Delivering Food Subsidy - The Oxford Topic of Food, Politics, and Society - page 301

is a test case for policies related to malnourishment. Second, India has one of the world's
largest food subsidy programs. It is likely to become larger, too, because of a great deal of
political activity related to the issues of food security, which will possibly lead to legisla-
tion called the National Food Security Act. The impending passage of such a law has led
to a sizable public debate about the coverage and means of delivering food subsidies that
are appropriate to a poor country. These arguments are relevant beyond the context (of
India) in which they were made.
In this chapter, we first trace the evolution of the Indian model of food distribution.
We then discuss the distribution system's outcomes and performance as well as the
rights approach to food security and the move to bind the government legally toward
food subsidies. The key issues introduced by this debate, which are generic to the design
of food subsidies, are addressed in subsequent sections. The attempt is to evaluate the
merits of various arguments in terms of their intrinsic logic as well as the available evi-
dence from the experiments tried around the world. Last, we reflect on the ideological
divide and the political economy of self-interest that together shape the course of food
politics in a developing country such as India.
Subsidy Transfers in Kind: The
Indian Model
Food subsidies in India are delivered through the public distribution system (PDS). This
system consists of a network of retail outlets (popularly known as ration shops) through
which the government sells grain (principally, rice and wheat). Grain sales occur at a
fixed price called the issue price, which is typically lower than the market price. Two
conditions govern the sale of subsidized grain: the buyer of grain must possess a ration
card; and grain purchases are subject to a quota. The PDS is supported by a procurement
operation that procures and funnels supplies to it. Through the Food Corporation of
India (FCI), the government procures grain at the procurement price and then stores
and transports it to the various consuming locations.
The Indian model is not unique. Comprehensive rationing schemes, where the state
is the single intermediary between consumers and producers and has monopoly over all
domestic and foreign trade, was prevalent in the erstwhile socialist states. In develop-
ing countries, it is usual for subsidy transfers in kind to operate along with private food
markets. Supplies may come from imports, foreign aid, or domestic procurement. Food
subsidies may cover all or some consumers. Common institutional arrangements are a
parastatal to procure the commodity and a retail network for distribution.
In India, the origins of government intervention lie in the Second World War when
the colonial British government used its powers to promulgate orders on price con-
trol, movement, and requisition of foodgrains. The government decided that it would
procure the basic staples and distribute them to select urban populations. However,