in December 1959 by the working group on public distribution;
The Commission for Agricultural Costs and Prices (CACP) demanded a fresh look at all aspects of the management of food economy in general and PDS in particular and made three specific recommendations.
The Eighth Plan team stated that a concerted effort will have to be made for limiting the PDS benefits to the poor families only.
But nothing was achieved
Actually, the PDS has been an anachronism for quite some time and has been continued because of its crucial support to the government. It has continued with a different shade and composition,viz. Revived Public Distribution System (RPDS) and targeted PDS and the Dual Pricing System.